Eleven Misconceptions About Paying for College
It happens every year. Parents are shocked that their student’s college didn’t award their student enough, or even any, financial aid. Many went into the process of applying for financial aid with the wrong ideas of how it works. Here is the truth about some of the most common misconceptions:
FAFSA doesn’t award financial aid. The FAFSA application only determines if you are eligible for aid. Yes, all students who submit the FAFSA qualify for an unsubsidized federal loan. But the FAFSA is just the government’s way of calculating your eligibility. It’s just the messenger.
Your EFC is not the amount you will pay. Every family has an Expected Family Contribution from FAFSA. And some 300 private colleges use the CSS Profile from the College Board which can calculate the EFC differently. The EFC is a measure of your financial strength and is understood to be the amount you can afford to pay. But…. most colleges don’t offer 100% of need, or enough aid to cover the remaining costs above your EFC. Most public universities can not afford to meet everyone’s demonstrated need. Even if a school meets 100%, you will be expected to pay the full amount of the EFC.
A merit scholarship might not be enough. A $20,000 a year scholarship sounds generous, but if the private college’s sticker price is $60,000+, you need to reconsider. Full scholarships exist but they are rare and extremely competitive.
Loans might be the only “aid” your student is offered. Officially, federal loans are not considered financial aid, but depending on your EFC and the college’s available money, it may be all that is offered.
Your student cannot borrow the cost of college. Federal loans come with limits- for good reason. Students can borrow up to $5,500 the first year, $6,500 the second, and $7,500 for the junior and senior year. If a parent doesn’t qualify for a Parent Plus loan, students can borrow a little more but most are subject to the limit. To borrow more, students would need their parents to co-sign private loans. Most of these begin repayment almost immediately whereas federal loan repayment is deferred until after graduation.
Outside scholarships are not a golden ticket. They can help but typically they are not enough to finance the full cost. Most private scholarships are small- from $500 to $2,000. Additionally, receiving a private scholarship can reduce your aid package from the college. You need to know the college’s policies on outside scholarships.
You student almost certainly cannot file as an independent. The age of 24 is still the magic age for automatic financial independence. Only a few circumstances grant independence. Most must be documented by a school counselor and financial forms.
Saving for college helps more than hurts. Parental non-retirement savings don’t hurt financial aid as much as one might think. The EFC formula weights income much more heavily than savings. On non-retirement savings, parents are expected to contribute up to 5.4%. You are not penalized for saving.
Colleges don’t care that you are behind in retirement. Colleges are bound by financial aid formulas and your EFC. The FAFSA doesn’t ask for consumer debt. Financial aid is not based on high living costs. The CSS Profile does consider stiff medical bills and private high school tuition. All colleges do consider changes in circumstances ( lost job, illness, etc). You can request a review but be prepared to document the change.
Dream schools can be a nightmare. Telling your student that they “can go anywhere”- if it means a school beyond your means- can sink retirement goals and burden you with life-altering loan payments. Don’t agree until all the numbers are in. Look at all 4 years of costs and multiply that by each child in the family. The biggest myth a parent can operate under is “We’ll figure it out as we go.”
Please contact us if you would like a free interest meeting to provide some of the basics on EFC, Need-based giving and merit scholarships. We are standing by to support.