Millions of high school graduates will finalize the biggest financial decision of their young lives Monday, if they haven't done so already: where to attend college.
The choice will carry a hefty price for many students and their families. For the 2016-2017 academic year, the average all-in cost of one year at a public university was $20,090 and more than double that — $45,370 — at a private college, according to the College Board.
People have turned to student loans to pay for college costs that are rising faster than the overall rate of inflation. Last year, 42.4 million Americans owed $1.3 trillion in federal student loans and more than 4.2 million borrowers were in default .
You and your children can avoid that debt trap. Here is a four-step strategy to figure out how the choice you make on College Decision Day will affect your student debt load.
Know exactly what your school will cost
Most colleges have a net price calculator on their websites to help students and the parents determine what their top college will cost after scholarships and grants. These tools require students and parents to answer detailed question about their finances, so you may need your tax returns and a snapshot of your bank and investing accounts to answer all the questions.
Several other online calculators can give you a rough estimate of the costs. If you plan on going to a private school, MyinTuition will provide a ballpark figure by answering just eight question in about three minutes.
Many students underestimate the cost of college. Only 41 percent of high school seniors expect to borrow to finance their degree, according to a survey by student loan servicer Navient and education technology EverFi. However, 61 percent of students who go on to finish school take out loans, according to the College Board.
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Students and parents have received their financial aid offers , but don't take them at face value.
Understand the difference between scholarships and grants, which don't have to be repaid, and student loans, which do. When your kid receives a scholarship, ask about the school's "displacement" policy. It's a sneaky way of reducing the value of a scholarship by including it as part of your income and giving you smaller financial aid packages.
Consider what happens to grants and scholarships after freshman year. The aid offer's addendum details whether a scholarship can be renewed. College Navigator, which is run by the Department of Education, can give you a sense of the average scholarship rewards for all undergraduates.