Don’t Fall for These Costly College Payment Myths

By FeaturesFOXBusiness

It seems as if everyone has a different plan that they tout as being the best for saving for college. Families trying to map out a college payment plan face rough waters as the cost of  higher education continues to rise in the face of a still-sick economy.

According to a study by the College Board, the cost of in-state public four-year institutions for the 2011-2012 school year rose 8.3%  compared to last year while out-of-state tuition and fees at public four-year colleges increased by 5.7%. At private nonprofit four-year colleges and universities, costs have jumped 4.5%.

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“There’s a real danger that families who aren’t familiar with the process will take in some of the information that’s out there and either misapply it or misunderstand it and in doing so, cause themselves to spend a lot more to educate their children than they need to,” says Jim Briggs, co-founder of

Here are six myths that the experts say can cause students and their families to pay more for college in the long run and how you can arm yourself with the right information.

Myth 1: High-income families won’t get any financial aid.

Many parents assume that if they make a high salary, their child won’t be eligible for any financial aid. Briggs says that it’s a good idea for families across the financial spectrum to complete a FAFSA form to see if they qualify for need-based aid and if not, to borrow money through federal student loan programs.

Reyna Gobel, author of Graduation Debt: How To Manage Student Loans and Live Your Life, recommends every student estimate how much he will likely receive with FAFSA4caster.

“Don't avoid filling out a form because you don't think you'll qualify for Pell Grants,” she says. “You may lose out on a university- or state-based grant or scholarship.”

Myth 2: If you save too much, it will hurt your eligibility for financial aid.

Parents shouldn’t feel discouraged from saving for their kids’ education over the fear they might qualify for less aid, says Suzanna de Baca, vice president of Wealth Strategies at Ameriprise Financial.

“Even if it works in your favor, the amount you might receive in financial aid from the government or the college would likely be significantly less than what you could have saved had you started early,” she says. “The benefits of saving for any financial goal typically far outweigh any consequences of doing so.”

Briggs points out that from a financial aid standpoint, parent assets are only assessed at about 5% after an asset protection allowance is applied, while student assets are assessed at a much higher rate.

Myth 3: The sticker price is the true cost.

Students and their families should distinguish between the “sticker price” of a school (the advertised price of attendance) and the net cost, which factors in grants or scholarships.

“The truth is the sticker price on college doesn't mean anything--don't make any decisions until you personally receive your financial aid award letters and compare them,” says Gobel.

Myth 4: Private schools are more expensive than public universities.

In general, experts say private schools are considerably more expensive than the sticker price of public schools. However, private schools have significant amounts of aid to award in need-based and merit-based situations, something that cash-strapped state schools can’t offer as easily.

“All schools use a slightly different [need-based scholarship] formula, but that formula for many people results in significant discounts, so that $56,000 sticker price that you would pay at a Harvard or Princeton might be at or below the net price that you would pay at a state school,” says Briggs.

Myth 5: Students loans are a bad idea.

Although the growing amount of outstanding student loan debt in this country continues to balloon, students shouldn’t be discouraged from borrowing for school. Families need to do their research, start saving early, and borrow only what you need so that your student isn’t left with a mountain of debt.

“It's OK to expect your child to take out loans on his or her own to pay for education beyond what you are able and comfortable with funding,” says de Baca. “It can help your child gain financial responsibility, build credit and ultimately appreciate the education they’re receiving even more.”

Myth 6: Uncle Sam doesn’t want you to go to college.

Parents should take advantage of the tax benefits of paying for their child’s education.  There are several tax deductions, including the American Opportunity Tax Credit (,,id=211309,00.html) that is worth up to $2,500 per student for the cost of tuition, fees and course materials paid during the taxable year and 40% of the credit (up to $1,000) is refundable even if you owe no tax.

“There are a lot of families who don’t claim their education credits in their full amount and that would save them money that they could then use to pay for education,” says Briggs.

While it’s no secret that college can be expensive, students can have better control over their debt level if they make smart decisions from the get go.

“You control which school you select, the way you purchase your textbooks, and how much you spend while in college,” says Gobel. “You can't control your tuition prices, but you can make a dent in the cost of college with your own choices.”

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