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Creative ways to pay for college in an economic downturn

Economic woes needn't mean the end of your child's college plans.

By Robin Levinson, Consulting Educator

Feeling the sting of our failing economy? If you've been diligently saving for your child's education, chances are you're among the millions who have suffered losses from the crashing stock market. In addition, private loans may be more difficult to obtain as banks become choosier about their lending practices. If your child is applying to college, you'll need to come up with the money fast.

The first step is to calculate exactly how much you need. Experiencing sticker shock? Your solution might be as simple as having your child volunteer in a new city. Here are some other creative tips to help you and your teen finance a college education in an economic downturn.

Apply for a Pell Grant

Possibly the only thing good to come out of this economic hullabaloo is the increased federal funding for education financial aid. In the wake of President Barack Obama's economic stimulus plan, the Pell Grant program will receive more than $15 billion in aid, amounting to over $500 more per student.

Enroll in a work-study program

Another good thing about the stimulus plan is that it awards more than $200 million to work-study programs, making them accessible to more students. Encourage your son or daughter to work part-time during the school year to lower his or her tuition costs. As long as the job doesn't interfere with studying, working part-time might boost his or her GPA. Studies show that students who work 10 to 15 hours a week have better grades than their peers without jobs or those who work longer hours. Research suggests it helps them budget their time better and achieve their long-term goals.

Take a "gap year" and earn money

Although your teen may have planned on attending school in the fall, many universities see the benefit in taking a year off. Both Harvard and Princeton actively encourage it, and most institutions will save the student's spot if the deferral is for a good reason.

Programs like City Year and AmeriCorps place student volunteers, ages 17 to 25, in cities across the country and provide scholarship awards when they finish their assignments. Participants receive a $4,575 grant toward their future education or existing loans. They also receive a cell phone, health insurance and a monthly stipend to help them meet their living expenses while they are volunteering. Some colleges even match or augment the award.

Find a benefactor

GradeFund, a new Web site started by two brothers and recent college graduates, helps students find personal and corporate sponsors who agree to contribute a base fee per top grade (usually an A or A-). Sponsorship varies by school, program and corporation, but it's just one of many ways that businesses are giving back to their communities.

Robin Levinson is the content editor for CampusCompare, a Web site that helps college-bound students find the right school.

Comments from GreatSchools.org readers

06/1/2009:
"The reality of the major tax payers and 'supporters of the sytem' paying in but not being 'poor enough' to get anything back will become more and more of a reality over the next 4 to 8 years, and beyond; but hey, we voted! The best way for middle income families to pay for college is to take out loans and make our college bound children aware of our sacrifices and also make them aware that we expect them to assume part of the responsibility of paying those back. I have one child starting college in Fall of 2010 and another in Fall of 2011. They are already taking college credit classes at the community college, as sophomore and junior, just to cut down on the cost of those units when they get to College. They also know they will be responsible for paying their own auto insurance and gas money. They're getting 'hand me down' cars, free. That is much more than I got. They're expected to hold a part time job and to be smart enough to live at home while attending college."
04/27/2009:
"Other great programs to know about: Private schools are matching public school tuition if students are admitted to both as a way to attract the best and brightest. There are need-blind grants for students willing to teach for a few years after graduation at certain schools. Parents looking at colleges should learn the intricacies of how the schools tabulate financial aid, because some schools count the family home as an asset, and others don't. Paying down the mortgage can reduces savings and increase financial aid at some schools (FAFSA schools as opposed to the schools that use the CSS formula). One piece of warning on work-study--students participating must work all the hours that the work-study requires or they will be hit with a bill at the end of the school year that includes interest. So students should take as little as possible or make sure they can truly commit to working that many hours."
04/27/2009:
"I think these tips are good, although I doubt we qualify for financial aid through FAFSA. I think the idea of a gap year is underrated. Having a year to figure out what you want to study, and to save up money is great. When I went to school I majored in English because I liked to read. If I had taken a year to work, and understood more how hard it is to get a job, I might have majored in something else. A little life experience never hurt anyone."
04/27/2009:
"agree...agree..agree...to all posters. people who pay little taxes are the ones getting grants for their kids. ridiclous!"
04/27/2009:
"IT IS ALSO SILLY TO SAY THAT BLACK PEOPLE GET THE WORK STUDY PROGRAMS. AFRICIAN AMERICANS ARE IN THE SAME BOAT AS OTHER RACES, I KNOW FIRST HAND."
04/24/2009:
"iT IS ALL SOO SILLY - TAKING A GAP YEAR IS GOOD IF THERE IS A JOB - BUT THERE IS NO JOB. PELL GRANT YOU HAVE TO BE SUPER POOR, WORK STUDY THEY GIVE IT TO BLACK PEOPLE OR PEOPLE THEY HAVE IN MIND ALREADY. LOOKING FOR A BENEFACOTRS IS LIKE LOOKING FOR A NEEDLE IN A HAYSTACK. COME DOWN TO EARTH FACE THE REALITY AND DON'T WRITE SILLY SOLUTIONS. YOU WILL PROBABLY NOST POST THIS FEEDBACK."
04/23/2009:
"Agree with your first poster. Stop the idea of getting any support from the Feds as those who make over $40,000 get nothing! and in California, if you are a family of 4 and make combine income of $75,000, you get no Cal Grant even if your child has a gpa verification of a 4.0 because you make over their ceiling. The FASFA formulas are ridiculous and don't take into cost of living adjustments state to state, city to city, etc. "
04/23/2009:
"I wish people would stop mentioning government grants as a way to pay for college. It is only a offered to those who are at the proverty level. The middle class, although struggling just to make ends meet, get nothing. I am very discouraged by this system of giving nothing back to a segment of the population who has supported the system for years. Now that it's our turn, my daughter has to pick a college she can commute to because we can't afford the expensive tuitions, and can't get a dime in the form of a grant! Stop making it sound as if it is so easy to get anything from FASFA. It isn't."
04/23/2009:
"Good suggestions, especially about 'GradeFund' which we wouldn't have known about."
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