4 Stubborn Financial Aid Myths
I think that many of the misconceptions that people possess about the college process revolve around financial aid. With the college admission season about to head into high gear, today I want to share the four financial aid myths that are probably the most common.
Myth No. 1: I make too much money to qualify for aid.
You shouldn’t automatically assume that you won’t qualify for need-based assistance. How much income you earn is only one part of the equation. What also matters is the price of a particular college. For example, some families that don’t qualify for financial aid at moderately priced state schools may be in line for considerable help at pricey universities.
At Princeton University, for instance, families making between $160,000 and $180,000 qualified during a recent school year for an average of $26,450 in financial aid.
You can obtain an early assessment of whether your family might qualify for aid by using a free financial aid calculator. A calculator will produce an estimated Expected Family Contribution, which is what colleges would expect you to pay, at a minimum, for one year of school.
You can find an EFC calculator at the College Board.
Myth No. 2: My home equity will kill my chances for aid.
Most colleges won’t care if you own a house and won’t count home equity against you if you do. That’s because the majority of schools rely on the federal aid application, the Free Application for Federal Student Aid (FAFSA), which doesn’t ask parents if they own a home.
Colleges that use an additional form, the CSS/Financial Aid PROFILE , will ask about a family’s home equity. With rare exception, however, these colleges will limit the amount of home equity they consider when they evaluate a family’s ability to pay. Colleges will typically impose a cap that rarely exceeds 2.4 times a family’s income, according to Paula Bishop, a CPA in Bellevue, Wash. who assists families with financial aid issues.
Here is the list of the colleges and universities that use the PROFILE.
Myth No. 3: I have saved too much in my child’s college fund to qualify for aid.
In reality, less than 4% of American families who apply for financial aid are penalized for their savings. Here is a post that I wrote about this myth: Why Saving for College Won’t Hurt Your Chances for Financial Aid
Myth No. 4: Completing financial aid forms is a waste of time.
Most families should complete financial aid applications, because without filing these documents, they will have no hope of receiving need-based aid.
The FAFSA will become available on January 1 for the 2012-2013 school year. The application should not take long if you gather the necessary documents before you sit down at your computer. You can find out what information you’ll need to complete the FAFSA by checking out the FAFSA on the Web Worksheet.
The latest PROFILE is available every fall. While the FAFSA is free, the PROFILE costs $25 for the initial application and college report, and all additional reports are $16 each. Some low-income families will be eligible for fee waivers.