9 College Planning Mistakes You Should Avoid

 In College Costs, EFC, FInancial Aid

9 College Planning Mistakes You Must Avoid

Do money worries or the admission process keep you up at night?  Avoid these common college planning mistakes to eliminate your fears.

Paying for college and getting accepted can be scary stuff. During the college planning process, we are dealing with two of the most emotional things in our lives: KIDS and MONEY!

These fears can drive our negative emotions which traditionally leads to poor decision making. A poor decision at this life juncture can be very expensive and compromise your retirement.

At Peachtree, our hope is to provide you up to date, relevant, and educational information to help you make informed, rational decisions.

By not falling victim to these nine big college planning mistakes, you can turn your fears and frustration into success.

Mistake 1: Not having the college money talk before searching for colleges

We can’t all afford an estate on West Paces Ferry, right?

So why go out and visit that estate with your wife and kids if you are going to have your heart broken when you can’t afford it? Here is what always happens if you do visit: your spouse loves it, your kids are already picking out rooms and you are emotionally crushed since you now want this for your family. This college planning mistake could have been avoided by visiting a house that was right for your budget.

In 1999, I started learning about financial strategies working for a mortgage firm. I always thought it was wise that families got pre-approved for a house. Almost 20 years later, I still can’t believe parents do not get “pre-approved” for a college purchase. You should know your financial fit by understanding how much a college will cost you after you evaluate available merit/financial aid, your college resources, and the smartest strategies to pay the four-year bills.

Hopefully, by following this step, you will not be like the families that come to us late in the senior year and ask to make the impossible ($300,000 for college) possible.

Sit down with your student before visiting colleges to talk about a college budget, the potential use of loans, your loan comfort level, and how you want to approach the search in a smart financial way

Being on the same page financially avoids heartbreaks!

Mistake 2: Not knowing your Expected Family Contribution and (most importantly) what it really means

Part of the college funding analysis is knowing your Expected Family Contribution (EFC) and understanding it is much more than a number. So many people stop early in the process because their EFC is either too high or really low. They assume they will get nothing or everything. This is far from the truth and a fatal college planning mistake families make every year.

The EFC is the amount the government expects a family to be responsible to pay towards college. This number may be a ridiculously high figure, but you can still achieve your student’s dream college without overpaying for it. All you need to do is understand the EFC’s relationship to your student’s academic profile and the best strategies available to you.

Your college search should start with an EFC analysis and a merit aid eligibility profile. To see an example of an accurate report, click here.

Mistake 3: Not filing for financial aid (completing the FAFSA)

Every year, families leave money on the table…billions of potential college grant dollars go unclaimed every year because people do not file the FAFSA.

Even if you do not think you’ll be eligible for need-based financial aid (because you followed step 2), fill out the FAFSA anyway.

Having a FAFSA on file is helpful and in some cases required for scholarships.

In other cases, it can be helpful if something changes in your financial situation, such as illness, death or unemployment.

Another great reason is to gain access to the only loan available in your student’s name:  The Stafford (Direct Federal Loan).  Regardless of the family’s financial situation, many are routinely realizing the benefits of using this loan.

Mistake 4: Students earning too much money or having too much savings

What’s wrong with students earning and/or saving money towards college? It contributes to increasing a family’s EFC and it has a higher weight towards the number.

Colleges expect dependent students to pay 20% of their savings towards their college costs, where parental assets are assessed at 5 to 5.625%…a big difference.

Many need based families make this mistake. If your student is a borderline need-based financial aid candidate, earning too much money could push him/her out of eligibility for funds they might otherwise have qualified for.

Mistake 5: Not understanding the impact or importance of applying early decision and early action

College application can be a frenzied process. Parents are worried about their student’s future. Students are worried about hearing back from that dream school. Those of you with a student who is already set on a particular school may have come across the terms ‘early action’ or ‘early decision’. These terms are deceivingly similar, but there is a huge difference between them. It is very important that families know what kind of contract they are signing when considering these application tactics.

This could literally define your student’s future. To compound the problem, schools have adopted more confusing versions like EDII, restricted early action, and single restricted early action.

Not understanding the impact or importance can limit your options. We unpack a little more information in our blog the top 5 considerations with early decision and early action.

Mistake 6: Being unfamiliar with your scholarship terms, dates, and conditions

If you have an academically talented student (even students with a 2.5 GPA) and you completed your selection process correctly, your student may be offered great scholarships. This is awesome news, but sometimes students do not investigate the terms and conditions of their scholarships for future years.

Most colleges require scholarship recipients to maintain a certain GPA and minimum number of credit hours. If a student doesn’t meet the terms and loses the scholarship, they may make it unaffordable to continue their education at that university.

Additionally, many scholarships are only offered for a 4-year period. So, if your student isn’t on the four year path, you may very well have an expensive 5th and 6th years.

Mistake 7: Changing majors or not thinking about a career pathway before applying

Stephen Covey nailed it in habit 2 from his best-selling book, 7 Habits of Highly Effective People: Begin with the End in Mind. Many families set the goal of getting into college, but it should really be about picking a major and finding a pathway for your student to thrive when he/she graduates. Many students pick a college without a focus on a field of study and flounder around without graduating in four years.

Changing majors is possibly the biggest nightmare a parent has about their student’s education and continues to be the primary reason many students do not graduate on time. You probably heard stories about a friend’s student who is changing their major and taking an extra year to finish.

Did you know the national 6-year graduation rate is only 59%? Yes, 6-years! Although not the only reason, changing majors is a big contributor to this problem. Of course, more years equals more costs for parents.

Students need to be exploring their interests while in high school, thinking about what they like, and are good at. Most families can get direction with a good profile tool so don’t think this is as hard as your student would make you believe.

If you have built a profile and had an engaged conversation about major selection and still haven’t found a direction, you still have great opportunities attending a liberal arts college.

Mistake 8: Taking out parent loans or private loans when federal loans are the better option

We strongly discourage parents from taking out certain loans, especially the Parent Plus loan. Loans in the student’s name are the best option and provide more opportunity than just covering a funding shortage. But with student loan debt at $1.3 trillion, you should understand the costs before you apply.

Mistake 9: Being taken advantage of

The final nightmare scenario we hear about are scams and working with the wrong type of advisor. We simple say “beware.” Did you know there are product salespeople and other types of advisors that don’t have a fiduciary responsibility to help you with your college funding plan? For a funny and great example of different the types of advisors, enjoy what-is-a-fiduciary-and-why-does-it-matters.

Many scholarship scam services charge you high fees for something you could do on your own.

Plenty of great FREE resources are out there to help you (like our blog library), and we strive to share them with you.

You are also welcome to schedule a free 30 minute call to discuss your situation and get some free no obligation, no sales pitch advice (we promise).

Let’s avoid these nightmare situations with some pre-planning and awareness, and sweet dreams will be had by all.

Stuart Canzeri
Stuart is known as one on the industry experts in college funding and college financial planning. He serves as a registered fiduciary for his clients and has been in the financial and college planning arena for a combined 18 years. Stuart received a Bachelor of Arts in Communications from Tulane University, a MBA from Mercer University and completed his Certified Financial Planner certification from the University of Georgia’s Terry School of Business. He is Co-founder of Peachtree Financial Group, a boutique registered investment advisory firm and Managing Partner of Peachtree College Planning. He was appointed twice as a Commissioner at the Fulton County Housing Authority and still serves today.
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