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.