Don’t Fall for These 4 Financial Aid Myths

Many of the biggest misconceptions that people have about the college process revolve around financial aid. Now that we’re in the midst of financial aid season, I wanted to share  four  financial aid myths that are probably the most common.

1. I make too much money to qualify for financial 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 recently 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. The 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.

Here is the EFC calculator on the College Board website that I like to use.

Of course, you should ALWAYS use a net price calculator when evaluating your chances for need-based financial aid or merit aid for affluent students at specific  schools. See my previous post on this topic:

Playing Hide and Seek With Net Price Calculators

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 even ask parents if they own a home.

Colleges that use an additional form, the CSS/Financial Aid PROFILE , will inquire 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 smart CPA in Bellevue, Wash. who assists families with financial aid issues.

Here is the list of the 249 colleges and universities that use the PROFILE.

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. My post tomorrow will delve into this topic.

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 nor will they be able to obtain federal college loans.

The FAFSA became 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 in advance.

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.

Join Me at My College Workshop on Saturday!

I will be holding a college workshop at the University of California, San Diego this Saturday (Feb. 4). At the Finding the Right College Workshop, you will learn specific strategies to increase your child’s admission chances, ways to evaluate colleges and universities, essential ACT and SAT information and what you need to know about  college rankings.

You can learn more here and sign up for the workshop here.

Lynn O’Shaughnessy is the author of The College Solution, an Amazon bestseller, and a workbook, Shrinking the Cost of College. Follow her on Twitter and Facebook.