College Financial Misconceptions

There is plenty of college financial advice available to the American family.  A quick internet search, and you can find pages of content.  But that does not mean that we are more educated about college financial planning.  As we travel our area presenting our educational college financial workshops, we find that many people are more confused than ever about college finances.  Here are some of the top college financial misconceptions that we come across.

College Financial Misconceptions: College is or will be  Free!

This was one of the rallying points of the recent election cycle.  There are a few colleges out there that offer free tuition, but for the most part college is not free, nor will it be free for the foreseeable future.  Some countries, such as Germany, have tried to make college free for all students.  But it isn’t really a free ride: it’s paid for by taxes.  I think maybe we should just remember, that there is no such thing as a free ride.  Even if it was label as “free”, there is a cost somewhere.

College Financial Misconceptions: There is plenty of time to plan!

Most people we meet have little to no plan to pay for their college needs.  In fact, the words we hear most often are, “I wish I’d heard this sooner!”  With college costs soaring, the average family can expect their college cost for a 4 year college degree to be between $80,000 – $120,000.  In a recent article (October 2016) entitled, “Here’s What the Average American is Saving for College” is was reported “According to Sallie Mae, the Average Family has socked away $16,38o….to meet their [college] goals.”  You can see that there is a great difference between what college actually costs and what the average person has saved for college.   The secret to saving more is to start a good plan early.  The longer you wait to plan, the more difficult it will be to attend your college of choice.

College Financial Misconceptions: My child will get scholarships!

Scholarship and Grants are certainly a part of most college awards letters, but the chance of obtaining a full scholarship is pretty rare.  How rare?  According to Mark Kantrowitz, editor of FinAid.org, only about .3% of full time college students received enough to cover the total cost of college.  This number again highlights the fact that you cannot rely upon scholarships to pay for your college plans.  You need to have a plan, and you need to follow that plan.

College Financial Misconceptions: The EFC is all I will have to pay!

A phrase that is common in college financial planning is the Expected Family Contribution (EFC).  The EFC is used “to determine an applicant’s eligibility for need-based federal student aid, and in many cases, state and institutional (college) aid.”*  But the term EFC is a bit misleading.  The EFC is not the maximum that you will be expected to cover, but rather the starting point of your responsibility.  For instance, let’s say your EFC is 17,000.00.  The award letter arrives and the total college cost is 32,000.00 you receive 5,500 federal help in the form of an un-subsidized loan and 3,000 in school scholarships and grants.  There is still a difference of 6,500.00 between total award and EFC.  This difference is the family’s responsibility.  You can submit an appeal letter, but ultimately the family is responsible.

Don’t let these college financial misconceptions keep you from developing a financial plan for college.  Don’t be confused by all the information you are presented regarding college finances. Develop a plan today and start to follow that plan toward your college dreams.  If needed, obtain help from a financial planner who specializes in planning for the college years.

 

 

 

College Strategies for the High School Freshman

Your student has now reached the halfway mark through his/her first year of high school!  At this point, much of the nuts-and-bolts of specific college planning and financial strategies are still processing. However, you are currently in the ideal time to assess where things stand with your freshman student and his/her overall high school experience.  So here are some college strategies for the high school freshman

College Strategies for the High School Freshman: Pay Attention to the Fall Semester

The first report card of high school is a pretty big deal, and it is the initial indicator of how your student is performing at this new level.  We urge you to take the time to determine what has gone right so far, and help it to continue, as well as finding the best way to correct anything that may have gone awry or presented a challenge.  At this point it is still early, and there can certainly be an adjustment stage. Encourage your student in every way possible toward achieving academic excellence.

College Strategies for the High School Freshman: Consider the Big Picture

Yes, schoolwork is a huge part of the high school equation when it comes to college preparation.  However, do not ignore an assessment of how your student is adjusting to high school emotionally and socially, as well.  Activities are a fantastic preparation for college and for life in general, whether they are science clubs, leadership, athletics, or other interests.  There needs to be balance, certainly, but this is one area that also needs parental support.  Parents can make a huge difference in a student in discovering his/her areas of interest, and so can extracurricular activities.

If you have already saved money for college, then it’s never too early to get your financial plan together

College Strategies for the High School Freshman: Protect the money you’ve saved.

If you have money saved outside of your company’s retirement plan, talk to your College Funding Advisor about re-positioning those assets into accounts that are not exposed to the financial aid formulas.

  • This strategy was used with permission from our College Planning Network.  It is one excerpt from our monthly email that gives tips and strategies to help students and families prepare for the college years.

Turn Daycare Dollars into a Diploma

Lately we have been focusing on early planning for your college needs.  We believe that the secret to saving for college, or saving for any reason, is to capture funds before they get re-allocated into other ares of spending.  This has been commonly referred to as Parkinson’s law.  This law was first outlined in a 1955 edition of the Economist magazine.  This simple law states that expenses will always rise to the level of income.  This is true: think of your last pay raise.  Where did that raise go? If you did not capture it for a particular purpose, it just got absorbed into you normal spending habits.  Well, here is a plan to help you resist Parkinson’s Law and turn daycare dollars into a diploma.

The Soaring Cost of Daycare

What would you say the average family spends for daycare?  The number may surprise you.  There are many sources to check for the actual numbers in your specific area, but a quick search lead us to 2-1-1 Childcare where we found that the average cost of daycare in our area was around $250.00 per week.  Even that cost varies significantly from area to area.  With a few punches on the calculator keys we found that the annual cost of day care is around $13,000.00 per year.  Over the course of 4 years, that would be roughly $52,000.00.

But what happens at the end of the daycare years?  First, there is usually a large sigh of relief, maybe a night on the town, but then the money usually gets absorbed into the normal spending habits.  If you fight that temptation and make a plan, you can save some substantial money for college.  This will take some discipline, but it will save your student thousands of dollars in debt later.

Turn Daycare Dollars into a Diploma

Let’s do some math.  If you were to capture $1,000.00 of those day care expenses and set it aside in a small savings account.  Let’s say that that savings account was earning 1%.  You would have to search high and low to find such a thing, but let’s just use it as a simple illustration.  We used bankrate.com to run a quick illustration.  At the end of 12 years you would have saved $144,086.83 for your student’s college education.   That is just one expense that can be captured.  Can you find some more?  Probably!

You can resist Parkinson’s law and turn daycare dollars into a diploma!  Want to know more?  Make an appointment with our office today.  We can help you design a plan to capture these expenses and not create a debt crisis for you and your student.

Unexpected Costs of College

College is one of the greatest investments in a student’s future.  As you plan for your student’s future, don’t forget the unexpected costs associated with college.  Many colleges try to show these expenses in their award letter, but it is hard to calculate these costs precisely simply because there are way to many variables.  Some of the costs are associated with particular majors, while others are related to the location of a particular college.  Let’s examine some of the unexpected costs of college.

The Unexpected Costs of College: Travel

No matter where a student attends college, they will have some kind of travel expense.  If you attend close to home, it may be as simple as a tank of gas and some fast food. However, If you are attending across the country, this cost could include plane tickets, perhaps some shipping expenses, or maybe even addition set-up costs.  In a recent College Parent of America article, “Top 7 – unexpected cost of college”, they listed college travel expense as one of the top 7 unexpected expenses.  You need to consider travel costs in the overall costs of college.

The Unexpected Costs of College: Books

Every student is going to need textbooks each semester, therefore, textbooks are also an unknown expense.  While we know textbooks are needed, the cost of textbooks is greatly dependent upon the chosen major.  Princonomics revealed that the cost of textbook is souring.  The average students spends around $1200.00 a year on textbook alone.  Princonomics breaks the cost of books down to show what majors have the most expensive textbooks.  You need to consider the costs of text books in your college planning.

The Unexpected Costs of College: Set-up

The student and family will also need to plan for “set-up” costs.  This expense includes: technology, learning supplies, dorm room supplies, toiletries, etc.  There is no way to figure out what these needs will cost.  There are just to many variables.  However, it is an expense that is often overlooked and therefore needs to be considered.  The best idea would be to establish a budget.  While textbooks and travel expenses are pretty inflexible, you may be able to make some small adjustments with your set-up costs that can lead to lower expense.  Make a plan, and if you start early enough, you may be able to take advantage of some great deals.

The unexpected costs of college can add up! Proper planning can alleviate some of the pressure of these expenses.  In upcoming posts, we will share some money saving ideas to help alleviate some more of the pressure of these unexpected costs of college.