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In the midst of a $1 trillion student loan debt crisis, students and their families have had the same question on their minds:
Can I afford to pay for a college education?
In the midst of a $1 trillion student loan debt crisis, students and their families have had the same question on their minds:
Can I afford to pay for a college education?
Good news: the answer is yes. By shifting the way we think about the college search, every family can find the right college at the right price.
Right College, Right Price helps you discover the real cost of a college (after scholarships, work study, loans, etc.) before you even begin to apply—saving you hundreds of dollars in application fees and thousands of dollars in tuition.
This guide will walk you through simple, but powerful, steps of the Financial Fit program, which will allow you to:
- Calculate exactly how much you can afford to spend on college.
- Find great colleges you can afford.
- Understand the ins and outs of the financial aid process.
- Choose the right college and avoid excessive debt.
With Right College, Right Price, your student will not only have access to a college education, but also a life after college—without the burden of excessive student loan debt.
Table of Contents
Part 1: The Problem and the Solution
Chapter 1: The Problem
Chapter 2: Overview of Financial Fit
Part 2: The Planning Phase
Chapter 3: Assess Your Affordability
Chapter 4: Discuss Your Affordability with Your Child
Chapter 5: Understand the Financial Fit College Categories
Chapter 6: Net Price Calculators and Comparing College Categories
Chapter 7: Consider the Commuting and Community College Options
Chapter 8: Narrow Down Your List of Colleges
Part 3: The Execution Phase
Chapter 9: Understand Expected Family Contribution (EFC) and Its Relationship to Financial Aid
Chapter 10: Discover Merit Scholarships
Chapter 11: Locate Private Scholarships
Chapter 12: Complete the FAFSA and CSS Profile
Chapter 13: Maximize Benefits
Chapter 14: Analyze Award Letters
Chapter 15: Understand the Ten Loan Options
Chapter 16: Choose the Right College at the Right Price
Chapter 17: Manage Costs Effectively While in College
About the Author
The way we’ve been choosing and paying for college for so many years is now broken, leaving families in tough financial situations or with ex...
The way we’ve been choosing and paying for college for so many years is now broken, leaving families in tough financial situations or with excessive debt. But I’m here to tell you that, even faced with soaring tuition, a poor economy, and limited financial assistance, every family can find a great college at the right price. We just need to use a better method.
So much has changed during my thirty-plus years of working with families on selecting and paying for college. I’ve always attempted to help them determine how they could provide their son or daughter with the resources to attain a college education—and do it without destroying their own financial lives.
In the early years, the solution was simple: just get families to file forms correctly. Later, it became more complicated: help families understand the details of the financial aid system so that they could better plan, prepare, and learn how to maximize benefits.
But now, in the midst of the student debt crisis and a system gone wrong, these options are simply not good enough for most families. A government financial-aid system that was once the backbone of opportunities for low- and middle-income families can no longer be relied upon to help families solve their problems.
This story is a perfect example of the situation in which many families are finding themselves today.
Jennifer* was a high school senior when she received an official award letter from her top-choice school, Indiana University in Bloomington. However, her award letter listed a net price for the college—what her family would have to pay for her to attend after loans and grants—that was $12,000 more per year than what her family could afford. It was April of her senior year, and Jennifer needed to make a final college decision by May 1. She and her parents had no idea what to do next.
Unfortunately, Jennifer’s story is common today. Jennifer was a terrific student. Her ACT composite score was 31, and her high school grades were mostly As. But she wasn’t given the right approach to make her college choice affordable.
Jennifer believed that she had followed the correct steps during her college search process. After all, she did what high school guidance counselors and college admissions officers told her to do. During her junior year, she and her parents used a well-known and respected college-search software program to help them choose potential colleges. Jennifer focused on colleges in the Midwest that had business programs. When she entered these variables into the program, it generated a list of 327 schools. Jennifer then narrowed down the number of colleges by focusing only on those with an enrollment of 20,000 or more students, because she wanted to go to a large school.
Jennifer wanted to attend a school with a strong business program, so she turned next to U.S. News & World Report. She learned that Indiana University, the University of Illinois, the University of Michigan, and the University of Wisconsin-Madison all had highly respected business programs.
After visiting with college admissions officers at each of these schools, spending time on their websites, and visiting their campuses in the summer between her junior and senior years, Jennifer decided to apply to all four schools. Together, the college applications cost the family $260.
Jennifer’s guidance counselor and the college admissions officers told Jennifer and her family not to worry about cost. Each college admissions officer suggested that financial aid was available to qualified students and that merit academic scholarships might also be available.
Jennifer’s parents attended several financial aid sessions at her high school. They learned that, once they filed a financial aid document called the FAFSA, they would receive their Expected Family Contribution (EFC) number. Colleges would use this number to determine how much financial aid the family would receive. Jennifer’s parents could use this number as a good indicator of how much money they would have to pay out of pocket for her to attend college. Jennifer’s parents used a program called FAFSA4caster to learn their EFC, which was $12,457. While this amount was high, they believed it was manageable.
Jennifer and her family were also prepared if the net price of college was slightly higher than that EFC number. During the winter of her senior year, Jennifer searched for private scholarships in case additional money was needed. (She was able to obtain a $1,000 one-time scholarship from a local Rotary club.) Her parents also had saved about $6,500 for her college needs. Jennifer was thrilled when she received acceptance letters from all of the four colleges.
However, the shock came in April when the official financial-award letters arrived. None of the schools had a net price anywhere close to the $12,500 that Jennifer and her family had expected. The closest option was their state’s flagship school, the University of Illinois at Urbana. This school did not offer Jennifer a merit scholarship, and Jennifer only qualified for federal Direct Loans. Thus the college’s net price was $27,500—and this appeared to be her best financial option of the four.
Indiana University, Jennifer’s top-choice college, offered her a merit scholarship. The award letter also indicated that Jennifer qualified for federal Direct Loans, but in the end, the net price was still higher than for the University of Illinois. The two other schools, the University of Michigan and the University of Wisconsin, had net prices that were even higher. So not only was University of Illinois not her first choice in schools, but as the most “affordable,” it cost more than double what her family could afford.
Extremely disappointed, Jennifer and her family were left with two bad options. She could attend the local community college begrudgingly or she could overextend—borrow more than she should—and attend any of her four options.
Jennifer was a great student. She did everything she thought she was supposed to do to find the right college. But in the end, she found herself needing to either go to community college or take on excessive debt.*All examples within this book are inspired by my experiences as a counselor. Names have been changed to protect the privacy of the individuals involved.
This is just one example of the many ways the college financial aid system isn’t working for today’s families. The good news is that there is a better way that will help you find a great college at the right price.
I’ve created Financial Fit™—a college search method that helps families find affordable college options—and used it as the basis for both this book and the Financial Fit software program on www.collegecountdown.com. With these resources, I hope to solve the college debt crisis for families. I believe that by working together—parents, students, counselors, and colleges—we can do just that.
I realized a couple of years ago that I had to focus on what I could control. I can’t control how colleges make pricing decisions. I could complain about the rising costs of college tuition and fees being well beyond inflation, but the complaint would not change the reality. I could complain about the federal and state governments’ inability to increase their support to match the rising college costs, but looking at the other challenges that those entities have, that complaint seems almost unwarranted.
What I did realize, though, was that we could change how we search for schools.
Financial Fit offers a solution. Using the tools and resources provided in this book and the software program, every family can find affordable college options. No family—that’s right, no family—has to borrow excessive amounts of money so that their child can receive an undergraduate college degree.
I am confident that by using the Financial Fit method you will be able to replace the angst and anxiety that you have about college costs (as a parent) with a hope that you can provide your son or daughter with something that you definitely want them to have—and you can do it without destroying their financial lives or your own in the process.
In this chapter, we’ll take a closer look at the issues affecting the college search and financial aid system today so that you can see just how we got where we are and understand some of the biggest myths and misconceptions about paying for college. One of the biggest issues is the current college-search timeline.
The Traditional Timeline
The college search process was much simpler in the past. Years ago, most students considered only a few colleges, those that their friends planned to attend or perhaps those personally recommended by their guidance counselor. Paying for college was also easier back then. College was much more affordable twenty to thirty years ago than it is today. The requirements to receive financial aid were not as stringent, and at some schools, students could borrow enough money in student loans to cover the cost of tuition.
Today’s high school students follow a completely different process in searching for a college. During their junior year, students begin to seriously think about which college they would like to attend. They attend college fairs and speak to college admissions counselors. And eventually, a counselor, parent, or friend introduces them to online college search programs.
With the click of a mouse, students can use these programs to access information about more than 2,000 four-year colleges and universities in the United States. To narrow down their search, they enter preferences such as whether they would like to attend a two-year or a four-year school, along with the desired location, school size, major, and extracurricular activities. (See Figure 1.1.)
Figure 1.1: Traditional Factors Considered in Choosing a College
As the student enters preference after preference, the colleges that don’t match up with these preferences are eliminated. Colleges that do match up stay on the list. The students can even get an idea of whether they will be accepted to these colleges by comparing their GPA and SAT/ACT scores with those of students who have been accepted and not accepted at these colleges.
Do you see anything missing so far in the factors students are considering in narrowing down their list of schools? That’s right: price. Now, college search programs show each college’s listed costs. But those costs are just the advertised price, what we call the “sticker price” (much like when you go to purchase a car). These programs are unable to compute how much students will receive from that college in grants, scholarships, and student loans, and thus how much that school will actually cost to attend (the “net price”). Without the ability to do this, the costs listed in college search programs have no meaning.
Once students and parents use college search software to create a list of potential colleges, they peruse these colleges’ websites and perhaps visit some campuses. By the time the fall of senior year rolls around, many students are prepared to apply to six to ten schools. In most cases, these applications must be accompanied by an application fee that ranges from $30 to $90.
Even at that point, while students are applying to and being accepted by colleges, they have no idea how much each college will cost. College admissions and financial aid officers often do not help the situation. They may cite statistics that create the impression that many families receive financial aid from their school. Sometimes, they’ll cite average aid awards to keep a family interested in their school.
Finally, in January of the students’ senior year, the first step in finding out the real costs begins. Parents file the Free Application for Federal Student Aid (FAFSA). In some circumstances, parents must also file a CSS Profile, a supplemental form required by certain colleges. Financial aid officers use the results of these forms to construct financial-award letters.
In March or April of their senior year, students receive these official financial-award letters from the colleges that have accepted them. A typical award letter lists all grants, scholarships, student loans, and work options that a student will receive if he or she chooses to attend that particular college. After they analyze these award letters, families are finally able to determine the actual cost of colleges. They are finally able to see each school’s “net price.”
Now consider this typical scenario: A student, like Jennifer, has done exactly what she was told to do. She started the process by establishing an initial list of colleges. High school and admissions counselors encouraged her not to worry about the cost just yet. “Follow the timeline,” they told her, “and everything will work out.”
However, what happens when her official award letters arrive in March or April of her senior year and none of the colleges are affordable? And she only has until May 1 to decide what to do! Disappointment sets in. Such disappointment usually leads the student and her family to pursue one of two options:
- Option 1: The student and her family decide that she should attend a local community college. Now, a community college is a great option when it’s part of the original plan, but if a student decides to attend because he or she thinks there is no other option, the student may attend reluctantly and enter college without the enthusiasm needed for a successful first year.
- Option 2: The family decides to overextend its debt and chooses one of the unaffordable colleges. This option is much worse than the first. Parents often feel guilty if they don’t overextend. They feel that their child has worked hard to get good grades and deserves to attend the college he or she wants. This thinking has created what the national media now calls the student debt crisis.
As you can see, the way we currently tell students how to search and apply for colleges leaves the major factor of costs completely out of the equation until too late. Fortunately, Financial Fit gives you a way to start seeing and planning for costs right from the start.
Ten Misconceptions about Paying for College
Another major problem with planning for college costs is the large amount of outdated or just plain incorrect information out there. This misinformation confuses parents and often leads to bad choices or missed opportunities. I’ve identified the top ten misconceptions about paying for college—and what the truth is—so you can avoid falling into any of these traps.
Misconception 1: College tuition today is so high and opportunities for help are so limited that only wealthy families can afford to send their kids to college.
Reality: Qualified students can attend college, regardless of their family’s income, if they follow the right process and choose the right school. Sticker prices—what a school lists as its comprehensive costs—range from $2,500 per year at a community college to more than $55,000 per year at a highly selective private college. Families don’t pay the sticker price, however. They pay the net price, which is the price after grants, scholarships, student loans, and work options are deducted. Some colleges offer impressive awards to lower their net price, which allow many students from lower- and middle-class households to attend college without accumulating excessive debt.
Yes, financial aid is more limited than it was in the past. States have tightened their budgets, and more students are applying to colleges than ever before. Qualifying for the Pell Grant, the largest source of federal financial aid, is also more difficult now. However, even if your son or daughter does not qualify for financial aid, he or she can still receive federal student loans, which are available to all full-time students regardless of income. There is an affordable college option for all families. The key is to learn how to find this option. The Financial Fit program will teach you how to do just that.
Misconception 2: The financial aid system supplies enough aid for all qualified students to attend the college of their choice.
Reality: The financial aid system is more limited than it was in the past. It might supply enough resources for qualified students to attend college—but not necessarily the college of their choice. Many students mistakenly believe that financial aid will allow them to attend any college. However, the process of matching what a family can afford with the net price of a school is the only way to ensure that a student can attend college without accumulating excessive debt. A family can’t rely on the financial aid system alone to make that happen.
Misconception 3: The best colleges cost the most.
Reality: While elite colleges tend to come with higher sticker prices, as we’ve discussed, the sticker price is not what you pay. Many families find that their student’s profile will result in some fantastic net prices at great schools. It’s just a matter of determining that early in the process.
Also, recognize that there are no “best colleges.” The best college for a student is one that fits the student in all ways. The student’s academic profile matches the academic profile of the college. It has the student’s desired major or program of study. It has the right “feel” for the student, so he or she feels comfortable there. More importantly, it is the best financial fit for the student. The student can attend the school without risking financial devastation after graduation.
Misconception 4: Your Expected Family Contribution (EFC) is what you must pay for your child to attend college.
Reality: EFC is one of the most misunderstood and misleading terms related to the college search process. Your EFC is calculated when you complete the FAFSA. The EFC is then used as part of this equation:
Cost of Attendance – EFC = Need
You’ll read more about this in Chapter 9, “Understand Expected Family Contribution (EFC) and Its Relationship to Financial Aid.” But basically, the EFC is just a number used to determine whether a student is eligible for certain financial aid programs. While financial aid officers at colleges need to know this number, it has little value to families because, at most schools, it does not translate into net price. In some cases, a family’s net price is lower than its EFC, but in other cases, it’s higher. Financial Fit will show you how to learn your estimated net price and your official net price at every school in the country. This is what will help you determine whether a college is affordable for your family.
Misconception 5: Students can borrow an unlimited amount of money to attend college.
Reality: Students can borrow a great deal of money to attend college—too much money, in some cases—but this amount is not unlimited. Every student can obtain federal Direct Loans, formerly called Stafford Loans, simply by filing the FAFSA. The Direct Loan program has a per-year maximum borrowing limit: Students may borrow $5,500 for their freshman year, $6,500 for their sophomore year, $7,500 for their junior year, and $7,500 for their senior year.
There are two types of Direct Loans: subsidized and unsubsidized. Both types are student loans and not parent loans. This means that they are written in the student’s name, so the parent is not legally responsible to pay them. However, the terms of subsidized and unsubsidized loans are quite different. The subsidized Direct Loan is the more attractive of the two. No interest is accrued on a subsidized loan while the student is in college. The interest rate, which was 3.4 percent in 2012, does not begin to accrue until six months after graduation. The interest on an unsubsidized Direct Loan begins to accrue immediately, and the interest rate is higher. The interest rate on an unsubsidized Direct Loan was 6.8 percent in 2012.
Some students take the maximum amount of Direct Loans and acquire private student loans when more resources are needed. The private loans could have a higher interest rate. However, the goal of Financial Fit is to help you and your child avoid accumulating excessive debt.
Misconception 6: The key to getting financial aid is to learn how to “hide” your savings.
Reality: While the system that determines your family’s eligibility for financial aid takes into account your family’s income, it only takes into account certain assets, such as savings and investments. These are called reportable assets. Later in the book, you’ll learn how these reportable assets impact the EFC number. Only in rare cases will repositioning of these assets lower a family’s net price to attend a college. Sadly, though, some financial advisors recommend the repositioning of assets as a panacea and charge money for this recommendation even if the result doesn’t impact the net price of college.
Misconception 7: If you don’t claim your child on your tax return, your child can become independent and will receive more financial aid.
Reality: Your child is not considered independent simply because you didn’t claim him or her on your tax return. Children can become independent, though, if they are wards of the court, homeless, in the military, or married. They are also considered independent if they have children whom they support financially. Students taking graduate courses and those who are twenty-four years old or older are also independent. If a student is deemed independent, the only financial information recorded on the FAFSA is the student’s. Parents’ financial information is not to be recorded.
Misconception 8: Students should find the college that most interests them before they begin searching for financial aid and scholarships.
Reality: Although a number of aspects of the Financial Fit program differ from other college-search methods, this one is the most critical. Students and parents following the Financial Fit program do not start the college search process by using college search programs, looking at college websites, visiting college campuses, and talking to college admissions officers. Instead, students and parents begin the college search process by systematically determining what they can actually afford to pay for college—and then looking for great colleges. This method is described in Chapter 2.
Misconception 9: Countless scholarship dollars remain unclaimed each year, but finding this money is difficult and time-consuming.
Reality: Thousands upon thousands of agencies and organizations offer private scholarships, but finding them is no longer difficult. Students can now use scholarship search databases to find relevant scholarships. Categorizing scholarships into these four groups and pursuing the groups in this order maximizes search results: workplace scholarships, local groups, regional groups, and national groups. We’ll discuss finding and applying for scholarships in Chapter 11.
Misconception 10: If you make too much money, you shouldn’t bother filing the FAFSA.
Reality: All families should file the FAFSA regardless of their income. Although the FAFSA determines your family’s eligibility for need-based grants and subsidized student loans, other forms of aid are available regardless of your income and assets. If you want your child to have the opportunity to borrow some money to pay for college himself or herself, you need to file the FAFSA. You can’t obtain Direct Loans unless you file this document.
Why Paying for College Is So Hard Today
While the issues with the timeline and many of the misconceptions about paying for college have been around for quite a while, paying for college today is much harder than even in the recent past. Several factors are driving this growing problem.
Soaring College Tuition
While the recession may have caused your family’s wages to decrease, the cost of college has soared. Consider the increase from the 2001–2002 school year to the 2011–2012 one. The following average costs are according to the College Board and do not include room and board:
- Tuition and fees at a two-year public college increased from $1,748 to $3,122.
- Tuition and fees for in-state students at a four-year public college or university increased from $3,605 to $7,692.
- Tuition and fees at a four-year private college or university increased from $14,895 to $25,296.
Over the past ten years, the direct cost of college (tuition, fees, and room and board) at a private four-year college or university has increased an average of 5.4 percent per year. During this same time, the direct cost of college for an in-state student at a four-year public college or university has risen at an average rate of 6.2 percent.
During that same period, though, the average rate of inflation was only 2.26 percent, according to the U.S. Bureau of Labor Statistics.
These statistics have led to a new term, “college inflation.” “College inflation” means that the costs of college are rising much more rapidly than the inflation of the economy as a whole, making college much less affordable for everyone. This would be a problem in any economy, but it is especially troublesome today.
Figure 1.2: The Rising Cost of a College Education
A Poor Economy
Paying for college has never been easy, but it’s more difficult now. The poor economy is partly to blame. The recent recession has left many people out of work. In 2010, the unemployment rate was a staggering 9.6 percent. It decreased in 2011, but by less than one percent. And in some states, such as California, Florida, and Michigan, the unemployment rate in 2011 remained higher than 10 percent.
If you are lucky enough to have a job today, you might not make as much money as you once did. The median household income in the United States has dipped from $51,295 in 1998 to $49,445 in 2011. (These incomes have been adjusted for inflation.)
The housing bust has also made it more difficult to borrow money for college. A decade ago, families had the option of borrowing against the value of their homes to fund a college education. Today, many families have lost the equity in their home, so their ability to use this equity as a borrowing source has decreased or been eliminated.
Limited Financial Assistance
As if the other problems weren’t causing enough strain, the amount of financial assistance available to colleges is on the decline as well. The amount of money that states are willing to contribute to a public four-year college or university has decreased during the last decade, which means students have to pay higher tuition. In 2000, most states contributed more than $8,000 per student per year, and students paid $3,350 each. By 2010, most states contributed only $6,500 per student per year, and students had to pay $4,300. Why did states cut back on their funding? Many states feel their limited funds are needed elsewhere. Also, jobs are scarce and thus more students than ever are now enrolled in college.
A Perfect Storm
These are the realities. College costs have soared. The economy is challenging. Resources to families from states and the federal government have not kept up with college inflation. The result, of course, is that students and parents have borrowed significantly more money. However, the method described in this book will help you personally avoid this problem of excessive debt. You’ll learn what not to do, and more importantly, you’ll learn what to do and when to do it. By following the recommendations provided, you’ll ensure yourself an affordable college option and avoid excessive debt.
THE IMPACT OF PARENTS’ FINANCIAL MISTAKES
After one of my seminars during the winter of 2008, a family called asking for a personal consultation. Laura was an assistant principal at a junior high school. She and her husband had a combined income of $150,000 and were raising four children. Two of their children were in high school. Like most families that attend my seminars, Laura and her husband wanted the very best for their children.
However, Laura was living in a sea of red. She had no equity left on her home after a first and second mortgage. The family owned two relatively new cars and had to make loan payments on them for another three to four years. Because of their income, they had little opportunity for need-based grants. Yet despite that good income, Laura had no discretionary income left each month and very little in savings.
Here was the kicker: At the age of forty, she was still paying off $70,000 of her own student-loan debt! Her monthly payment on that debt was more than $700.
The only college option for Laura’s children was a two-year community college. After this, they could attempt to enter the workforce and accumulate enough savings to continue their education as working young adults and slowly complete their bachelor’s degrees.
Laura’s own college choice was her first poor financial decision. When I asked her how it all happened, she said, “During my senior year of high school, I was a pretty good student, but I came from a home where neither parent attended college. Everyone was encouraging me to find the best college possible. My parents wanted to give me the best, and my high school counselor encouraged me to pursue schools that fit me academically.
“I never even thought about cost because all the responsible adults told me that financial aid would be available. We filed the FAFSA and I received the grants they said I would receive. My parents had absolutely no resources and very little income. Sure, I was able to attain federal and state grant money, but it did not cover the high cost of attending my top-choice college. I had to borrow the rest. The financial aid officer at the college helped me attain a private loan beyond the Stafford, and I graduated with $50,000 of undergraduate debt.
“Although I started working soon after college, I needed a master’s degree to advance myself. I kept deferring payment on the undergraduate debt as long as I could while incurring more debt to take graduate courses.”
I asked Laura the obvious question: “Why did you attend the college you did when there were less expensive options available to you?”
Her answer helped me realize why Financial Fit is so important. She replied, “I didn’t know any better. No one counseled me. No one stopped me, and responsible adults like my high school counselor and the college admissions counselor encouraged me to strive for the best college possible.”
Laura’s experience is not uncommon. So many families from the mid-1990s to the mid-2000s continued to purchase things they couldn’t afford. They bought houses, cars, and educational opportunities by borrowing money—and now they and their children must suffer the consequences.
The Student Debt Crisis
The problems with the college cost system have gotten so large and widespread that this mounting debt is now referred to as a national crisis.
Too many college students today owe an extraordinary amount of money in student loans. They are borrowing twice the amount that they borrowed a decade ago (after adjusting for inflation).
In 2010, student borrowing surpassed $1 trillion for the first time. The Federal Reserve Bank of New York and other sources report that Americans now have more student-loan debt than credit-card debt. The average student debt is now approximately $25,000, and the average parent debt to help a child attend college is $34,000. Very soon, the average family debt to pay for college will surpass $60,000. Unlike other types of loans, student loans can be quite punishing. Even if students declare bankruptcy, they are still responsible for student loans.
We see the stories around us every day:
- A 26-year-old graduate from New York University who was attempting to manage a student debt of $100,000, as featured in an article by Ron Lieber in the May 28, 2010 edition of the New York Times.
- A 2009 graduate of Northeastern University who was carrying a $200,000 student debt load and was mentioned by writer Laura Rowley in a December 6, 2010 article on Yahoo! Finance.
- A student who accumulated $74,000 in student debt to pay for a business degree from Kent State University that Sue Shellenburger wrote about in “To Pay Off Loans, Grads Put Off Marriage, Children,” published in the Wall Street Journal on April 18, 2012. Sixty percent of the student’s monthly take-home pay is used to pay her monthly student-loan payment. Forty percent of her fiancé’s paycheck is used to pay his monthly student-loan payment.
Clearly, the student debt crisis has long-term implications for everyone. You and your child can avoid this situation by choosing a college that you can afford. You’ll start learning how to do this in the next chapter, “Overview of Financial Fit.”
THERE ARE NO “SILVER BULLETS”
When I tell families that they need to begin the college search process by weeding out colleges that they cannot afford, they are not pleased. My message is not one that they want to hear. They do not want to hear that their child cannot go to his or her top-choice school because they, as a family, cannot afford this school.
Instead, they want me to show them how to find a scholarship that will cover the cost of the tuition at this school or tell them how they can hide their money so they appear to be poor and receive the maximum amount in financial aid. These families want me to come up with a “silver bullet,” a magical way to make it work out so that their child is not disappointed.
The Financial Fit program is a practical way for families to send their children to college without accumulating excessive debt—but this method in no way promises that they will be able to send each child to his or her top-choice school. There are no silver bullets. If you purchase a home or a car that you can’t afford, you’ll suffer the consequences of excessive borrowing. The same is true of college. The key is to find an affordable school that is a financial fit for your family. And you need to do this early in the process so your child does not waste time pursuing college options that are unaffordable.
- Students today use college search software programs to select college options by entering preferences such as major, location, and school size.
- Many of these students select college options without learning the net price of these colleges until very late in the college search process. They may be disappointed to learn in March or April of their senior year that none of the colleges they applied to is affordable.
- When students and their parents follow the Financial Fit program, they first learn what they can afford to spend on college and then investigate colleges that match that affordability.
- Paying for college today is even more difficult than it was in the past because of soaring college tuition, a poor economy, and limited financial assistance.
- Students today are borrowing twice as much in student loans as students did in the past. This has led to what media calls the “student debt crisis.”
Parents who are otherwise practical often lose sight of practicality when they begin thinking about their children’s college education. Yes, college is an investment in their future, but creating mountains of debt doesn’t help a student become more independent. The stories are everywhere: a 2010 piece in the New York Times about a 26-year-old New York University student who managed to accumulate $100,000 in student debt or a 2009 graduate of Northeastern University with $200,000 in debt in a 2010 Yahoo Finance article.
Palmasani says there are no “silver bullets,” but there are definitely better ways to plan and smarter decisions to be made. The first step is to figure out exactly what your family can afford to spend on college and identify colleges that fit your pocketbook. You’ll need to understand the financial-fit categories: 1. Flagship state schools; 2. Non-flagship state schools; 3. Flagship state school out-of-state; 4. Non-flagship state school out-of-state; 5. Highly selective private schools; 6. Midsize private schools; 7. Traditional private school; 8. Community college and/or commuting options.
There are many misconceptions about financial aid. One of the most common is that the most exclusive colleges cost the most. Don’t assume because the price tags are higher that you can’t afford one. Harvard University has a sticker price of more than $55,000, as do many of the more selective private colleges and universities. But the “Harvard Plan” offers free tuition and free room and board to any student whose family’s income is less than $60,000. Yes, if a student has the goods to be accepted, Harvard picks up the tab entirely. Additionally, if a family’s annual income is between $60,000 and $180,000, the most they’ll be required to pay is 10 percent of their income.
Read more here: http://www.charlotteobserver.com/2013/01/01/3759735/getting-your-financial-house-in.html#storylink=cpy#storylink=cpy
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