What's the most expensive purchase you'll ever make? If you're about to say "a house," stop and think for another second. Did your house cost $250,000 plus four years' wages? That's the cost of a private college education these days. The cost of public schools, while cheaper, is still likely to exceed $100,000 once you add in room, board, books and lost wages.
That's why college-cost myths can prove so costly, says Carol Stack, co-author of "The Financial Aid Handbook: Getting the Education You Want for the Price You Can Afford." These myths often lead to mistakes that can cost students and their parents tens of thousands of dollars.
What are the most costly myths and mistakes? How can you learn the truth about paying for college? Here's a guide.
Myth #1: You get what you pay for.
Many parents assume that the pricier the college, the more valuable the education. But, in reality, not only do some costly colleges not deliver the quality education they promise, few students pay the same rate at the same schools. You can liken the seats in a classroom to the seats on an airplane. Every person in the room is likely to have paid a different amount.
If you want to get the best deal on a college -- just like an airline seat -- you'll need to do plenty of research, Stack says. Investigate schools based on your child's interests, the schools' graduation rates and their generosity with aid -- in addition to the sticker price. For detailed information about how to figure the net cost of attending a college, check out this related post: College Decision time: How to Find the True Cost.
Myth #2: If you get into a "reach school," you should go there.
This could be the most costly mistake a student could make, says Stack. The reason? Colleges give the most aid to kids who are in the top of their entering class. Kids who barely qualified to get into a school are not likely to be offered much other than loans, which could cause them to graduate mired in debt. To get merit-based scholarships and grants, your student should be positioned in the top 25% of those accepted by that particular college. The data on what grades and SAT scores each college requires is readily available on the web. If price is an issue, forget the reach school and go to a school that's reaching for your student.
Myth #3: State schools are the most affordable.
Yes, your tax dollars may have been supporting your state's public colleges and universities for years. Yes the sticker price of a state school may make it appear more affordable. But these schools still might be more expensive than a private school that's willing to meet 100% of your "need." Many incredibly expensive private colleges, such as Harvard and USC, provide so much aid to qualified students that their all-in cost can be considerably cheaper than the least expensive state school. Top students should never eliminate a college based on the sticker price. The net price -- the price after scholarships and grants -- is what makes a college costly or affordable.
Myth #4: You don't need to talk money until your student is accepted.
If you want to avoid disappointment and debt, you'd be wise to have frank discussions about what you can afford early in the college application process -- possibly even before your student fills out applications. Good students should still apply to costly schools (as long as they're good about meeting aid), but parents should explain any provisos involved in attending those institutions. To say: "We can only afford XYZ school if you get scholarships and grants of at least $5,000, and if you get a job to pay all your incidental expenses" for instance, gives your child something to work with.
If the child is set on a school that doesn't provide enough aid, you can also suggest that he or she search for private scholarships at FastWeb.com to make up the difference. What you shouldn't do is dash hopes at the last minute, says Stack. "There are books on how to talk to your kids about sex, drugs and alcohol, but there's very little to tell you how to talk about money," she adds. But with a decision this costly, you've got to find a way.
Sit down together and go through a budget. In addition to making college more affordable, it's a great life lesson for kids who are about to launch independent financial lives of their own.
If money is really tight, don't forget about the College Two-Step -- two years at a community college plus two at a four-year university. This little dance can cut college costs almost in half and allow your child to qualify for universities that would otherwise be a reach. (Many top-notch four-year universities have articulation agreements with community colleges that guarantee admission to any student who successfully completes two years with a minimum GPA.)
Myth # 5: If my parents won't pay, I'll get more aid.
If your parents can't afford to pay for college, you may qualify for more aid. But financial aid formulas are designed to ensure that families that have the economic wherewithal to pay for college, don't throw the burden to schools or taxpayers. The only way you get more aid when your parents are flush, is if you qualify as an "independent" student. That's not easy to do. The most common ways to be "independent" are to be older -- born before 1989 (for the 2012 school year); married; a grad student or a foster child.
Myth # 6: If you're not poor, there's no reason to fill out financial aid forms.
There is no specific income or asset level that knocks you out of the running for financial aid. The ability to claim aid will depend on family circumstances and the cost of the chosen college. Even those who didn't qualify for aid in one year could qualify the next because, for instance, another child might enter college and make your family more "needy" based on the aid formula -- or because you earned a little less or child is attending a more expensive school. Furthermore, if you want to be able to borrow at low fixed rates through the federal student loan program, you need to fill out the FAFSA form. Unless you're stupendously wealthy and couldn't care less about financial aid, go to fafsa.ed.gov and get cracking.
Myth # 7: I can pay someone to find scholarships for me.
Nope. If you want a scholarship, you're going to have to apply for it yourself. And legitimate scholarships never require an up-front fee. The companies that promise to get you scholarships for a fee are simple scams, according to the Federal Trade Commission. If you want help finding scholarships that you can qualify for, check out FastWeb, which is a free (though advertising supported) online scholarship search service. For the cost of clicking past a few advertisements, FastWeb will match you up with relevant scholarships and show you where to get information on how to apply.
If you pay a scholarship search service, you're wasting both time and money.