10 Myths Surrounding Financial Aid and College Affordability
Choosing a college to attend and a major to pursue are relatively easy decisions compared with navigating the financial aid process and deciding what you can afford. In fact, a survey reveals that filling out financial aid forms is more stressful than applying to college.
Separating truth from fiction allows you to make informed decisions, so GoodCall® assembled a team of experts to discuss 10 financial aid and college affordability myths.
Carol Stack and Ruth Vedvik, two college admissions officers with decades of experience, are the authors of a new book, The Financial Aid Handbook: Getting the Education You Want for the Price You Can Afford. The first three myths are from their book.
#Myth 1: You get what you pay for
It’s a common assumption that cost is positively associated with quality. So, the more expensive a product or service, the more superior it must be to lower-priced alternatives. However, Stack tells GoodCall® this theory does not necessarily apply to colleges.
“The value of a college education is based on not only what is offered, but more importantly, what each student puts into the effort for obtaining that degree,” Stack says. “Four-year residential colleges offer a host of fabulous learning opportunities – in the classroom, on the playing fields and stages, through leadership in student clubs and organizations, but if you don’t choose to participate, or if you do so only half-heartedly, regardless of price, you won’t obtain the full benefit.”
Also, Stack says the price of an education varies by student. “Whether the sticker price is reduced by need-based grants or merit-based scholarships – the price is mutable, so a higher sticker price doesn’t mean a high net (or actual) price.”
Myth #2: If my parents say they won’t pay, I’ll get more aid
Regardless of what your parents say, it won’t change your financial aid situation. “One of the most basic tenets in college financial aid is that the primary responsibility for paying for college rests with the student and parents – period,” Vedvik says. “Federal and state government aid, as well as scholarships and grants from the colleges themselves, are supporting mechanisms.” So, if your parents refuse to help, then it’s your responsibility to pay for your education.
However, Vedvik explains that this is not the case for students who are financially independent. “To be truly financially independent, you must meet the tests the federal government has designed – so if you are over age 25, or are a veteran, or are a homeless, unaccompanied youth – you can apply for aid using a different rubric.”
Myth #3: My state school is the cheapest option
State schools have a reputation for being the most inexpensive option, but this is not always the case. Stack explains, “When a student has conducted a thorough, cost-conscious college search that matches student attributes with college missions and support – it is often the case that a private college or university has a lower net price.”
One thing students don’t consider is how the length of attendance can affect price. “Lower four-year graduation rates at public colleges and universities increase the likelihood that you might need five – or even six – years to earn that degree,” Vedvik says. And that increases the cost of your education. However, she says this extended school duration causes another effect. “You have also, then, incurred an opportunity cost – two fewer years to be in the job market, earning a salary, rather than paying tuition.”
Myth #4: There’s not a lot of financial aid available
Since so many students have massive student loan debt loads, it’s easy to believe that there’s not enough financial aid to go around. However, Joe DePaulo, CEO and co-founder of College Ave Student Loans, tells GoodCall® there are several types of financial assistance that students can seek. “The U.S. Department of Education awards over $150 billion per year to help students paying for college and career school,” DePaulo says. “Scholarships, grants, work-study programs, and loans are all available to prospective students to help them pay for their education, and you might get tuition discounts from individual schools.”
Myth #5: My family’s income is too high, so I shouldn’t bother applying for aid
Household income isn’t the only criterion used to determine aid eligibility. “Such factors as the number of people in the household, child support costs, and home equity can impact a student’s award package,” DePaulo says. “Minimally, most undergraduate students qualify for unsubsidized federal direct loans; access to these loans is not need-based, so your income doesn’t matter.”
And, for those who do need to borrow funds, he recommends federal direct student loans because of their low, fixed interest rates and built-in protection for repayment options. “A combination of savings, scholarships, and student loans often work together to make college possible for families at all income levels,” DePaulo says.
Myth #6: You shouldn’t think about paying off student loans until after you graduate
You can start making payments while you’re still in school, and DePaulo recommends this strategy, adding that students should pay as much as they can as soon as possible. “Use the College Ave Student Loans calculator to see how you can save by opting to pay – even a little – each month while you’re in school.”
Whether you choose this option or not, DePaulo recommends that you find out what your total monthly payment will be after you graduate. “Knowing this will help you plan ahead and can help you avoid overborrowing.”
Myth #7: All private student loans are the same
If federal loans don’t cover all your expenses, you might want to consider a private loan. However, DePaulo warns that they’re not all the same. “Low rates are important, but also be sure to look for lenders with flexible repayment options that can help you match your monthly loan payments to your budget – and be on the lookout for any application or origination fees as well.”
Myth #8: A college degree is the only way to make a decent living
Admittedly, the career path is narrowing for those without a college degree. Also, a recent report reveals that 41% of employers are now hiring college grads for jobs that used to require a high school diploma. However, Mackey McNeill, CPA/PFS and member of the American Institute of CPAs Consumer Financial Education Advocates, tells GoodCall®, “There are lots of high level manufacturing jobs, welding jobs, electricians needed – areas where people are begging for employees and will pay for your training.”
Myth #9: I will make more with a degree and therefore be able to repay my loans
“Maybe, maybe not,” McNeill says. “Some degrees don’t lead to a clear career path and some degrees don’t lead to highly valued work.” For example, a recent report on the highest- and lowest-paying bachelor’s degrees reveals that engineering specialties (such as petroleum, nuclear, chemical, systems, computer, and mining engineering) pay starting salaries ranging from $65,000 to more than $100,000 a year. However, some of the education specialties (such as early childhood, child development, and early elementary education) have starting salaries below $35,000 a year.
Myth #10: Everyone has loans, so it is OK
Remember your parents asking, “If everyone jumped off a bridge/cliff, would you jump, also?” Well, this is another one of those “just because everyone else is doing it” scenarios. The average student loan debt amount is $31,000 – and that doesn’t include interest.
A recent report on how student loan debt affects young workers reveals that 56% of them worry about paying back their loans either “always” or “often.” Also, 40% believe that this worrying is impacting their health. And yet another report reveals that student loan debt is limiting careers, marriage plans, and home-buying decisions. Is this a group that you want to join?
“Being broke – and that is what loans with no assets is – is not fun,” McNeill says. “So, think through other options first, or at least plan how to minimize loans.”