Paying for college


The price for higher education is enough to make a grown man cry. On the date of this writing, the average cost for private college is approximately $22,000 to $28,000. The average cost for public universities is approximately $9,000 to $12,000. As if those prices are not high enough, college tuition continues to increase at a rate of 7 percent annually. That being said, in the next five years college tuition for private and public universities will cost on average $39,000 and $17,000, respectively. As for those of us with younger children, the prices go up from there. “If you think the price for higher education is expensive, try ignorance,” said Earl Graves. Ignorance may be bliss but it’s costly.


According to published statistics, a person with a college degree can expect to earn $1 million more than someone with a high school diploma will earn over a 30-year working career. Using an often-repeated financial truth, “it’s not about how much you make, it’s about how much you keep of what you make. A hardworking non-college graduate can actually finish richer than a college graduate can. Considering the fact that the non-college graduate had a four-year head start earning money while at the same time avoided student loans. However, a college graduate tends to have more transferable skills than a non-college graduate has. As a result, when companies begin to merge and downsize those with college degrees generally have an easier time finding new employment. The best of both worlds would be earn to a college degree and avoid student loans. How do you accomplish such a task? The answer is obvious—save for college.

I’ve been stressing the importance of saving for college for years. Ironically, I get more questions about how to qualify for the maximum amount of financial aid than I do about what’s the best way to save for college. Financial aid is based on a student’s financial need. Financial aid is comprised of grants, work-study programs, scholarships and loans. Emphasis is placed on loans because this is where the bulk of financial aid comes from. More than 60 percent of financial aid is comprised of student loans taken out by students and parents. Remember the goal is to avoid student loans.

It’s difficult to generalize as to when and how much financial aid a family will be eligible for because there are many variables involved that differ from family to family. Here are some factors that influence financial need:

Income vs. assets. Income plays a much larger role in the computation of the EFC (expected family contribution) than do assets. A family with a relatively high income will have a higher EFC even though their assets may be limited.

Public vs. private colleges. A family may not qualify for financial aid at a public college but will at more expensive private institutions because the cost of attendance is much higher.

Titling of assets. How the family’s assets are titled makes a difference since the student’s assets are assessed at a much higher rate than the parents’ assets.

Number of college students. The more college students the family has, the more likely you’ll qualify for financial aid since family’s EFC is split between the students.

Income and assets are the biggest factors in determining financial aid. As a result, to qualify for the maximum amount of financial aid, you’ll need to shelter income and assets. Most of the strategies regarding sheltering income involve timing income and/or timing expenses to take effect during the college years.

These are strategies that favor people who are business owners. There are certain asset strategies that you can take advantage of.

•Convert assessable assets such as savings, checking, money market accounts and mutual funds to non-assessable assets such as retirement accounts, life insurance or annuities.

•Use assessable assets to pay down non-deductible debt (cash used to pay consumer debt).

•Since assets owed by students are weighted more heavily, use student savings to purchase non-assessable assets such as car and computer.

Although these ideas can help you qualify for more financial aid, they don’t avoid student loans. Below are some ideas to avoid or minimize student loans:

Go with colleges you can afford. Despite your child wishes to go to CTMU—cost too much university—you have to identify an amount you can afford for college and stick to it. It’s more important that your child earn a degree as opposed to where they earned the degree.

Focus on paying off consumer debt. If you can get rid of all consumer debt prior to your child attending college, you can pay as he goes to college instead of borrowing money. Let’s assume that financial aid, excluding student loans, covers all but $8,000 per year. You can afford to make monthly payments of $667 per month if you did not have credit cards, personal loans and cars loans to pay for each month.

It’s okay to work and go to school. Your child can work and help pay his own way through college. Secondly, your child may be able to find a job that offers tuition advancement or tuition reimbursement. They’ll graduate with a degree and a work ethic.

Academic, athletic and various scholarships. Encourage excellence in academics and athletics. Your child may earn various scholarships. There are countless other scholarships available if you research thoroughly.

Save for college. An ESA, Education Saving Account or a Section 529 plan, are college savings vehicles you can take advantage of. I favor ESAs because of their simplicity. However, an attraction of the Section 529 plans is that they’re treated as assets of the parents.

Be all that you can be. Serve a couple years in the military and they’ll pay for your college.

(Mortgage and Money Coach Damon Carr is the owner of ACE Financial. Sign up for Damon’s FREE online “Ask Damon” e-Newsletter @ Damon can be reached  at 412-856-1183.)

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