Following is an excerpt from Paying4College How to Save 25-50% On Your Child’s College Education.
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College costs are skyrocketing, and parents can’t seem to keep up. On average, families save $2,676 each year for their children’s education, with a total savings of about $14,000. At the same time, public four-year colleges typically cost about $7,605 each year, meaning parental funds will be tapped out before the end of sophomore year. And forget about private colleges: they cost an average of $27,293 per year, almost doubling in one year what most parents have saved for an entire four years. Looking at these facts, it’s not surprising that many students turn to scholarships and student loans, as parents are either unwilling or unable to save enough to send their kids to college without assistance. Approximately two-thirds of all college students will graduate with a student loan, with the average college student graduating with $25,000 in debt.
Saving a substantial amount of money on your children’s college education starts with avoiding the most common mistakes. Because many parents have acted without the guidance or support of experts, these mistakes happen all too often, costing them unnecessary time and money. Avoiding these mistakes alone will save you time and money, not to mention the saved stress, missteps, and aggravation.
The ten biggest mistakes families make and how to avoid them:
1. Not knowing your retirement needs.
Parents simply cannot begin to establish their college “budget” until they
understand how much of their income and assets they can pledge toward college
without derailing their own retirement.
Your student can qualify for loans and scholarships to pay for college.
Simply put, you will not find loans and scholarships available for your
retirement. It’s the rare parent that calculates the future cost of paying for
college and quantifies the impact it will have on them in 20 years. As a simple
example, paying an average of $37,000 per year for four years of college
equates to a loss of nearly $1800 per month in retirement. That’s not
insignificant!
2. Not knowing your EFC (Expected Family
Contribution). Most parents don’t even know what EFC stands for before it’s
too late to do anything about it. Your
Expected Family Contribution is the amount of money the federal government
assumes you should have to pay for college. Your EFC is based on the income and
assets of the parents, the income and assets of the student, the number of
people in your household, the number of people in your household attending college,
and the age of the parents. The amount
of money the government believes you can put toward college is guaranteed to be
more than you would reasonably expect. But with time and effort, there may be
ways for you to trim your EFC and increase your aid eligibility.
3. Not establishing a total college
“budget.” Parents tend to think of college on a year-by-year basis. The
incremental cost of college isn’t nearly as daunting as the aggregated cost –
all years, all kids combined. But parents need to understand the total cost of
college if they are going to approach their funding challenge strategically.
You can’t impact what you don’t fully understand. Think of a doctor treating
each symptom rather than diagnosing the total problem… it just prolongs the agony
and rarely solves the real issue.
4. Not applying for Financial Aid. The
myths surrounding financial aid are numerous, but the biggest reason every family should file the FAFSA (Free
Application For Student Aid) and/or CSS Profile (used by a few hundred private
schools) is that merit-based aid is handed out through the need-based door. In
other words, if you have a marketable student (decent GPA, good test scores,
athletic, academic or artistic skills), you are telling the schools you are
interested in any incentives they may want to give your child by completing the
paperwork. There is financial aid that
is not determined based on “need” so raise your hand and let them know you are
interested in free money if they are handing it out.
5. Assuming “staying in state” will cost less.
Many parents mistake the advertised sticker price for each college as the
actual cost. Nothing could be further from the truth! What parents need to know
is the actual out-of-pocket expense associated with each school and compare the
costs after all the discounts are factored into the bottom line. Private
schools have leveled the playing field for years by doling out their endowment
dollars to students that fit their profile. Also, it is good business. Schools
understand that certain students will thrive at their school, go on to become
productive members of society and, twenty or thirty years down the road,
contribute to their alumni endowment programs. This allows the institution to
continue to attract smart kids to their school. These same private schools have
an incredible knack for graduating their students much sooner than the state
universities – about 75% more often. The last year of college is always the
most expensive because of the inflationary nature of college costs: students at
state schools tend to take 5.5 to 6 years to earn a 4 year degree, costing
parents more money in the long run.
6. Accepting the idea that junior will “figure
it out” once they are away at school. You simply cannot afford to let your
son or daughter “experiment” at $20,000, $30,000 or $40,000 per year (going up
at 8% per year!). There are terrific, low-cost or no-cost tools available to
every high school student to help them understand their strengths, their
interests and abilities, their values. It is absolutely possible for a 17 or 18
year-old to have a solid understanding of what their likely career path will
be, and what educational curriculum will support that career. But
parents need to understand that these tools may not be provided by the schools
or the guidance counselor. A small investment of time and money in this
area will save most families a fortune in the long run.
7. Waiting until your child is a junior in
high school to discuss college. Parents need to create an education culture
within their household, and begin this culture at an early age. Setting
expectations in terms of what you expect, what you are prepared to invest, what
your student should contribute to the process, needs to be woven into
conversation early and often. While
college isn’t for every student, a lifetime of learning is for every person.
Helping your son or daughter understand how to play to their strengths and how
to put themselves on a path toward success is one of the greatest gifts you can
give them as a parent. I discuss these types of things with my son on our
drives to school in the morning – he’s in 4th grade – and I’m always amazed at
some of his comments and opinions. Our kids are always more capable than we
think and/or give them credit for being!
No matter how old they are, it’s not too late. Start the discussion and
continue it up until the day they graduate with a college degree, or make a
different decision for their future.
8. Not making your student “invest” in their
future. If your student doesn’t have any “skin in the game” you are setting
yourself up for heartache and unnecessary expense. Kids need to “own” their
future. They need to literally invest in their education – in the form of
maintaining certain grades, earning scholarship dollars, taking out student
loans in their own name, or participating in a work-study program through the
college. For families that are fortunate enough to be able to afford to send
their kids to college without incurring student loan debt, I still recommend
you have the student apply and take the loans.
You can pay it off at graduation but benefit from their literal
investment while they are in the process of earning the degree. Statistics show that kids who are “invested”
finish faster, with better grades.
9. Waiting too long to start this process.
The typical parent of a college-bound student in America has saved less than
half of one year of the cost of college (College and Retirement, You Can Do
Both by Scott T. Moffitt). We are simply letting this enormous investment sneak
up on us and find us unprepared. Because of the escalating cost of college,
most parents simply cannot save their way to success in terms of funding
college. But they could save 40% - 50% of the total cost and then do those
things during the high school years that will foot the rest of the bill. Challenging course selection during all four
years of high school, college campus visits, marketing a student-athlete to
college coaches, standardized test prep courses during the junior year, job
shadowing, sending kids away from home for a week at a time (camps, relatives,
leadership opportunities), filing financial aid forms, applying to a handful of
private schools with a history of generous financial offers… all of these will
contribute to a better (cheaper) college selection and college admissions
process.
10. Relying too much on the high school
guidance counselor. Today’s Guidance Counselor can help your son or
daughter find the college “fit” at best or assume the kid is college material
and leave them to fend for themselves at worst. The Public Agenda Report
published in March 2010 entitled “Can I
Get a Little Advise Here: How an Overstretched High School Guidance System is
Undermining Students’ College Aspirations” demonstrated that our current
system leaves a lot to be desired
(http://publicagenda.org/reports/can-i-get-a-little-advice-here). Even if the guidance counselor did help your
student figure out a likely path for their future, they cannot and will not
help you with the financial realities of funding college. They have neither the
training nor the expertise to assist parents in one of their biggest expenses.
To avoid these mistakes, and learn how to get your child the best and most cost-effective college education, get the book Paying4CollegeHow to Save 25-50% On Your Child’s College Education by Beth Walker & Honorée Corder. You can find it at Amazon, Barnes & Noble and Smashwords.
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