Smart College Financial Planning
Is it true the costs associated with a higher education require a small fortune?
The answer: it completely depends on your plan. Now can you buck the expensive system and still obtain a great education. It’s easy, just follow this advice…
State University or Community College
If you’ve got your heart set on a private school, you can always transfer after saving yourself thousands by spending the freshman and sophomore years at your local community college or a nearby state university.
According to the Money magazine article, “How to Save an Extra $50,000″, by Beth Braverman, M.P. Dunleavey, Josh Garskof, Donna Rosato and Penelope Wang, you can cut the price of a degree from private schools sharply by starting out at a nearby state public college or community college–additionally saving on room and board costs.
The savings are substantial. The average cost of a state university is $22,000-$16,000 and it’s a mere $3,000 average for a the local community college.
Articulation agreements between community colleges and certain public and private four-year colleges make transferring much easier. Check the community college’s website for the names of the colleges where they have an agreement.
If a transfer into a competitive private institution is your goal, seek out the flagship public college which usually offers more advanced courses than community colleges, advises Jim Miller, president of the National Association for College Admission Counseling.
Plan ahead by contacting the private school of interest to find out their course requirements for transfers. This way, choosing courses at your less expensive school will be in line with their requirements, saving time and money as a freshman and sophomore.
Mr. Miller also suggests asking about their requirements for GPA (and other), it will help your prospects, showing there’s an interest early on. Also, it ensures you understand what’s necessary for a transfer beforehand and can plan accordingly.
A Minor Downside
Some elite private schools (such as Princeton) don’t accept transfers, or only accept very few. The rates of acceptance change each year, so be sure to verify what their transfer policy is this year–overall, they’ve loosened up due to declining student numbers.
Transferring as a sophomore puts you at a slight disadvantage, the article states, because it poses a “social challenge”, being a newcomer. However, once a student begins taking classes and makes an effort to interact with others, that’s easily remedied.
Academic Achievement Grants
It pays in more ways than one to work for a great GPA and present yourself as an all-around student; allowing you to qualify for generous grant monies, entrance to the school of your choice, and eventually to land a job*. Not to mention taking a financial load off your parents backs! *Be sure to see my Quick Tip, “GPA, Credit Rating, and Financial Aid” of May 18th, which also discusses this topic.
Bruce Hammond, co-author of The Fiske Guide to Getting Into the Right College, believes students should focus on schools where they’ll rank in the top 25% of the freshman class measured by GPA and SAT scores.
You can check a college profile to see how much they award in “non-need-based-aid” (click financial aid) at College Board and College Navigator. There you may also see the percentage of freshmen who get scholarships. Some colleges also provide online financial aid calculators which can estimate the size of the merit scholarship. Be sure to check with each college’s financial aid office, some consider all applicants while others may require essays and paperwork and might have different deadlines than regular applications. The scholarships at private colleges may be large, $14,000 per year, or more (average schools could be as little as $2,000).
Take the Money Class
In The Money Class, a newly released book by well-known personal financial expert, Suze Orman, gives parents and students a warning regarding college, “Cost matters. Putting your children through college was a cornerstone of the American Dream, particularly for immigrants and first-generation children. But the New American Dream cannot simply be, ‘I want my children to graduate college’.” Ms. Orman wants parents and students to consider that the operative word is “affordable” college education. Parents must develop a strategy, when children are young, to save for their higher education. She states that, “The fact is, most families don’t stop to think through the cost part [of a college education].” Ms. Orman also insists that parents or guardians have the following priorities:
1.) You do not have credit card debt.
2.) You have an eight month emergency savings fund.
3.) You have a term life insurance policy.
4.) You are saving for retirement; aiming to set aside 15% of your gross salary.
She believes unless you have all of this in place, you can’t begin to think about saving for college. Her concern is that too often parents have set up nothing for themselves and sink thousands into a higher education for a child, only to go into financial ruin. “Your first order of business is building a solid financial foundation for your family,” she urges, without that, you jeopardize everything.
Once you have the ability to save for college, Ms. Orman suggests you go with the 529 Plans. In her opinion, the 529 Plans are a better way to save for school rather than an UGMA/UTMA, a Coverdell Education Savings Account, or a Roth IRA. She goes into great detail regarding the 529 plans and borrowing rules for college loans that is worth reading. Go to her site at The Classroom where you can find guidance about what factors to consider when determining how much a student can afford to borrow for college.
I agree with Ms. Orman’s statement that, “The right school is the best school that is affordable.”