T. Rowe Price is circulating a nice write-up about covering college expenses, broken down into six myths. You can read the full piece here; I’ve listed them again with a few of my comments:
- Financial aid is free money that will cover costs. Uh, no. Many scholarships have GPA requirements and loans have to be repaid. There are lots of sneaky costs that are not covered, ranging from supplies for a team presentation to sorority dues, and on top of all that: the financial aid package is based on a family’s ability to pay as calculated by the university. It may not meet your definition of your family’s ability to pay.
- Saving for college reduces your chances of receiving financial aid. Sort of. If you’ve managed to save $200,000, you cannot seriously expect any college to give you aid. But if you have saved nothing, and the college decides that your family has the ability to pay $200,000 over four years, you have an issue. Retirement and home equity are excluded in the financial aid calculation, by the way.
- 529 plays limit your options. T. Rowe Price says no, I say maybe. The money does not have to be used for college, and does not have to be used at any particular institution. But it does have to be spent on education for a family member. They make more sense for families with more than one child than for families with only children; if the eldest does not use the money, then the next kids in line can tap it.
- I’ll never be able to save enough, so why bother? Because every little bit helps! Yeah, the savings bond that my godparents gave me for my Christening only paid for one textbook, but that’s better than nothing! Money saved is money that does not have to be borrowed, so it’s cheaper.
- Go to the better school, regardless of cost. Go with the school that is the best fit, which may be the cheaper school or the school with the “lesser” brand. There are a lot of ways to get a good education in this country, and a student who is happy is better able to take advantage of the opportunities on any given campus. A student who is burdened with debt might not be happy.
- Certain schools are just too expensive. The most expensive private schools tend to have the most financial aid. If a fancy school looks like a good fit, you may as well apply. The worst that will happen is that they don’t give you any money, and so you have to go to your second choice school, where you will get a fine education because there are a lot of ways to get a good education in this country.
What do you think?
