Getting Real about College Funding

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Anywhere you look, you can find advice about saving for college.

And, if you’re trying to save for the full sticker price, not only is that advice depressing as hell, it also may be entirely inaccurate for your situation. This – by far – is not the proper strategy.

You’ll see a ton of information about 529s and how wonderful they are – and they can be in the absolute perfect circumstances. The fact most overlooked is that 529s are not savings vehicles; rather, they are investment vehicles. You could end up with less than the amount you actually contributed to the plan. Now, what kind of savings plan is that?!?

So, let’s get real…

• Conventional wisdom may be wholly inappropriate for your particular family situation;
• Actions taken should not favor eligibility for financial aid over the need to save; and,
• If you’re like most parents, you have absolutely no idea what you’re doing when it comes to a college planning campaign!

Where does that leave you?

It leaves you with the following points to consider and, most likely (and, yes, self-serving), with a dire need to engage the services of a professional college planner!

1. Schools expect a family to “pony up” much more than they can truly afford.

Now, who would have figured that one out?!?

The government and most schools base financial aid awards on the Free Application for Federal Student Aid (FAFSA), with which an Expected Family Contribution (EFC) is calculated. While the EFC may depend on a number of factors, the most prevalent factor is family income, closely followed by family assets.

The EFC expects a large chunk of income (22%-47%) to be used for college expenses. Family assets are assessed at just under 6%.

Maximizing financial aid is a horrible excuse for not saving, especially when you can do both at the same time. You just need to know how to do it.

< HINT – engage a professional college planner!!! >

2. Even if you qualify for a boatload of aid, schools may not be able to give it.

Less than 10% of schools meet 100% of financial need, while nearly half meet 60%-80%. Even those that meet your financial need may not meet it in ways you expect, as aid can vary widely from student to student.

3. Guess what? “Financial need met” DOES INCLUDE loans.

Depending on the school, loans (both student and parent) can be a significant part of the package. Even if a school meets your need, you could end up paying more than your EFC might suggest.

Don’t make the mistake of assuming that saving more will reduce financial aid and that you’ll pay more for school. That may not be the case.

< HINT – engage a professional college planner!!! >

4. Academic or athletic scholarships may not be part of the package.

A large number and variety of scholarships exist in the financial aid universe.

Every one of them may help, but most are relatively small.

And most scholarships, both merit and athletic, are NOT full rides. It doesn’t matter how talented your child may be, there will always be someone with equal or more talent.

As the saying goes, “don’t put all your eggs in one basket.” Have a Plan B in place.

5. Rely on realistic numbers, not hypothetical amounts.

< HINT – engage a professional college planner!!! >

We are waiting to hear from you!

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