What You Don't Know About Paying For College Can Wreak Havoc On Your Retirement

As a Certified College Funding Specialist (CCFS®), I hear almost every day some misconceptions, lies and untruths about the college market. Whatever the actual price a family ends up paying for college today will no doubt cut deeply into their retirement money. Most people know it, but they just choose to avoid it usually until it’s too late. Here’s some of the most prominent misconceptions I often hear.

Outside scholarships are more a goose than a golden egg

“There are billions of dollars of free money just waiting for students!” This is all advertising crap! Most students don’t win enough private scholarship money to pay for books and supplies, let alone their tuition. Private scholarships offer about 3% of the scholarship money every year. Typically, private scholarships range from $500 to $1,500. Even worse, you must notify the school of any scholarships and most colleges will reduce any financial aid you qualify for by that private scholarship amount!

Full rides are for athletes, not scholars

Full scholarships do exist, but they’re rare and typically offered by colleges you never heard of, nor probably not interested to attend. A $15,000 scholarship at a private college with a $60,000 total cost can still leave you scrambling how to pay for it. Good planning will get more merit scholarships than good grades and test scores. It’s all about negotiating the best deal if you know how to do it.

Your EFC is NEVER the amount you pay

The EFC is a measure of the family’s financial strength. Every family has an expected family contribution or EFC, but it’s not what you are expected to pay – it’s a calculation. Most colleges have enrollment management teams that play games with you, if the student plans to attend a college before you get an award letter, it’s probably too late to lower your EFC, thus reducing your cost to attend. The college has already determined whether, or not, they want the student and it will show on that award letter. Proper planning in advance can lower your EFC.

The FAFSA financial aid form is not financial aid

Filling out the Free Application for Federal Student Aid (FAFSA) only determines the student’s EFC and whether the student is eligible for federal aid. It does not mean the student qualifies for or will receive financial aid. The FAFSA only determines your EFC and it goes to the schools you choose so they can determine the outcome of your award letter. Without proper planning, you will most likely pay more for college than if you planned ahead. Ask us how to help you lower your EFC.

Colleges don’t care about your retirement

If you think that colleges care about how tuition costs will have on your retirement – you’re dead wrong – they don’t care! Maybe that sounds harsh, but it’s the truth. They also don’t care about your living costs, consumer debt, your mortgage, medical bills or private (pre-high school) costs either.

A college degree is a college degree and isn't necessary anymore

Did you know that on average a student with a college degree will earn 2x more in their lifetime than a student with just a high school diploma? A graduate of a tier-one school will earn 8x more in their lifetime than a student with a high school diploma. It's imperative to be competitive in the marketplace.

Saving for college may not be the blessing everyone thinks it is

A college can cost between $150,000 to $200,000 per child – especially when you add in the additional costs for room & board, books, lab costs, etc…Unless you have prepared and college “paid for” when the student attends college, you’re looking at financial aid or debt. But the financial aid formula is based on income, not so much on your assets. (Some assets will even be counted against you unfavorably) So if you have high income then financial aid may be out of the picture, even if you have saved some money for college. If you have little savings, you’re looking at some serious debt, which will drive up your cost of college significantly. Sound depressing? You have no idea. This requires planning with an expert years in advance.

Colleges are just looking for students with high GPA’s

College is 3 Things - essential, expensive and a business. If you work with a Certified College Funding Specialist (CCFS®), you are going to learn that effective college planning - if done the right way has three key components. There is an academic piece, there is a social, and there is a financial. If you really want to get the best school at the best possible price you need to focus on all 3 of these concerns.

Students can borrow for college – but it’s costly

Yes, students CAN borrow money for college. They can borrow up to $31,000 in Federal loans for an undergraduate degree. That equates to one year of college at an in-state public university. The rest is up to the family. Students can also sign up for private loans, but their parents must co-sign, and seldom get taken off the loan prior to payoff. Parents can also borrow the Federal PLUS loan, but that comes with an interest rate of 7.0% and a whopping origination fee of 4.264%. That’s 11.264%! When was the last time you paid that much interest to borrow money? Reach out to us to show you how to pay for college.

So what’s the real plan for college?

The real answer to solving all the above misconceptions is PLAN AHEAD! Develop a cash flow plan for college NOW! As a Certified College Funding Specialist (CCFS®) I’m trained in college financial planning and can help families calculate their entire cost of college, develop a cash flow budget around that cost, and control and manage education borrowing. Don’t rely on the Federal government, or the colleges, to come up with a solution for high tuition costs!

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