College Planning: Common Financial Mistakes Parents Make

When children are younger, college seems a million miles away. However, as most parents learn, time slips by quickly, and before they know it those little tots are all grown up and exploring colleges.

Planning ways to pay for a child’s college are a big concern for those whose kids have entered high school and are suddenly confronted with guidance counselors, PSATs, SATs, admission processes and other activities involved in college planning. At this point, suddenly realization hits and the idea of college no longer seem so far off.

With the costs of education significantly rising every year, all of a sudden the awareness of figuring out how to fund college is confronted. The financial blow could be hard if no previous thought had been given.

As parents navigate the roads which lead towards funding a college education, they find they make mistakes. Some are in hindsight, and others are learned during the planning process. The best way to avoid falling into the pitfalls is to know ahead of time what the options are and to proactively plan for paying for a college education.

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Neglect to Save Early

Delaying opening some sort of college savings account when a child is younger is probably the number one mistake most parents make. When parents discover the high costs of college, including the extra fees, books, and other educational expenses, sticker shock can set in.

By the time parents begin thinking about it, too much time has slipped by and in a struggling economy, saving the significant amounts to pay for even one year of college is difficult for many families. Neglect to begin early and regular savings with college in mind is often realized in hindsight as the biggest mistake by many parents.

Not Applying for Financial Aid

Sometimes parents don’t encourage their children to file for financial aid because they assume their income exempts them from qualifying for awards. Often people don’t file because they fall into a higher middle or upper-class income bracket or because they are a two income family. This is a big mistake.

To apply for certain low-interest education loans, a FAFSA has to be filled out, and by not filing the application, this will automatically exclude potential avenues to pay for college.

Regardless of income, all students should file the FAFSA; worse case scenario an application will not be approved for financial aid. In addition to ‘need’ based financial aid, there is also merit-based aid. If a student is a strong student, good grades, certain extra-curricular activities or specific leadership qualities, an award may be in the cards. Yet, students never know unless they’ve filed.

Even if a full award is out of the question due to income level, you never know, because enough money for books or other expenses may be approved. Even a $250 award can pay for books for a semester or two. Every bit helps.

Not Doing the Research

There are many ways to help fund a college education, if you know how to look in the right places. There are special educational accounts which can be started, ways to save money tax-free, scholarships and other potential avenues to explore.

Many parents assume if their children don’t receive awards through government PELL or TAP programs that they’ll have to pay education costs totally out of pocket, and this is not true. Parents should search the web, talk to colleges, attend financial aid seminars, research IRS information and explore any possible avenue to learn more about funding education.

Poor Prioritizing

When kids are little, it’s easy to delay thinking about savings because college is many years away, and in the meantime, a lot of money is spent on vacations, shopping, extra toys, restaurants and other non-necessity spending.

Imagine if all the money spent on luxuries over the years was put towards funding a child’s college education; that’s a lot of dollars when you add it up!

Don’t Allow Children to Contribute

Children who are taught early in life the value of a dollar and hold down a part-time job in their teens can also save money for college. This is beneficial on many levels because they’ll have some extra funds to help foot the education bill, and they’ve also realized that to gain something, you have to work hard to earn it.

Students who are handed a free ride by their parents, don’t often appreciate the hard work that went into obtaining the funding and may not take college as seriously. Those students who have contributed their own money towards college understand the value of paying for it.

Many parents make mistakes when planning for their child’s education. Sometimes the mistakes can’t be undone, but others can be rectified. Either way, the good news is there are avenues to pursue and lower-interest education loans to apply for when trying to pay for college, even if financial aid has been denied or isn’t enough to cover expenses.

Navigating the college system is not easy when the oldest child goes to college, but during the journey, many lessons are learned, and if there are younger siblings who will be soon following their older sibling’s footsteps, chances are figuring out how to pay for college will be a much easier task to undertake.