Expert discusses ways families can make a college education affordable
By Matt O'Brien - The Coast Star
Paying for a child’s college education can be a profound financial challenge. Having to send two, or even three, children within a few years of each other to college for an annual cost of $15,000 and up per child can make parents’ heads spin. However, on Thursday, Chuck Drawbaugh, an insurance and investment planner and college funding expert, offered some helpful hints for parents to keep their children’s college education affordable.
One type of financial aid Mr. Drawbaugh stressed during Tuesday evening’s seminar at the Wall Township Library was that students and parents should search for schools that will offer "merit aid" over other types of financial assistance. Merit aid, or what Mr. Drawbaugh compared to as a college's free-agency money, was ideal for students.
When merit aid is offered, it usually goes to students because of their academic and extracurricular performances in high school. "Prospective students are going to have to do some research and homework on schools where they might get merit aid" he said. For students to increase their chances of receiving merit aid, Mr. Drawbaugh said they and their parents would have to "get over the name game."
In other words, smaller schools that have smaller tuition rates than the larger, well known colleges, may offer its prospective students certain types of merit aid not offered by the larger schools, he said. Families that have a tight budget may want to opt for the smaller school. Just because the smaller school does not have the reputation as some state universities or Ivy League institutions does not mean the student’s quality of education would suffer, Mr. Drawbaugh said. "There are a lot of good schools out there" he added.
If merit aid is not an option for students, the families can pursue other loans and grants that are offered by the state. Mr. Drawbaugh said students need to fill out and submit the Free Application For Federal Student Aid (FAFSA) to determine what type of grants and loans they would be eligible for. College registration offices usually supply the FAFSA forms.
After submitting the application to the state it would be determined how much the family would have to contribute to the student’s tuition and other college costs, he said. Before filing out a FAFSA form, Mr. Drawbaugh said, there were ways students could adjust their finances in order to increase their eligibility for grants and loans. "For example, if a student has money in their name, that will count more heavily against them in the formulas for financial aid eligibility" he said. "[However,] legally they can’t just yank it [out of an account]" but in some instances families could legitimately overcome such obstacles to increase their chances for financial aid, he added.
In order to augment a student’s college fund, they should always be on the lookout for scholarships, such as money offered by the local chamber of commerce or by companies like Coca-Cola, Mr. Drawbaugh said. "People know there are thousands of scholarships" he said. "But at best it will help you with a small amount of what you need." Because scholarships will help with only a tiny portion of college costs, Mr. Drawbaugh said, students should "position" themselves with a school that will offer them the best financial incentive, such as offering merit aid.
He also said that families should be aware of scholarship scams. Some unethical companies that are hired by students and families that offer to hunt for scholarships often promise a certain amount of aid, Mr. Drawbaugh said. However, no one can promise how much aid the state or school offers, he said. "They are preying on the desperation of families and kids," he said. "When people get desperate they do stupid things."
Mr. Drawbaugh also discussed loan options prospective students should keep in mind. He said low interest loans, which sound ideal, are sometimes not always the best option. For example, he said, a low interest loan that must be paid back within 10 years may be more of a burden than one with a higher interest rate that must be paid within 25 years. The loan with a shorter period of time to pay it back will have higher monthly installments, Mr. Drawbaugh said.
Mr. Drawbaugh also discussed ways families could lower taxes when paying for a child's college tuition. One method he said families could use when borrowing money to pay for college was to borrow from their home by taking out a first or second mortgage. Families could deduct the interest they are paying from the mortgage where educational loans will not enable them to do so, Mr. Drawbaugh said. Such reductions could mean $2,000 to $3,000 in savings a year, which is as good as a scholarship, he added.
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