10 Foolish Money Tips
How to Pay for School
November 05, 1997

1) Make sure Junior is really ready to go to college. An astounding 38% of all college students quit school (at least for one semester) before the end of their sophomore year. After going to what many young people consider prison for the first 18 years of life, school is the last thing some want to continue. Before plunking down (or borrowing) $10,000, make sure that this is really something your child wants. A year "off" in the real world waiting tables or delivering pizza may be just the ticket to convince them that college might be worth it after all. Also, if they are expelled from school for academic reasons, it will be very difficult to get more financial aid. And you have to start paying those loans back right away.

2) Choose a cheaper school. Weigh carefully the true benefits of a private school versus the cost savings a larger state school offers. (We talked briefly about this in It's Never Too Late to Get Smart.) A college degree is an investment. Will a psychology degree from Swarthmore (a fine school I might add) really be more valuable than a psychology degree from the University of Virginia? Will it be worth 6 more years of debt to pay for it? Only you and your child can answer that. But the burden of debt after school is a compelling reason to choose UVA.

3) Attend a school close to home. As an in-state student at a public institution, your child will not only pay a reduced tuition but also will probably be eligible for financial aid earmarked for townies. Also, travel expenses and long-distance phone bills add up, especially the first year when home sickness may be more pronounced than after your kid realizes that he doesn't really miss you that much.

4) Think creatively. Hardly anyone finishes college in four straight years while taking a junior year abroad program anymore. Why not go to a community college for the first year to get the more generalized courses out of the way at cost savings of 50%? Or take some classes online? More than 100 colleges and universities now offer classes over the Internet and most charge in-state tuition, whether you're a resident of that state or not.

5) Look for co-op/intern programs. Many schools offer co-op programs where Junior can go to school for one semester and then work in his field for one semester. It may take him a little longer to finish his degree, but when he gets out he'll have experience in what he studied, money in his pocket, and possibly a job offer from the company where he interned.

6) Don't sell any securities for a profit in the year before you are applying for aid. Any profits you see from sales of securities will be counted toward your income, the first item that goes into determining need on the financial aid forms.

7) Reduce your income as much as possible. If you have losses from a business venture gone wrong, now is the time to take it. Reducing your income will help your eligibility for more financial aid.

8) Don't take any lump sum distributions in the year before you need aid. This is the same concept as the previous two tips. Don't do anything that will stick you in a higher "they can afford it" bracket on the needs assessment form.

9) Have your child classified as "independent." The good news is that your child will be judged on his own savings and income when assessing need for financial aid. The bad news is that you won't be able to claim him as a dependent for tax purposes anymore and he will have to fend for himself for a year before the benefits of this strategy kick in.

10) Look for unorthodox sources of scholarships. Millions of dollars in scholarships are given away each year to deserving students. The problem is that everyone is vying for the same scholarships. Look for the out-of-the-way treasures. I received a $5,000 grant for graduate school from a Southern heritage organization. Not only was I the only one to win the grant, but I was the only one who had even applied for it in four years. What did I have to do for it? I had to prove that I was a direct descendent of a Confederate soldier in the War of Northern Aggression. (That's the Civil War to all of ya'll Yankees out there.) Find out if any fraternal societies or religious groups that you belong to offer scholarships. Also, check out the Foundation Center for offbeat organizations that offer money to scholars.

--Trudy Hoyden (TMF Hoyden)

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