College Planning Myths: Part Two - Financing College
College Planning Myths: Part Two - Financing College
One of the greatest hurdles in sending your children to college is the financial cost. As you look ahead towards this goal, you are going to run into a number of myths and misconceptions regarding paying for college that you need to realize are not necessarily true.
In my previous blog post I discussed some of the myths surrounding the college admissions process. Now I would like to dissect some of the misconceptions surrounding financial aid and financing a college education.
Cox Collegiate Planners was founded with the idea that college planning is a multi stage event. Each stage goes hand in hand, and has a few processes. In order to find a college that is a good fit; I want you to think of approaching your child’s education as a two-step process; the first step is applying to and getting accepted by a school that is a good fit for the whole family.
Myth #1 - My child is such a superstar athlete, student, or both, they can get a free ride anywhere they want to attend.
If you refer to last week's blog post on College Planning Myths: Part One College Admissions, schools are flooded with applications from highly qualified students. As a general rule, high school students focused on attending college obtain high grades and get involved with various activities and sports. In other words, while your child may be wonderfully accomplished, so are many other students.
Full college scholarships are not easy to obtain and are in short supply. Do not assume that your child is going to easily fall into one. When shopping for colleges, it's important to look for schools that are able to fill your need for merit or needs based financial aid.
Myth #2 - Financial Aid is easy to obtain
Wouldn’t it be wonderful if colleges and universities funded the bulk of your child’s education and we did not need student loans? However, that is not the case.
Grants are not automatic for all students; they often have stringent requirements that vary by state. Like the college admission process, the financial aid department also uses a formula to calculate a student’s aid package. This involves multiple factors, from family size and income, to the costs of the school.
Myth # 3 - All Financial Aid is the same
Grants, scholarships, work study, loans, all differ and it is important to realize that you probably do not want to fund your child’s education entirely through loans. To make matters worse, interpreting a financial award letter is often difficult because loans are often mixed in with grants and scholarships.
Families should also understand that work study programs are not guaranteed. Students are sometimes given the opportunity to work at the university to help reduce tuition costs, but this is only if there is a job available once the semester begins.
Myth #4 - I have no savings, won’t the college give my child more aid?
This is a myth I remember my mom telling me as I was preparing for college... ahem... yesterday. I'm not surprised when I hear it come up again, because theoretically it makes sense. How can you pay for something that you haven't saved for?
Unfortunately, income influences your Expected Family Contribution(EFC) more than savings. Parental income makes up the bulk of the EFC calculation and can range from 22% to 45% based on the income level. Reference the 2017-2018 Federal EFC Quick Reference Table Below to get an estimate of your family's EFC based on income.
Let me share a true story with you: in preparation of their first child attending college, a couple elected to make several large purchases prior to applying for financial aid, so as to deplete their savings. The parents felt that surely their child would then qualify for additional grants.
They were wrong. Because their child was an in-state student attending an in-state university, the cost of attendance was fairly low. Plus, their combined income was well above the qualifications for state and other grants. They depleted their savings for absolutely no reason.
Myth #5 - I make too much money, completing the FAFSA form is a waste of time.
For a lot of families there are a few reactions that happen when they see their potential Expected Family Contribution amount as calculated by the FAFSA form. It's common to hear laughing, crying, gasping, the use of "choice" language, or just witness the shock. It's no wonder that families have been lead to believe that filing the FAFSA form is a waste of time.
As a CERTIFIED FINANCIAL PLANNER™, I can tell you that this belief is incorrect for a few reasons. The biggest reason is that you are telling colleges that you are willing to pay full price for college. In a perfect world nothing changes, but life is messy and unfortunately situations change. It is not uncommon to see financial changes during the course of a student's college career that stem from job loss, divorce or even death of a parent. By filling out the FAFSA, you are telling the education system that your numbers are current, but it helps your case if something were to change in the future.
Myth #6 - Private schools offer students more financial aid.
Sometimes, this is correct. When shopping for a college, don't discount a school based on it's "sticker price". Colleges differ in their financial aid policies. Some schools are merit based, and some cater to more needs based financial aid candidates. Look for a college that can fit your financial needs.
Schools vary in the amount of financial awards they are able to give due to factors like endowments. A small, private college could potentially put together a financial aid package that is significantly higher than a state school. State schools are limited in the amount of financial aid they are able to provide.
The real question is whether or not the aid is largely in the form of loans, or are they offering scholarships, grants, work study, and small or no loans to meet the costs?
Now let me share with you ways to help with the costs of college.
The most important thing to do is to plan ahead for college!
It's no secret that our children are facing a large National Student Loan Debt crisis. That is why I am a passionate advocate of beginning the process early. While we can begin working together when your child is a high school senior, late stage college planning has traditionally lead to higher student loan amounts. You can make a bigger impact on your family's comprehensive college financial plan by starting in the Freshman or Sophomore years of school.
By planning ahead we can access a school’s typical financial aid plan before your child applies. This helps by narrowing down your school list and eliminating schools that will be unaffordable. This can save you a lot of time, money, and energy.
The second most important thing is to complete the FAFSA accurately and have documentation ready for the financial aid office.
Once the FAFSA has been completed and verified by the U.S. Department of Education, your child will receive a Student Aid Report (SAR).You will need to contact the financial aid office to ensure they too have received it and you will likely have to furnish copies of your tax returns.
Be proactive! Just as you can meet with an admissions counselor you can also meet with a financial aid counselor to discuss your situation.
What if I lost my job or had a change in my circumstances after I completed the FAFSA?
Colleges do look at programs that will benefit your child, but if you had a change of circumstances, or if you lost your job, you can amend your application. You will need to speak to a counselor and furnish them with a written explanation as to what changed and how it is impacting your child’s economic situation. This is not uncommon, and it's important to be proactive with following through with any requests from the college.
Is there any other way for us to save money on the costs of college?
Yes. There are a few ways to cut the cost of your tuition bill.
- Shop for schools that fit your college budget!
- Your child can attend a community college for the first two years at significantly reduced tuition. Some schools have entered into partnerships with four year institutions to ensure that the credits transfer, which can save on the tuition costs. From personal experience, I'm a huge fan of community college because of the amount of money it saved my family.
- Your child can also take and score well on Advanced Placement (AP) exams. I know many students who entered into college with enough credits to save them a semester worth of classes. Even one or two successful exam scores save on the costs of the tuition for those classes.
**Note that you must check with the college admissions office to see what scores they will accept and you will need to have the official score report forwarded to them.
- Another increasingly popular option is enrolling for dual credit courses through the local county college while in high school. More and more high schools are partnering with local community colleges so your child can earn degree credit before even graduating.
- Finally, check with your student's college to see if they will accept summer course credits from a local community college. If your child lives in the dorms and comes home from the summer or even if they take a few classes before the fall semester begins, this can be a great option to complete some general education requirements at a lower cost.
**Your child may need to obtain approval from their academic advisor in writing and may need to complete forms for their college registrar’s office before doing this to ensure the credits are accepted and applied to their degree.
Cox Collegiate Financial can help you understand the college planning process and approach it in a way that will maximize the value for your entire family.
By breaking some of these myths, I hope it is clear that by starting the process early and working together, we can make the experience better for your child as well as the entire family.
Together, we can do this and I look forward to meeting with you to create a comprehensive college plan for your family's future.
Melissa Anne Cox CERTIFIED FINANCIAL PLANNER™ is also a College Funding and Student Loan Advisor, and Financial Coach in Dallas, Texas.