In response to David Kahn’s April 3, 2009 Wall Street Journal Opinion piece The Fat Envelope, Please, about how the economy is affecting college admissions, Kevin Poehlmann of Oak Ridge, N.J., wrote an April 7, 2009 opinion in Saving for College Involves Some Perverse Incentives pointing out that the “current system of college tuition and financial aid formulas punishes good economic behavior” because children of parents who don’t save receive lower tuition and grants.
I have no idea whether Poehlmann is correct that tuition and financial aid formulas favor nonsavers, but according to Myths About Saving for College at Finaid.org, families with more assets do receive less need-based aid.
If faced with the choice of saving or borrowing, it’s better to save now than borrow later, that is if you can save. As per the Motley Fool article Don’t Save for College!, parents have several higher priority financial planning goals to meet before it makes sense to save for college.
If you aren’t able to fully fund college via savings, then it makes sense to try to fund college as inexpensively as possible to minimize the debt burden for both parents and students.
One option parents should consider is that of scholarships and grants from small private schools. In my experience, small privates, especially more rural schools with a religious affiliation, often reward good students with generous grants and scholarships above and beyond federal aid and loans.
As an example, the final project for a statistical analysis class I completed last month analyzed the relationship between various factors and student indebtedness: see FinalProject.doc, univ&col-EDA.xls, and univ&col-BestSubsets-AfterRegression.xls. Although I cannot vouch for the data set–it was provided by the course instructor–the analysis points to a hidden variable of increased financial assistance from small private schools, especially rural and religious schools.
Jake B. Schrum, in Saving for College Involves Some Perverse Incentives, notes that private colleges typically offer more financial assistance and that rates of graduation from privates in four years are higher than that of rates from publics, in part because students at publics are not always able to get into all of the classes they need when needed to graduate on time.
Taking five years to graduate from a public might end up being more expensive than graduating in four years from a private.
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Another option for students looking to save money on college is to attend a two-year college and complete their general education classes, while doing so inexpensively. Then, they can transfer to a 4-year state college for the remainder of their 2 years.
Many, many years ago, I did it this way and it saved my parents a lot of money. Two-year colleges are still very affordable where I live, about $25 a credit (or $75 a class).
Just another option!
-Little House
I absolutely agree, but even if you ultimately decide attend community college, it’s worthwhile to apply to small privates to see what assistance might be offered. Then you can compare options and make the best choice.
Schrum is spot on. I was very lucky to be able to exploit that system of perverse incentives via a nasty divorce my senior year of high school. Thanks to my mom being a single parent and our (combined) family income dropping from 2 salaries to 1, out of state private school is less expensive for me than in-state public when considering need-based aid(tuition, board, and all).