Your personal finance should always come into question when it comes to college. Whether you are thinking of taking classes, or you have children that are planning to attend, the process of applying and getting into a college can be complicated and sometimes difficult. So it’s no wonder there are so many myths swirling around the entire situation.
With that in mind, here are 3 myths involving college that we would like to help you avoid.
1. Saving money in a child’s name hurts financial aid
If you are using a custodial account, the answer is yes. Saving in a child’s name can hurt your chances at getting more financial aid. This is because financial aid formulas expect 35 percent of the student’s assets to be spent each year on college alone. A 529 savings plan, however, has little to no impact since it is considered a parental asset, thus only 6 percent is considered. Bare in mind that your income is largely the barometer financial aid uses, less so savings.
2. We aren’t rich, so financial aid will pay for it all
This myth is regularly perpetuated by those who have no experience with how the government calculates what they call “need.” And it’s for this reason that when the tuition amounts are in front of them, and their expected contribution (or “EFC”) is in front of them, their collective jaws drop. Just as mentioned above, income is the deciding factor. Not being rich doesn’t mean that you don’t make enough to help pay for college. It’s sad but it’s true.
3. The remainder of my “need” will be funded by the college
Unfortunately this is mostly untrue. Very few public institutions and only about 1 in 5 private schools will help a student fill 100 percent need. “A 2008 study by the National Association for College Admission Counseling (NACAC) reported that 81% of private colleges and 93% of public colleges practiced need-blind admissions.” The gap is typically filled with work study money, grants, and scholarships.
If you would like additional information on how we can assist you, please contact us any time.