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Warning Signs You Are Paying Too Much for College

Warning Signs You Are Paying Too Much for College

Are you going to pay too much for an undergraduate degree? Here are danger signs that you might be heading in that direction.

Parents send the wrong message

You probably know parents who have suggested to their children that anything is possible. They tell their teenagers some version of this advice, apply to whatever schools you want and we’ll find a way to pay for it. Applying to schools without any knowledge about what the ultimate tab will be is often a recipe for disaster.

You believe teenagers deserve to go to their dream school

I heard today from an affluent mother who initially felt that way. She let her son, a National Merit Scholar, apply to three elite liberal arts schools, Carleton, Colby and Vassar, that don’t give any merit aid, just need-based aid.

“Why did I allow him to apply to those schools? Because I thought, ‘He’s so smart and he worked so hard! Shouldn’t he go to his dream school?’” Each of those, however, would have cost the family more than $260,000 for a single bachelor’s degree.

The mom balked, however, and her son is finishing up his freshman year at Oberlin College where he received a large merit scholarship. After acknowledging that she had been a “hard-headed dreamer,” she said, she “ultimately did the right thing for her son.”

Teenagers assume they will win lots of private scholarships

Despite conventional wisdom, private scholarships are the smallest source of money. Roughly 7% of school money comes from private scholarships, which are sponsored by foundations, service organizations, other nonprofits and companies. The largest source of money for many students will be from the federal government and the schools themselves.

Assuming you can apply for aid as an independent student

Having a child file for financial aid as an independent student might dramatically increase eligibility for financial aid. That’s because the student would report only their assets and income on the Free Application for Federal Student Aid (FAFSA) and not the parents’ income and assets.

Counting on this as your Plan A, however, rarely will work. Even students who are living on their own, paying their own bills and aren’t claimed on their parents’ income tax returns usually will be considered a dependent student for aid purposes.

You have to be able to answer yes to one of the 13 dependency status questions to qualify as an independent. Major ways to qualify include:

  • Being married
  • Being 24 years of age or older
  • Working on an advanced degree
  • Being in the military or a veteran

Students intend to apply to schools in their own states

Oftentimes, attending an in-state public university will be the cheapest alternative, but not always. Some state universities charge high prices. According to the U.S. Department of Education, state universities on the East Coast tend to be the most expensive including these:

  • University of Pittsburgh
  • College of William and Mary
  • Pennsylvania State University
  • University of New Hampshire
  • University of Vermont
  • New Jersey Institute of Technology

Students living in states with high-cost state universities might be able to find a better deal at out-of-state public universities, as well as at some private schools.

Assuming students can borrow a lot of money on their own

While many parents believe their student can borrow the full cost of their education, it isn’t possible unless the parents risk their own financial security. Most dependent undergraduate students will be able to borrow at most $31,000 with the Federal Direct Stafford Loan.

If parents don’t want to borrow a Federal Parent PLUS loan or a private parent loan, their student will have to apply for private student loans. And guess what? A parent, or some other adult, almost always has to cosign these loans. A cosigner is equally obligated to repay the debt, so these loans could end up as a huge financial liability.

Even if the student could borrow more, most students cannot afford to repay that much debt. Borrowing more than the student’s expected annual starting salary is excessive and may force the student to remain in debt for the majority of their work-life.

Failing to apply for financial aid

20% of undergraduate students, according to a report from the U.S. Department of Education, did not apply for financial aid. 30% didn’t apply for aid at public two-year schools.

More than a million students each year could have qualified for the federal Pell Grant if they had filed the FAFSA. Not filing also disqualifies you from aid from thousands of post-secondary institutions. You can’t get aid if you don’t apply.

Assuming you won’t qualify for financial aid

Families often assume that they won’t qualify for financial aid, but they won’t know for sure if they don’t take advantage of net price calculators.

Net price calculators are designed to generate a personalized estimate of the cost of one year of schooling at a particular institution after deducting grants and scholarships. Parents need to use this tool before allowing their teenagers to apply anywhere.

Worrying about reducing admission chances

Some parents fear that if they apply for financial aid their child’s chances for admission will drop. There is a possibility that this will happen at some institutions, since most do not provide need-blind admissions.

Many colleges and universities are need aware, which means that for a certain percentage of the applicant pool, they will consider a family’s ability to pay when deciding whether to admit the student. Even some need-blind schools become need-sensitive when admitting students off of the waiting list.

Students who don’t apply for financial aid for the freshman year might be ineligible for institutional grants in subsequent years, unless the family’s financial circumstances have changed. When families need financial aid, they should apply for it, or their student may have insufficient funding to finish without borrowing an unreasonable amount of debt.

Applying early decision

It can be financially devastating when a student falls in love with one school. When this happens it is often going to be difficult saying no regardless of the ultimate price.

One way that applicants express their devotion is by applying early decision (ED). With an ED application, a student promises to commit to the institution regardless of the net price. An accepted student, even if they receive no financial aid or merit award, is expected to attend.

When money is an issue, it’s far better to explore many options to see which ones offer the most affordable deal.

Counting on a scholarship

Parents of student athletes commonly assume that their children’s athletic prowess will underwrite the cost of school. Athletic scholarships are not as plentiful as parents and teenagers assume. Just 2% of high school athletes end up getting athletic scholarships and a very small percentage of those students capture a full ride.

Not thinking about the future debt

Parents and students should not borrow until they have a solid awareness of what a reasonable amount of debt would be and they know how it could be budgeted.

Borrowing the maximum Direct Loan amount ($31,000) is a good yardstick for students since the federal government provides safety nets for this debt. Parents need to assess how much they can borrow by considering such factors as their mortgage, credit card balances, debt for other children and their plans for retirement.

A good rule of thumb is to keep student loan debt in sync with income. If total student loan debt at graduation is less than the student’s annual income, the student should be able to repay student loans in ten years or less.

Lynn O’Shaughnessy is a best-selling author, speaker and journalist. Her book, The College Solution: A Guide for Everyone Looking for the Right School at the Right Price, is available on

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