Lynn O’Shaughnessy literally wrote the book on shrinking college costs. And the fact that both of her kids avoided student loans to pay for their bachelor’s degrees proves her methods work.
I recently spoke with O’Shaughnessy, author of “The College Solution: A Guide for Everyone Looking for the Right School at the Right Price,” to debunk five pieces of conventional wisdom when it comes to paying for college.
If you and your child are looking to avoid or limit your reliance on private student loans, consider the following tips.
Myth No. 1: The student should pick the school on their own
According to O’Shaughnessy, handing the entire college selection process over to the applicant is how most families’ college planning goes awry. Most collegebound students are woefully unprepared to find a school that makes sense academically and financially.
“Parents will say, ‘Oh, well, I’m just going to let my child apply wherever he or she wants, and we’ll see what happens,'” said O’Shaughnessy, who also runs The College Solution website. “This is an expensive investment, and you’re going to let a 17-year-old do whatever they want? That’s a disaster.”
To avoid applying to (and getting into) schools you can’t afford as a family, O’Shaughnessy recommends starting with College Board’s Expected Family Contribution (EFC) calculator. The tool will give you and your child a true sense of how much money you’ll be expected to put toward college costs.
Then you can help your student build a college list with affordability in mind. You’ll also have an easier time motivating your student to seek scholarships once they have a clearer picture of your family’s finances.
Myth No. 2: You have to go to an expensive school to succeed
“It’s a terrible perception, and studies show it’s not true,” O’Shaughnessy said. “Even if [you] don’t believe me and think that, ‘Oh, no, no, no, the people who have the Ivy League degrees get the best jobs,’ well, look at your LinkedIn account. Look at where some of the [colleagues] you admire the most … went to school.”
You might have your son or daughter look over your shoulder while you carry out O’Shaughnessy’s recommended exercise. That will hammer home that attending an elite (or expensive) school isn’t necessary for professional success.
If your child remains unconvinced, move the conversation to cost. For the 2017-18 academic year, the median tuition and fee price for full-time students attending private nonprofit four-year schools is $35,260, according to College Board. That’s nearly four times more expensive than the average published in‐state tuition and fees for the public four‐year sector of $9,970 during that same period.
If a college applicant chooses a school with a higher price for tuition, room and board, and other fees, they likely increase their reliance on federal student loans and potentially student loans offered by private lenders.
“Don’t assume that a fancy-name school that costs a lot is going to be worth the price you pay later in all these student loans,” O’Shaughnessy added. “When you’re 17 or 18, you’re so excited [about college] that you have no concept of what debt is. Parents should run some repayment calculators to see what kind of crazy debt [their child] could get into.”
Myth No. 3: The cost of attendance is what it is
More often than not, the so-called sticker price you might see on schools’ promotional materials might not be the most accurate.
Instead, O’Shaughnessy said you should rely on your prospective schools’ net cost. It’s also a dollar figure, but it subtracts any need-based grants and merit-based scholarships from the school and the state or federal government.
Type “[school name] net price calculator” into your favorite search engine to find the tool for your student’s top schools — institutions are obligated to provide one for freshmen, according to O’Shaughnessy.
Be aware that the more questions the calculator asks about your finances, the more accurate it’ll be.
To use these calculators, gather your tax forms and bank statements. It should take no more than 20 minutes to see a school’s true cost of attendance.
Myth No. 4: Saving for college lessens your chances of receiving financial aid
Although your family’s income significantly impacts your student’s access to need-based financial aid, you won’t be punished for your savings.
According to the 2018-19 formula used by the Free Application for Federal Student Aid (FAFSA), a 45-year-old married parent would receive an education savings and asset protection allowance of $19,800. If you’re 60 and married, for example, you could shelter as much as $29,100. The formula increases with age but decreases for single-parent homes.
Plus, any amount of savings beyond your allowance is assessed at 5% by the CSS Profile, another financial aid application used by schools, and 5.64% by the FAFSA.
“So for every $10,000 you save, your financial aid eligibility would decline by no more than $500 to $564; that’s nothing,” O’Shaughnessy said. “It’s always good to save for college.”
Myth No. 5: Don’t rely on your school to supply financial aid
During a 2017 webinar with her users, O’Shaughnessy rattled off a handful of surprising statistics taken from the National Association of College and University Business Officers’ research:
- 58% of public colleges students receive school aid.
- 88% of private college students receive school aid.
Given the fact that more than half of public and private college students receive school aid, one takeaway is that you don’t have to be top of your class to score financial aid from your college.
Be aware that not all schools offer the same types or level of aid. Nationally recognized schools overrun with applications, for example, are less likely to offer merit-based need. They don’t need to, O’Shaughnessy said.
But top schools are much more likely to offer need-based aid if you have the GPA and standardized test scores to gain admittance.
Take Harvard University as an example. Through the Harvard Financial Aid Initiative, it guarantees to cover all costs beyond what your family can reasonably contribute.
Keep residency in mind too, O’Shaughnessy said.
Out-of-state schools, for example, are less likely to offer need-based aid. After all, you and your student could probably find more affordable options in your home state. Using schools’ net price calculators will help you to gauge the generosity of these schools.
No matter the school type or price point you and your child are eyeing, consider O’Shaughnessy’s tips to avoid falling victim to faulty conventional wisdom. Then you can pick the right college for your student and your family.
Need a student loan?Here are our top student loan lenders of 2018!
|1 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or Nationwide Bank, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 11/1/2018. Variable interest rates may increase after consummation.
2 Important Disclosures for Discover.
3 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for PNC.
PNC Bank is one of the nation’s largest education loan providers. For over 40 years, PNC has been committed to helping students and their families make possible the adventure of college.
6 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2018 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
7 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
8 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
9 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.94% – 12.78%1||Undergraduate, Graduate, and Parents|
|4.04% – 13.04%3||Undergraduate and Graduate|
|4.34% – 12.99%2||Undergraduate and Graduate|
|4.12% – 10.98%*,4||Undergraduate and Graduate|
|5.03% – 11.23%5||Undergraduate and Graduate|
|4.12% – 13.13%6||Undergraduate and Graduate|
|4.92% – 10.01%7||Undergraduate and Graduate|
|3.72% – 9.68%8||Undergraduate, Graduate, and Parents|
|4.26% – 12.13%9||Undergraduate, Graduate, and Parents|