Why do we hear horror stories about college students graduating with tens of thousands of dollars of debt and without good job prospects? And what can college students and their parents do to avoid falling into that debt trap? The answer is financial literacy — education geared at successfully handling one’s finances and making wise decisions. This is the time of year when college seniors receive acceptance letters and decide where to attend college. Many factors are involved in this important decision, but for the majority of families the most important factor is affordability. Luckily, there are many opportunities for financial aid available to most students. In fact, college board.org states that in 2013, college students in the United States received $119 billion in aid from our federal government.

The average student received about $13,200 last year to help pay for college, with more than half of that money coming in the form of grants that do not require repayment. Here’s the way the financial aid system works:

College applicants and their parents must fill out a form called the FAFSA (Free Application for Federal Student Aid). Schools then use this information to determine a student’s EFC, the amount that is expected for the student’s family to contribute.

Then, colleges determine the amount of financial aid each student will need above that amount, and students can apply for government or private loans, scholarships and grants.

When the amount of financial aid received exceeds the amount charged for tuition, student housing and other school fees, the student is due a refund, which can be used for living expenses or anything else the student wants to spend it on.

Mary Johnson, who is a financial literacy expert at Higher One, Inc. and a former associate commissioner for the Connecticut Department of Higher Education, shared invaluable information with me about how to choose the correct college, how to pay for it, and how to avoid unmanageable debt. She offered this advice for high school seniors:

• Families should sit down together and discuss expectations of who will pay for what. A family emergency or an unforeseen financial difficulty like major car trouble could dash your dreams of a college degree.

• Students should carefully evaluate their financial aid packages before selecting a college. Student should know that they do not need to accept all the loan money that is offered to them. For example, if they are offered $3,000 a month for housing and other living expenses, they might be able to live on far less, thus entering into much less debt during college.

• Debit cards are often better ideas than credit cards for students. If you must enter into credit-card agreements, be careful about debt that can mount quickly with high interest rates. Keep your balance low and inform the credit card company you do not want your credit limit raised.

• Know what your required loan payment will be after graduation and compare this amount to what you can expect to earn with your college degree. The benchmark figure of manageable debt is 10 percent -- a person’s debt, excluding a mortgage, should not exceed 10 percent of his/her income.

• Is a pricey college worth the investment? It may depend on a student’s career aspirations. During the first two years of college every college student must complete general education requirements. These courses are pretty much the same regardless of the school, so there is little reason to pay big bucks for college during the first two years, she says. Johnson especially likes the idea of a student starting out at a two-year college like the one where I teach, Georgia Perimeter College.

• Two-year colleges are generally very affordable choices, and at under $85 a credit hour, Georgia Perimeter College is a great value.

On Monday, March 17, the GPC Newton Campus is offering a free Financial Literacy Day geared both to students and the public to further explore how to pay for college and avoid debt. At 11:30 a.m., Rachel Sands, a business development officer at Georgia United Credit Union, will speak about avoiding debt.

In addition, the college is hosting a business transfer fair from 9:45 a.m. to 1 p.m. Representatives from four-year colleges will be available to talk about how to transfer to their business programs. All events will be in Building 2-N on the GPC Newton Campus, 239 Cedar Lane, Covington.

For more information on planning for and financing college, go to:

www.higherone.com/oneforyourmoney/

www.gradsense.org/gradsense/

For more information on Financial Literacy Day at GPC, contact leila.lawlor@gpc.edu.

Leila Lawlor, J.D., M.B.A., teaches business at the Newton and Decatur campuses. She can be reached at Leila.lawlor@gpc.edu.