College application deadlines are fast approaching and soon parents and students will be making decisions that affect the rest of their lives.
But this is also the period where parents should watch out for financial missteps that could cost them big bucks. Here are five financial mistakes parents with college bound students should avoid.
Procrastinating in completing the FAFSA
The FAFSA (Free Application For Federal Student Aid) is the application form all parents must complete in order to apply for federally funded financial assistance. The form is time consuming and requires income tax information from the most recent tax year. This is why many parents procrastinate in completing the online application.
While the federal deadline for completing the FAFSA application is June 30th 2012, many states and colleges use the FAFSA information to dictate the financial assistance they offer as well. States and individual colleges often have deadlines for FAFSA completion that fall far earlier than the federal deadline.
In addition, many states allot financial aid funds on an ongoing basis. Procrastinate in filing the FAFSA and your state may not have any financial aid left to offer your child. If you check out the Illinois state FAFSA deadline information at the FAFSA website, for instance, it states:
“Illinois – As soon as possible after January 1, 2011. Awards made until funds are depleted”
Parents may begin filling out the FAFSA form beginning on January 1, 2012. You will need your 2011 income tax information available (but you don’t necessarily have to have filed your income taxes before completing the FAFSA).
For more information visit www.fafsa.ed.gov
Failing to investigate college graduation rates
While inquiring about the college campus or academic reputation of a college is wise, many parents forget to ask a crucial question of admission counselors and university officials alike.
What is the college’s graduation rate? What percentage of students graduate in four years, in six years?
No student wants to fail to finish college and be on the hook for tens of thousands of dollars in the process. Picking a college where your child has a fighting chance of graduating is especially important considering only 40.5% of black students starting four-year institutes graduate, compared to 62.6% of white students.
Inquire about the school’s academic resources. Do they have a learning or study skills center? Does the school provide free tutoring? Does it provide summer orientation programs to help students get a head start? Many schools like the University of Wisconsin-Madison feature aggressive peer counseling programs and skills building initiatives to help students adjust to the rigors of college.
Ignoring scholarship money
Your child doesn’t have to be an Einstein to get a piece of the scholarship pie. Thousands of scholarships are awarded based on community service, leadership, proficiency in the arts and other non-academic requirements. Students can use websites like Fastweb.com and FinAid.com to search for scholarships they may qualify for.
Don’t forget to think locally as well. Many local organizations provide scholarship money. The local Rotary club, your church, or the local chapter of Alpha Phi Alpha just may have a scholarship fund you’ve overlooked. Also, don’t forget to check in with your employer. I was able to pick up easy scholarship money with little competition by taking advantage of a scholarship offered by my parents’ employer.
Overlooking college related tax breaks
The government provides many tax incentives to help families better afford college. The American Opportunity Tax Credit (Hope Tax Credit), for instance, provides qualifying families up to $2,500 in tax credits for the first four years a student is enrolled in college. For a complete list of available college tax credits visit the IRS tax benefits for education website.
Tapping retirement savings to help pay for college
While it may be tempting to tap retirement savings to help fund your child’s education dreams, it’s probably not a good idea.
With future social security benefits in jeopardy and corporations slashing pension programs to the bone, most couples will need as much money as possible to survive after retirement.
There are several ways to finance a college education other than tapping retirement funds. Grants, scholarships, federally guaranteed loans, as well as private student loans are all options.
But there is no way to finance a retirement. The over 65 Pell grant doesn’t exist. Neither does the Golden Years retirement scholarship, and forget about federally guaranteed retirement loans keeping you out the poor house.
BMWK, if you have kids in college or about to enter college, what are some pieces of financial advice you can offer to others?