Mistake #1: Making Dangerous Assumptions!
The first assumption is that your child's high school counselor will help provide you with a myriad of ways to save money on college. The truth is, their time is limited, they don't know all of the practical, financial, and tax strategies that you can employ to save money, and quite frankly it's NOT their job to save you the most amount of money possible!
The second assumption is your student's college financial aid counselor will show you all the ways you can save money on college. You are badly mistaken! Their job is to simply process the paperwork you give them and determine what you're eligible for. That's it! They are NOT going to provide you with hours of counseling and strategies.
The third assumption is that you make "too much money" to qualify for financial aid! How do you know? I've helped families earning a six-figure income receive financial aid. While there's more money available for low to middle income families, there are a variety of ways higher income families can earn financial assistance. Don't just throw up your hands and say, "We make too much money to qualify!" That may NOT be true at all! For a free analysis, you can call my office see what your options are.
Mistake #2: Starting Your College Planning Too Late!
The best year to start is in your student's junior year! There are very two important reasons for this:
The first reason is that students need time to really think about college. They need to process some important questions, like:
- "What college is best for me? In-state or out-of-state, urban or rural, private or public?"
- "How big of college do I want to attend? College sports? Christian? Etc."
- "What careers interest me the most? Which college offers the best classes for that career?
The second reason is because financial aid is based on your prior year's income tax return. In other words, if your student is attending in the Fall of 2009, then you'll need to fill out a FAFSA based on your 2008 tax return. What you earned in 2008 determines your student's 2009 to 2010 financial award package. If you want to save money on the cost of college, by starting in your student's junior year, you may want to consider some financial and tax strategies that can double or even triple your eligibility for financial assistance!
Mistake #3: Looking In The Wrong Place For The Money!
Most parents mistakenly urge their children to spend time and energy looking for private scholarships on the internet. That's fine, if they're willing to spend ALOT of time and energy. However, most students (while in their senior year of high school) either don't have the time OR they don't want to take the time. 90% of the students I've worked with over the past ten years have submitted applications for those internet scholarships only to never hear from the company in terms of a response to the student or simply be turned down! While one of my students did earn about $33,000 in private scholarships, it took him working about 15 hours per week for several months to get it done! He sacrificed his after-school job to accomplish this incredible task. Even if your student is willing to do that....there's no guarantee!
So, where's the money? 99% of the money is found in both the Federal and State government plans. Private scholarship only make up 1% of the total funds for college, in spite of the fact that we hear there are millions of dollars out there. The Federal and state monies are mathematically based. If you meet certain guidlines, you can count on it. That's why I encourage you to find someone, like myself, who can offer you some insight as to whether there are strategies that can work for you!
Mistake #4: Not Filing A FAFSA Early Enough!
College funding is awarded on a first-come, first-served basis! It's important that you know that! The colleges receive information from the filing of your FAFSA and then allocate or budget monies you may qualify for. If you're late, chances are the money will be gone! If it's gone - even though you may qualify more than most applicants - you will NOT get anything. You have up until June 30 of the year your student will enter into college to get it done, but I recommend you submit it shortly after it becomes available to the public each year - which is January 1.
Plus, you need to fill this form out EVERY year your child goes to college! If you need help with this, our office would be happy to file this form for you every year so that you don't have to worry one second about it. It's up to you!
Mistake #5: Not Filing The FAFSA...Because You Make Too Much Money!
This idea is simply crazy, and is usually the advice given by someone who's NOT a college funding expert. Even if you make a large, six-figure income YOU QUALIFY FOR FINANCIAL AID! You're not going to get "need-based" assistance, but you will be offered a Stafford Loan. This is a low interest federally-based loan that goes into your child's name and can be deferred until 6 months after they leave college!
FACT: In order to dispell the myth that my kids were going to go to college and party it up, I told each of them that they were going to pay for college....ALL of it! However, I told them, "if they did well, they could earn my financial assistance." In fact, if they did real well, I promised them that I would pay for most of it. The BIG KEY was - they had to earn my help! Wow! It changed their whole attitude completely! You see, I felt that they needed to have "blood in the game." I knew (after working with so many college bound students) that they needed to put some of their own ownership into their college education. Nobody ever appreciates something given to them for free.
So, even if you do make a high-income level, still file the FAFSA each year! I've had many high-income earning parents thank me for this one idea!!!
Mistake #6: Choosing A College's Based On The Sticker Price!
Most parents force their students to shop colleges based on their price tag. It sounds reasonable, but colleges are a weird animal! They have factors in them like:
- Percentage of Need
- Percentage of Need Met
- ACT qualification standards for scholarships
- Endowment funds
- And several other factors.
All of these things are part of the overall equation that can make an EXPENSIVE college cheap! I recently sent a student to Washington University (Cost of attendance is $30,000 per year) for less than $5,000 per year. Another student went to Drury University ($26,000 per year) for less than $3,000 per year! That's why you've been able to read in magizines such as Newsweek and Time how it's possible to go to a "private" college for less than a "state" school.
There are internet sites that can help you with this!
Mistake #7: Putting Financial Assets In The Wrong Place!
Until 3 years ago, a 529 plan was the worst place to put money away for college. In spite of the fact that it gave you a tax deduction and usually lost money within the portfolio, it was counted in as part of the Student's Assets! This increased a students EFC (Expected Family Contribution) dramatically and destroyed thousands of students ability to receive financial aid! It wasn't until so many people complained that they changed the law.
An Education IRA is a horrible solution! It disqualifies you from receiving the coveted Hope Scholarship Tax Credit or the Lifetime Learning Credit! Which, in turn, could be far more financially devastating! For example, if you're earning $250 per year in interest on your Education IRA, but you are disqualified from receiving the $1500 Hope Tax Credit or the $2000 Lifetime Learning Credit, you've lost a substantial amount of money!
And, NEVER, NEVER, NEVER put money into the child's name! This is suicide! Money in the child's name is a large factor in INCREASING your child's EFC and lowering their eligibility for financial assistance!
Mistake #8: Not Competing Or Negotiating With A College!
Many students only have one or two colleges they're interested in attending. And, that's reasonable. However, schools will often compete with each other, especially if your student is a good academic student. Choose several different colleges. When you get their award letters, see who offers you the best award. Then negotiate!
Mistake #9: Letting A Financial or Tax Person File Your FAFSA
As a tax preparer, I've seen the mistakes these NON-COLLEGE FUNDING PEOPLE make. They may offer some great financial and tax strategies, but they may be horrible college funding strategies. Since college costs are no laughing matter, you might want to have a college funding expert in your area (or you can call my office) to help you with some guidance.
In fact, our office can FILE THE FAFSA for you! By doing so, we can make some suggestions that can potentially save you thousands of dollars over a 4 year college education.
Mistake #10: Just "Winging" The College Funding Maze!
Most parents just approach the college cost issue with the attitude, "Well, I'll deal with it when it comes!" That was the same attitude you heard on the news from some folks who lost their lives when Katrina hit New Orleans. Be smart! Be proactive! Get help! Don't "wing" the college funding issue. There's too much money at stake.
While there's a lot of information at your bookstore or library, the books you'll find are so massive or there's just too much information, that it would take quite some time to fully get a grip on things. However, if you've got the time, go for it! Otherwise, give us a call.
For more information, please feel free to contact me at (816) 739-9894.
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