Okay, you think you have this college thing all figured out. You poured through a dozen financial aid forms, kicked the most expensive schools off your list, checked out your borrowing options and are now trying to convince your child to think less about English literature and more about engineering. But even among smart parents, there are areas of misinformation and myths about college costs. However, given the fact that four years at an in-state public college costs an average of $71,500 and $240,000 for an elite private school, it pays to understand these five myths and how to beat them.
Myth #1: If you save for college this will damage your chances of getting financial aid
Myth #2: You can’t afford a private college
Myth #3: There is no point in getting a liberal arts degree
Myth #4: Your child will be crippled financially by student loans
Myth #5: Starting at a community college is a great way to cut costs
Busting Myth #1
The fact is that if you save for college it probably won’t affect your chances for getting aid. This is because under the financial aid formula, your income matters most and it is assessed at 47%. In comparison, just a maximum of 5.64% of your savings will be counted – after excluding your retirement accounts, any small business you might own and your home equity. The net/net here is that your parental savings will probably have very little impact on how the government calculates your expected family contribution. Plus, those savings will come in handy to help pay for the contribution you will be required to make out of your income.
Busting myth #2
Yes, you probably can afford to send your child to a private college. While private schools may have huge sticker prices such as $39,500 a year (the average), that’s not the price you’d actually pay. Many schools discount their prices, especially for good students. This comes in the form of merit grants. In fact, last year the average discount was 45%. Of course, the Ivy League schools and other top private schools still offer aid based mainly on need. But their definition of need can actually extend to higher-income families. And many other high-quality colleges offer merit aid. As an example of this, at Rice University 22% of its students have academic grants that average $15,000. And at Denison University, more than 40% of students get merit awards that average $16,300.
Busting myth #3
If you think there is no point in your child getting a liberal arts degree, you might want to think again. Of course, people who graduate with a business or a STEM (science, technology, engineering and math) degree tend to earn salaries above the average. However, many liberal arts majors do just as well. In fact, a recent study by the Georgetown Center on Education and the Workforce revealed that the top earning 25% of people who majored in history earned a median annual lifetime income of $85,000 versus the $82,000 earned by computer programming majors. Plus, there are cases where lower salaries are trumped by better job security. As an example of this, the typical education major earns $42,000 but their unemployment rate is only 4%. In comparison, a biomedical engineer might earn $68,000 but faces an unemployment rate of 11%.
No, your child will not necessarily be crippled financially by student loans. While you might read horror stories of people graduating with more than $35,000 in student loans, this is often due to the increasing amount of time that young people are taking to earn their degrees. This may shock you but only 32% of students at public colleges and 52% at private schools got out in four years. It’s more common for students to take as many as six years to graduate. On the other hand, at the more selective schools 85% of the students finish in four years. And the schools usually have strong alumni networks that can help their graduates find jobs. The truth is that if your child attends a good school and graduates on time with great skills and good contacts, borrowing the money can be well worth it.
Busting myth #5
Despite what you might read, starting at a community college and then transferring is not necessarily a great way to cut the costs of getting a BA. The problem is that students who start at a two-year community college are less likely to get their bachelor’s degree. Part of the reason for this is that many four-year colleges make it tough to transfer credits. Two-thirds of the states have articulation agreements, which ensure that community-college courses will be accepted at their four-year schools but there are many loopholes. As an example of this, they may allow transfers only if the student has a certain GPA or they may be able to use discretion in terms of the credits they will accept. And these articulation agreements should not be confused with a guarantee that your child will get a slot at a four-year college. Plus, if your child does not have a strong peer group, this can make it hard for him or her to stay focused.
If you would like to save money by having your child start at a community college, make sure that there is one in your area that offers a guaranteed transfer to a four-year school. And make sure you talk with the admissions office at the four-your school your child would like to attend about its transfer requirements and how many students it accepts from two-year colleges. The good news is that if your child starts at a two-year school and then successfully transfers the odds of him or her getting a BA degree is as good as for the four-year students.
Finally, if you’re wondering why college costs so much these days, here’s a video featuring two professors at William & Mary College who have written a book that answers this question.