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Parents need to know how to maximize their children's eligibility for financial aid; they need to understand how financial aid formulas work so they can take advantage of ways to lower out-of-pocket costs. Even paying expenses in the most tax-efficient way is a benefit to families who get aid as well as families who do not.Most families today have NOT saved enough to pay the staggering costs of private colleges, or even state schools, when you add 4 to 6 years multiplied by the number of children! Costs can range from $75,000 to over $200,000 for a four-year stay, although the national average to graduate is over five and a half years. And what about graduate school or other advanced studies? For many professions advanced degrees are required. What can parents do if they don't have a stash of money in savings? Many parents look for low-cost alternatives-- community colleges or state schools, and they also rely heavily on borrowing. Even if the parents have savings, do they want to deplete those savings? The problem is that after several years of borrowing, accumulated interest costs can be crushing! School loans are readily available-- and most families use them but the problem comes later on, when the monthly payments and debts add up and put a strain on cash flow and lifestyle. The burden increases with two or more children. This is often why students end up dropping out of school, and the drop out rate is now over 50%. Families who plan ahead tend to lower costs and get better aid packages from schools. Taking advantage of ALL your options can mean thousands of dollars saved. What if an aid package doesn't cover enough of the costs? Many schools are hurting from the financial downturn and have been under-awarding students in their financial aid packages. One of the secrets that most people do not know is that you can appeal an award, and sometimes negotiate a better package. Appealing an unfair award can mean thousands of dollars more in financial aid help. What about loans? Loans can be very beneficial and may be a temporary necessity. Subsidized or zero-interest loans are the best! But not everyone can qualify for them. There are student loans, parent loans, and possibly some private loans, with varying interest rates. One must assess whether borrowing is the best choice, and if so, under what circumstances. When is the best time to start this planning process? There is an African proverb that says: The best time to plant a tree is 20 years ago. The next best time is today. For parents who act early, when students are in their freshmen, sophomore or junior years of High School, it may be possible to lower the Expected Family Contribution (EFC) upon which financial aid packages are based. If you wait until the senior year, it may be too late for some cost-saving changes. (Story by Linda Cypres, image provided Wikipedia.)
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