|
| Myths about Saving for College |  Many families mistakenly think that they are penalized for saving, and that they would be better off if they didn't save. The Federal Need Analysis Methodology confirms that a family with more assets will get less need-based aid. However, the federal government does not count all of the assets, just a fraction, so a family with money saved will have money left over. The most important thing is that the more money you save, the more options you'll have and the less you'll have to borrow. Borrowing is always more expensive than saving.
Many parents mistakenly think that if they don't save for college, they'll be able to pay by means of loans, or that the federal government and the schools will pay for education. Student loans only cover college costs, and the government and schools consider parents to have the primary responsibility in paying for their children's education. Even if your child gets a lot of need-based aid, it doesn't cover the full costs. The Pell Grant, for example, covers only 10% of current private four-year college costs. Work study covers only 10-20% of college costs. If you don’t begin to start now it will only hurt you later. The only sensible solution against increases in college costs is to save as much as possible and as early as possible.
Families also believe that they can rely on scholarships to pay for college. For example, four-fifths of parents hope that their children will get scholarships, but only about 7% of students are actually awarded private sector scholarships. The average amount of the scholarship received by undergraduate students is $2,000. Moreover, due to outside scholarship policies, getting a private scholarship will often reduce need-based aid packages. It is still worthwhile to search for scholarships, because scholarships often replace loans, but one must be realistic about the chances of winning a scholarship (1 in 15) and the impact of scholarships on paying for college (less than 10%).
|
|
