I thought this article from this morning’s WSJ was so good, I wanted to summarize it here. Thanks to my friend Shuva Rahim for pointing it out to me!
Also, be sure to pay attention to my firm’s blog, as we will be releasing a series of posts centered around education costs and how best to save for them later this summer.
Here is a quick summary of the 5 common mistakes people make when paying for college, per the article referenced above:
- Not applying for aid
Most upper-income and even middle-class families don’t apply for aid or fill out the FAFSA form, as those families just assume they won’t get any need-based aid, or they are fearful that doing so will hurt their child’s ability to get into the school. There certainly are reasons for this approach as the author points out, but ignoring this process in general can absolutely leave money on the table.
- Not looking into a 529 Account
According to Edward Jones, just 32% of Americans are aware of 529s. Just a dire stat indeed, given the tax friendly nature of these accounts and the operational flexibility with them. A 529 account by far, in my opinion, is the best way to save for college.
- Not Budgeting for True Costs
As Sara Goldrick-Rab points out in the article, if a discussion hasn’t happened between the parents and the child on what can be afforded and what can’t, a lot of issues that could be avoided will certainly come up. Also, getting at the detailed costs for housing and food – especially in the different areas of the country (depending on where the student is looking to enroll) – can absolutely vary and the financial plan associated with these costs should reflect that.
- Misfiring on Scholarships
I’ve heard it over and over again how so many scholarships – “free money” – are left on the table and are just not applied for. There are a lot of reasons for this I’d imagine, but sheer lack of effort probably is the largest. A number of smaller scholarships are out there – you just have to search. Which, why wouldn’t there be an app for that?? There is – check out Scholly – a newer app designed to help students search and manage the application process for scholarships (I wish I would have had this around back in 2000!
- Obsessing about Elite Schools
There are over 4,000 colleges in the US – 8 belong to the Ivy League. Only 2.7% of all undergraduate applications in 2015 went to those eight schools.
Rather than obsessing on these schools, the focus for which school a student should apply for should be more on fit – “a student’s needs, wishes, and academic performance” – as well as within the family’s planned budget.
It’s clear that planning for a child’s education is filled with a lot of different variables. However, as this article clearly points out, there are certainly a few areas people tend to overlook, when it comes to structuring the best plan for their student and themselves. If anything, this list is a good reminder for those of us furiously saving for our kids’ future educations to not just stick our heads in the sand, but to keep aware of the ever-changing information available and how that information could adjust how we execute our plans.