This past weekend I was watching The CBS Early Show and they presented a segment with a “so called” expert on Paying For College In Tough Times where Vera Gibbons shared advice on Scholarships, Financial Aid and Loans.  This would have been a great opportunity for CBS to give you quality information that you could really use, but instead, what you got was a slot filler, time killer and all vanilla.  Check out the link to the story, then come back here and I’ll tell why her information is poor and so is her knowledge on paying for college.

Okay, so you’re back.  What did you think?  Wow, are you ready to pay for college now?  I’m sure you have all the information you need…  right?  WRONG! 

I’ll give Miss Gibbons credit on knowing which websites to go to to find information on scholarships, financial aid and the FAFSA… but that was it!  As we have said and posted many times, it is important to fill out the FAFSA early, but if you have a senior in high school today… you are too late to get the most financial aid possible.  Your FAFSA should have been in by the end of January.  Yes, the FAFSA can be difficult to fill out, but she really should have talked about the importance of planning at least a year in advance to set your tax return up in the most efficient manner possible to lower your EFC and get the most aid available.   I know they have time restraints with each segment, but it is VITAL to know what the colleges are actually looking for in your tax return and exactly how the public and private colleges view your income and assets differently.  Did you know that private colleges look at how much equity you have in your home?  Did your student make over $3750 last year?  Do you own a small business or a farm?  Did you know there are tax advantages and could be more aid available to those who do?  That probably would be more helpful… right?   In her defense she did mention some of the tax breaks such as the Hope Credit and Lifetime Learning Credit, but do you know how to use them?  Does your accountant?

Miss Gibbons also mentions searching for scholarships using fastweb.com, which is a great website, and yes there are scholarships available.  What she doesn’t tell you is that scholarships make up only about 3% of the billions spent on college every year.  If you are depending on scholarships to pay for college… forget about it.  You are actually better off looking locally for scholarships through your students high school or your church or a local business organization you may belong to.  Yes, some students do get full scholarships and I hope it’s yours, but you must be realistic about those chances.

Next, Miss Gibbons talks about the importance of 529 Plans and investing in aggressive age-based plans.  She may have well as told you to set fire to your money, because these 529 Plans are a HUGE waste.  Every client we have seen over the last six months have lost at least 50% of where they once were.  529’s have the greatest investment risk and are tied to the market… which if I’m not mistaken is a total disaster at this point.  Oh yeah, 529 Plans are considered to be a parent asset which will increase your EFC.  More BAD advice. 

I want to highlight this last paragraph because her response is weak and of course so is the advice…. One man who told Gibbons he’s unemployed and tried unsuccessfully to get more financial aid for his son in college wanted to know what he could do to get that additional help.“My hunch,” Gibbons responded, “is that he didn’t go about it the right way. You’ve got to put in a request for a professional judgment review from your school to see about getting additional aid. He might not be needy enough. Only the neediest of needy are actually getting aid. Beyond that, look at the loans. Stafford loans, PLUS loans, they’re out there. There are (reasonable) payment terms. Private loans are getting more difficult to get in this environment.”

First of all, financial aid is available to most Americans, not just the neediest.  We find aid for families making over $100,000 per year.  It’s all a matter of positioning your finances correctly and knowing how the financial aid formulas work.  Secondly, Stafford Loans come from The Financial Aid office as part of student loans.  Thirdly, PLUS loans are running at 8.5% interest to be paid back over thirteen years.  If you borrow $25,000 per year for four years, it will cost you almost $150,000.  Does that sound reasonable?

The reason I’m so fired up about this today is because this is the kind of bad information put out by the media that people will follow and end up being screwed.  If you want the best information and want to maximize all you can in getting the most out of paying for college, then you must listen to real experts.  Vera Gibbons may be a financial expert, but she really has NO IDEA about paying for college in tough times.  Neither does your neighbor, your cousins best friend or your Aunt Sally, but guess what… we do. 

Please follow our advice and forget hers… there are better ways to pay for college.   Contact us @ info@dreamstrategy.com if you would like more information on the best ways to pay for a college education.