Higher education is life's second-most expensive purchase, after a house, for the vast majority of the people who seek it.
And Minnesotans go to college in greater proportions than people in 40 other states. Just more than 37% of the state's adults over age 25 have at least a bachelor's degree, federal data show.
As a result, paying for college is an issue that shapes the finances inside many Minnesota households in the years before students go — and the personal finances of individuals for years after their schooling ends.
Getting financial aid may be easier than many people think. As we'll show, one application, updated every year, does most of the work.
But as the nearby columns discuss — and we'll examine in future stories — the options and decisions that come next are dizzying.
Two fairly recent developments have made paying for an education even more eventful in people's lives and finances.
First, tuition and other costs have risen faster than inflation for the last three decades. For people who wind up borrowing to pay some of their higher education, that means bigger loan balances that take longer and cost more to pay down.
Second, the age of students has moved upward in that time. Today, colleges and universities are no longer dominated by students who just finished high school.
"The majority of college students in the United States are actually nontraditional-age students," said Meghan Flores, state grant and financial aid manager at the Minnesota Office of Higher Education.
"They're not right out of high school, so that word 'traditional' is kind of misnomer," she said. "A lot of folks start college and life happens and they stop and go back later. Or a lot of folks just start working and later decide 'Hey, I want to study.' We also see a lot of people retrain or go back for a second credential."
The financial aid process is the same no matter when a person enters a college or university and no matter the type of degree that is pursued.
The most recent debate over education financing is now centered on two issues being batted around in the Biden administration — whether to further extend the pandemic-related moratorium on federal loan repayment and whether to forgive Americans $10,000 of their student loan debt.
The fundamental process of obtaining financial aid for higher education doesn't hinge on those debates, however. Here are the basics of how it works in Minnesota, and where to get help:
What to do first
The savviest parents begin saving and investing for college-related costs when their children are very young. Many turn to so-called 529 plans, named for a part of the U.S. tax code, that let adults prepay tuition or make deposits in education savings accounts and reap a tax benefit in the process.
States, investment manager firms and other financial institutions offer 529 plans. An account in the state of Minnesota's plan, called MNSAVES and administered by TIAA-CREF, can be started with an initial deposit of just $25.
But when the time comes to apply for college, parents and prospective students need to take two other important steps.
The first is to create a Federal Student Aid ID. This can be done online at studentaid.gov. IDs are not shared. If the student is just coming out of high school, still a financial dependent of parents, then IDs must be made for the student and parent or parents individually.
The ID is used repeatedly through the years with the federal government, state, college or university, banks, other lenders and grantors in the financial aid process.
The second step is to gather financial information that's needed to fill out FAFSA, the Free Application for Federal Student Aid.
The application has dozens of questions about a family's — or student's, as the case may be — finances. But a key element that can trip people is that it looks at the income of the family or student from two years earlier.
That means students who are entering college this fall had to provide information about 2020 income. Students who start in fall 2023 will need 2021 income information.
FAFSA is the fundamental interface into the realm of financial aid. Students and their families fill it out — usually online these days, but paper applications are still available — before the first year of college. Then, they do it again each new school year. And if they go on to grad school, they do it again each year of that, too.
For users of the online application, it can be linked to tax filings from the IRS, which simplifies some of the data input.
After the application is sent in, the Federal Student Aid office at the Department of Education examines the family's (or student's) financial situation. Usually within a week of the application, the office replies with an offer of federal aid. It then ships that offer to the colleges that the student is interested in attending.
While the federal financial aid process is only open to U.S. citizens, Minnesota is one of the states with a financial aid process for people who aren't citizens. Called the Minnesota Dream Act, it makes aid available to undocumented and "DACAmented" students who attended a Minnesota high school for three years or graduated or earned a GED in the state.
When to send in FAFSA
In 2016, the government upended the long-held routines of admissions and financial aid officers at colleges around the country by shifting the start of the FAFSA process three months earlier. For students applying to start college in the fall of 2017, they could submit the FAFSA on Oct. 1, 2016, instead of Jan. 1, 2017. It's been that way ever since.
"That's a tremendous thing if families are willing to step into the process at that time," said Kristin Roach, director of financial aid at the University of St. Thomas in St. Paul. "But it's also tied to admissions."
In response, many colleges and universities moved their early-admissions process to earlier in the fall. That's because they don't examine financial aid requests until deciding whether to admit a student.
At St. Thomas, prospective students are assigned a financial aid counselor as soon as they're accepted. And if they decide to enroll, that counselor will stay with the student until graduation. "Our hope is they provide a financial safety net as the student persists at St. Thomas," Roach said.
Deadlines for early and regular admissions vary by the school, however. Flores said prospective students and their families should submit the FAFSA as soon as they can after applying to the schools they are considering.
The window for seeking financial aid is extremely long — 21 months. Students who just completed the 2021-22 regular academic year have until the end of this month to seek financial aid for it, though it's unlikely there are many students who need aid who would wait this long to ask for it.
"The earlier you start, the more time you give yourself to make a well-rounded decision," Flores said.
