So Many Lessons to Learn About Paying for College: One College's Financial Aid Web Pages are a Great Resource

Paying for college - Holy cow! I had heard a little about it but wasn't until I actually started the process a year ago, as part of my high school senior's college search, that I realized ALL that was involved (and just how crazy some of it seems).

Understanding FAFSA, EFC, merit-based aid vs. need-based aid, etc. is critical when it comes to navigating financial aid. Bethany University in California has a website that features, among other things, Financial Aid 101. There are many resources out there and this is one of my favorites. Definitions are clear and plenty of examples make the explanations more concrete.

I'll address some of the crazy parts of the financial aid process another time. For now, let me offer you a large bottle of caplets for the headache you're going to have, tissues to dry the tears you'll shed and all the good luck in the world.

Do You Know Which Colleges Outside Florida Accept Florida Pre-paid Tuition?

Were you aware that Florida pre-paid college tuition funds could be spent at hundreds of colleges throughout the US, not just in the state of Florida? Who knew? Certainly, not me.

A list of approved colleges and universities is available on the Florida Pre-paid Plans website. As long as a school meets designated parameters, your pre-paid funds can be used to pay for tuition nearly anywhere.

Prepaid college plans are also known as 529 plans. Here's how 529.com describes the plans and their tax benefits:

Two Types of Plans

There are two types of 529 plans: traditional college savings plans and pre-paid tuition plans. College savings plans are the most common. Essentially, you contribute funds to the plan over time and can withdraw them tax free to pay for your college education (or other qualified education expense) wherever you decide to attend. Pre-paid tuition plans allow you to "lock-in" the price of education at today's prices. Many of these plans are flexible and allow you to attend whatever college you want. After all, it's hard to predict which college your child will go to in 18 years.

Tax Advantages

...Earnings from 529 investments aren't subject to federal income tax. If you invest in your state's 529 plan you often don't have to pay state income tax on your 529 earnings too. Some states even offer upfront tax benefits for investing in the plan.

If you live in a state that levies an income tax, it may make sense to invest in your state's plan. However, most 529 plans are open to all United States residents. You should shop around to find the best plan for you.

Unlike many retirement savings plans, there are no "income phase outs" to prevent high net worth families from investing in 529s and reaping the tax benefits.

Having plenty of options is important when it comes to college selection: The more choices you have, the more likely you are to identify an ideal fit. It's good to know that prepaid doesn't mean "Florida only."

The College Search and Four Important Lessons for Parents

I was searching Google blogs this afternoon and ran across this gem, which I urge parents to read: Four Fatal Errors Parents of College-Bound Students Make.

The post on College Search GamePLAN - The Blog is short, sweet and oh-so-right-on-the-money. It's a quick read but in case you don't have time to click on the link, here's a quick overview of the key tips offered:

1. Make sure you have a sound financial strategy in place before beginning your college search.

2. Billions of scholarships DO NOT GO UNCLAIMED each year - furthermore, the way scholarship funds are allocated by colleges means that value of the scholarship could actually be deducted from the financial aid package, resulting in a zero net gain

3. It's a fallacy that only highly visible (top U.S. News ranked colleges) offer the best educational opportunities

4. College selection and admissions has become so complex that many families don’t start soon enough - start at the beginning of a student’s junior year

Please note: This article was written by Howard Verman, director of Strategies for College, and published in collaboration with Lauren Starkey of Examiner.com

Image by Cecile Graat

Student Loans: Borrower Beware!

Michelle Singletary, the personal finance (and nationally syndicated) columnist for The Washington Post, issued some dire warnings in her September 20, 2009 column, After College, Student-Loan Sinkhole Awaits. According to Singletary, the current financial crisis in mortgages, business lending and credit cards also extends to student loans, as follows:

The percentage of those loans in default grew to 6.7, up from 5.2 percent in 2006. The figures represent borrowers whose first loan repayments came due from Oct. 1, 2006, to Sept. 30, 2007, and who defaulted before Sept. 30, 2008, according to the U.S. Department of Education.

In other words, the department reported, nearly a quarter-million student-loan borrowers went into default during that year.

Gulp. And there's more...

Go to StudentLoanJustice.org and read the stories of "victims" living under crushing student loans. Also go to http://www.defaultmovie.com and watch the poignant trailer from "Default: The Student Loan Documentary." The feature-length film chronicles the stories of borrowers who, years after leaving school, are trying to repay loan balances that have ballooned to two or three times the amount they borrowed.

For so many, the heavy borrowing is unsustainable... Until there is a sustainable solution, there has to be a sea change in the view by many parents and students that college at any cost -- no matter how unaffordable -- is worth the years of financial burden and perhaps ruin.

The more I learn, the more discouraged I get. People at either end of the economic spectrum have access to money to pay for college, but if you're somewhere in between - even struggling to pay bills and keep your head above water financially - you'll be hard pressed to afford a college education for your child. Borrower beware, indeed.

Tuition-free Colleges are Real!

Yes, Virginia, there is a Santa Claus - and this time he's bringing a tuition-free college education. You don't necessarily have to be destitute to be eligible, either. It seems too good to be true, but it is.

In researching these colleges, a good place to start is the list of 8 Tuition-Free Colleges on mentalfloss.com. Be sure to note that tuition-free doesn't necessarily mean expense-free: "Free" may not extend to room and board, incidentals, travel, etc. Furthermore, "free" might require work-study. Some schools offer limited majors, such as the Curtis Institute of Music. Nonetheless, if paying for college is a concern then taking a look at these schools is a worthwhile investment of your time.

As I dug around looking for an up-to-date list of tuition-free colleges, I found that the list of eight schools is frequently cited but not exhaustive - by a far stretch. A far more extensive list is 100 Free College Rides You Don’t Need Daddy to Pay For on advantageedu.com. Be sure to review this list! Although it may be dated (it was posted in January 2008), much of the information is sure to still be valid. Besides colleges in the US the list also includes a handful of schools in other countries.

Please leave a comment if you know of other colleges and universities that have tuition-free programs or other programs to help offset college costs.

Photo by Thomas Campbell

A White House Staff Report: "Barriers to Higher Education"

Hot off the press from the White House Task Force on Middle Class Families is a look at why the average American has such a tough time paying for a college education.

In an appearance today at Syracuse University, Vice President Biden made a town hall presentation about the importance of a college education to our country's middle class. Two key issues are getting into and paying for college.

"Barriers to Higher Education" examines how much merit (ability) determines access to a college education, "Because a clear pathway to a college education is a clear pathway into the middle class." Beyond the issue of merit, the report also delves into questions about the high cost of higher ed and struggles many families face trying to afford a college education.

The report includes links to previous reports and studies on the topic and is worth a read; let's hope some initiatives are put into work soon - say, in time for Fall 2010?!

Photo by Christian Carollo