Q: What are some of the mistakes parents make when financing their child’s college education?
A: A study by the College Board’s Advocacy and Policy Center found that many parents don’t understand the financial aid options available to their children. Here are the top three mistakes parents make when it comes to college financing.
1. They don’t put cost first. Many parents don’t have a full understanding of how much it costs to send their child to college. Nearly half of the parents in the College Board study did not know how much it cost for their child to attend a public college in their home state. Often, going in-state is the most economical choice. High on the list of which college to attend should be the cost. It’s financially unwise to say to your child: “Honey, go to the school you want to, and we will figure out how to pay for it later.” That “later” could be decades of debt. Use the College Board’s calculator to get an idea of costs.
2. They feel they can never save enough, so they don’t save anything. Let’s say you only save $1,000 a year (less than $100 a month). When your child is ready to go to college, you would have $18,000, and that’s not even with investing the returns. That amount of money may not pay for four years, but it will go a long way toward covering many expenses. Only 15% of families used money from a college savings plan to fund expenses, according to a study by student loan lender Sallie Mae and Gallup. To learn about 529 college savings plans, go to the Saving for College Web site.
3. They don’t fill out the Free Application for Federal Student Aid (FAFSA). Many families assume they won’t get any money; so they don’t fill out the FAFSA form. But this form is the gateway to grants, work-study programs and other free money. The FAFSA form is also required to determine eligibility for federal student loans, such as subsidized and unsubsidized Stafford loans and PLUS loans for parents. According to Sallie Mae, 28% of families did not submit the FAFSA last academic year. Half said they did not complete it because they were not aware or did not think they would qualify for aid. Go to the FAFSA Web site to learn more about filling out this important form.
It’s never too late to start thinking about how to fund your child’s education.