College Financial Aid Myths versus Reality
Some may say that it doesn’t matter. They say that they make too much money or have too many assets to qualify for aid. It’s a myth that families earning more than $50,000 will not get aid. Even families earning well into the six-figures may qualify for financial aid. Other myths I come across in my college financial planning practice include:
1. Not Enough Financial Aid is Available.
2. Only students with good grades get financial aid.
3. You have to be a minority to get financial aid.
4. I won’t need government help. I’ll get scholarship money.
One reality is that more than 70% of aid comes from government sources and almost 29% from school endowment funds. Private scholarships provide a small portion of funding. And exclusive “name brand” schools don’t hand out merit scholarships to attract students. They don’t have to.
The other reality is that there is more to college funding than “financial aid” or “college savings.” You have to understand the integrated role of financial planning with financial aid and taxes. We all like a bargain and saving ON the cost of college may be as important as saving for college.
There are dozens of strategies available to help you lower your “Expected Family Contribution” which in turn may qualify you for more aid and more scholarships. There are more strategies that will help you manage your cash flow and lower your borrowing costs. And then there are the tax strategies that may help you lower your income tax bill. There are others that any family can use to simply lower the overall cost of attendance.
The key is to understand the interplay between tax planning, financial planning and college financial aid formulas. This is a minefield and without an experienced guide it’s pretty easy to blow yourself up along with your chances for either financial aid or a lower overall cost for your diploma or both.
