A Lesson in Paying for College — Part 1

lesson-in-paying-for-collegeHere’s a little-known fact about the cost of a college education: there are two prices, one for the informed and one for the uninformed. The uninformed “buyer of a college education” generally spends thousands of dollars more than the informed. And, while the uninformed is sending their child to the local community college or state university, the informed parent is often sending their student to a prestigious private college – and paying the same price! Helping you become a more-informed buyer of a college education – and helping you save potentially thousands of dollars in the process – is the purpose of this two-part blog series. Following are 5 of the 10 common mistakes that parents make that cost them thousands of dollars in lost financial aid and tuition discounts. Next month I’ll cover the remaining 5 items.

Mistake # 1 – Assuming their income or assets are too high for them to qualify for financial aid.

A lot of people mistakenly assume that they won’t qualify because they earn too much or have too much in assets. Sometimes that’s the case, but often, because of any number of factors, like divorce or unusual expenses, number of children, number of children in college at the same time, taking care of aging parents, or the college having different criteria for determining financial need, you can earn up to $200,000/year and still get need-based aid.

 Mistake #2 – Rushing through the financial aid forms and submitting them incorrectly

If you think that applying for financial aid is on a first-come, first-served basis, think again.  The faster (and less carefully) you apply for financial aid, the more likely you are to commit errors.  You do not want to submit your forms a second time with corrections and waste even more time.  Going to the back of the line because your forms were filled out incorrectly or had errors can result in lost financial aid since it is a finite resource. Plan ahead, meet the college’s deadlines and you’ll be fine.

 Mistake #3 – Applying to fewer than 6 colleges

If the student applies to fewer than 6 schools, the odds for a good aid package are much less than if he applies to 10. The more colleges applied to increases the odds of getting a really good package that can be used as leverage to secure a better package at another school.

Mistake #4 – Picking the wrong schools

It is imperative that the family choose schools where their child ranks in the top 20% of the incoming freshman class with respect to their GPA and SAT/ACT scores. Although schools give financial aid based on your calculation of “need” at their school, they will definitely give preferential packaging (i.e., more FREE money versus loans) to students who rank in the top 20% of the incoming class. The reason they do this is to attract the better students to their school. Use this reality to your advantage.

 Mistake #5 – Assuming all financial aid is the same

All schools are not created equal and will not be able to give the family the same financial aid packages. Some schools are well-endowed and get a lot of money from alumni and corporations. These schools have more money to give out and are generally able to meet most of a student’s financial need at their school. Others don’t, so it can actually end up costing you more to send your child to a “cheaper” school if they don’t have the money to meet your need. Families should know each school’s history of giving money BEFORE they ever apply, so they’re not disappointed when they get a bad financial aid package from their child’s top school choice and realize they won’t be able to afford it, or will need to take on crippling student loan debt to cover the gap.