The costs of higher education are rising. According to a recent College Board survey, today’s college education costs approximately $24,061 for an in-state public college and $47,831 for a private college, up 3% since last year.
Inadequate planning through the college financial aid process can bring the burden of unnecessary debt in the form of unsubsidized federal loans, private bank loans, or home equity lines of credit. In our years of working with middle- and upper-income families, we have learned that you can save as much as 50% off of tuition costs with proper planning.
Here are common mistakes to avoid that can potentially save you up to $30,000—
Mistake #1: Not filing the Free Application for Federal Student Aid (FAFSA) or other financial aid forms because you assume that you make too much money.
The reality is that most families with incomes up to $175,000 per year are eligible for some form of financial aid. The higher education industry is booming, with more than $200 billion available from the Federal Government, individual states, colleges, and private foundations and corporations to give in aid to deserving students.
To qualify for funding, you have to apply for financial aid. The FAFSA is the form required at all colleges that award federal aid. Select colleges, typically private schools will require completion of the CSS/Financial Aid PROFILE. New York schools will require the New York State Tuition Assistance Program (TAP) form.
Mistake #2: Applying for private scholarships as your lead college funding strategy.
Private scholarships account for only 1% of college funding. 99% of college funding comes from the Federal Government, colleges, individual states, and private foundations and corporations. Much of this free money comes in both merit and need-based aid. However, having financial need does not necessarily mean being low-income. Your need is calculated by the FAFSA, but if your student is highly desirable to a particular college, then financial aid officers are willing to make sure financial barriers are not the reason your child cannot attend.
Mistake #3: Choosing colleges without comparing your student’s profile to the rest of the student body.
To increase the competitiveness of the college financial aid award, you should make sure your student is a highly desirable candidate. This is different from assessing your child’s chance of admission. To get the best college aid package, choose schools where your student has a GPA and SAT/ACT scores that put him or her in the top 10% of incoming freshmen. Nationwide it is a priority for colleges to attract high-quality students to their campuses. Therefore, top academic achievers will be favored in their financial aid packages with more FREE money (e.g. scholarships and grants) and fewer loans that have to be repaid.
Mistake #4: Applying only to in-state public schools.
In-state public schools are affordable options with tuition being half of what it costs to attend a private college. However, in-state public schools get no private funds and rely heavily on state and Federal funds. Moreover, state schools get thousand of applicants to share a smaller pot of financial aid.
This makes private schools a viable option for optimal funding. Though not all private schools are created equal and will not give you the same financial aid packages. Look for schools that are well endowed and get a lot of money from alumni and corporations.
We have seen cases when families would have paid more for an in-state public school than a better financially endowed private college where the student was highly desired.
Mistake #5: Not knowing where you keep your money matters.
In FAFSA’s calculation of the family’s Expected Family Contribution (EFC), money saved in the child’s name is weighted much more heavily than money saved in the parent’s name. This mistake could make the difference of $10,000 in financial aid dollars. Position your money legally and ethically in a way to maximize your financial aid.
Mistake #6: Going through the financial aid process yourself to save money.
Consider retaining the services of a college/financial aid expert to help you navigate the process. A hired expert can generate an average financial aid package of $60,000 in college merit scholarship funding for four undergraduate years. That’s an average of $15,000 tax-free dollars per student, per year of college. With this type of aid package, the cost of your investment returns a multiplied profit in the way of college aid that you would never obtain if you took the “Do It Yourself” approach.