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Financial Planning / Paying For College


Subject:  Re: Parent vs Child Assets Date:  8/8/2001  5:02 PM
Author:  NellieD Number:  4164 of 8558

And there does seem to be a bit of an undercurrent to many posts on this board that some families "aren't the type" meant to be helped by financial aid even if those families' 100% truthful applications indicate that they are eligible for the aid or subsidized loans. However, I do think there is a distinction bewteen gaming the system in a legal way -- which I don't have a problem with; it only makes sense to have the application paint the most favorable picture possible -- and outright lying about what the money is for and how it will be used.

A big part of the problem is that people have a misconception about what financial aid is.

Student loans are the primary source of financial aid. They are "meant" for everyone. Posters often say "I'm not eliglbe for any financial aid" and it just isn't true. Virtually everyone everyone is eligible for some sort of financial aid -- it's just not always the type they want. Make no mistake about it, giving you loans with absolutely no collateral is a real benefit. If you went to a bank, you would either have to put your home up as collateral, or you would pay much higher interest. This IS financial aid.

Federal grants are "meant" for people with very low incomes. I make no judgment about why people have low incomes -- they could have lost their job, could be disabled, could be uneducated themselves and unable to earn a lot of money. That is what need-based aid is meant for -- to give the less fortunate a chance at an education where they can lift themselves out of their unfortunate circumstance. If everyone cheats the system and makes themselves eligible need-based aid, where does that leave the truly needy?

There are things parents can and should do to paint their financial picture in a favorable light. I always recommend that people max out their retirement plans before they save a dime for college. This is totally legitimate and completely ethical. As I have said many times: There are loans for college, no one will lend you money for your retirement. However I can never recommend or condone that people transfer money to relatives, or purposefully underreport assets to be eligible for aid they don't really need. These types of behaviors are unethical and illegal. People like to complain about "Welfare Cheats", but these activities are just as fraudulant and just as much of a burden on of us taxpayers. Where do you think this money comes from?

Once upon a time, there was a lot more grant aid available (per capita), and it was a lot easier to be an "Independent" student. But people took advantage of the system so much that they had to change the rules, making the maximum Pell grant too little to do much good and making it virtually impossible for anyone under 24 to be considered "Independent". Many current students suffer because of this. And the only people to blame are the people who took advantage of the system in the past so badly that they had to change the rules.

The rules will change again to prevent abuse. For people who have young children, the manipulation that people do today WILL affect the financial aid availability and rules when your children are college age. This is not a "holier than thou" attitude. This is reality. For every dollar that goes to a financial aid cheat today, that's less dollars available for you tomorrow.

When it comes down to it, there are three ways you can legitimately pay for education. 1) You can save a whole bunch of money, and have enough to afford it without financial aid. 2) You can not save at all and hope that the financial aid rules remain the same when your child is in college, then borrow a lot of money and make ends meet. 3) You can be very poor, receive a bunch of grants and still have to borrow a bunch of money.

To me, being poor isn't a good option. And, personally, I think you should worry about your family's standard of living as much if not more than your child's college fund. Everyone has to choose their priorities. If the security of the college fund makes you sleep better at night, then that may be the best choice for you. But once you've made that choice, be happy that your child will taken care of and don't gripe about the fact that you aren't getting the aid you think you "deserve" (this is not directed at "you" Mark -- that's the "general" you).


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