Parents Still in Denial About Paying for College

I've written quite a bit about the gap between what parents would like to do when it comes to paying for their kids' college and what they are actually doing. In particular, it seems that many parents want to pay for college but not saving enough for it (of course this begs the question if parents or kids should pay for college, but that's a different post.) Well, it appears that this isn't the only issue parents face in thinking about paying for college. First of all, there's a big gap between those who think their kid will get financial aid and those kids who actually get aid. Here are the numbers from the January issue of Money magazine:

• 72% of parents believe their kids could receive merit grants
• 28% of kids get state or school merit grants

I think parents need to take a big reality pill, face the facts that college is a very big expense and that there's not much help on the way, and start saving like fiends. I'm not saying it's easy and parents should save for retirement before college, but, that said, they can't ignore saving for college and can't wish the costs away with unrealistic scholarship expectations.

Here's what we're doing:

We recently set our college savings number and subsequently opened two 529 savings accounts. We also contribute the maximum to two Coverdells each year.

And here are some additional thoughts that may help those of you saving for college expenses:

• Three Ways Parents and Students Pay for College

• What Students Need to Do to Qualify for Federal Financial Aid

• How to Get College Scholarship Money

• What You Don’t Know About Saving for Your Child’s College Education

• Want College Financial Aid? Apply Early!

Comments

[Bob]

I'm not discounting what you are saying at all, but parents might be more realistic than you think.

The statement:

72% of parents believe their kids could receive merit grants

Is likely true. 72% of students probably COULD receive merit grants if they wanted to work hard enough to get them.

Your quote doesn't say:

72% of parents believe their kids WILL receive merit grants

I'm not sure how much this is changing, but my parent's weren't particularly supportive about any ambitions I ever had about going to college. They basically told me I had to pay for it, or earn a scholarship if I wanted to go.

I heard my mother say several times 'You COULD get a scholarship if you wanted to'. Needless to say I didn't...

It's hard to believe, but I am sure there are many parents out there that think college is a waste of time and money. They won't save for school and probably won't do much to help their kid get through school.

[Matt]

I think this is part of what drove a permanent wedge between me and my mother...merit grants aren't what they used to be. The size of available awards hasn't even kept pace with inflation, while both the number of students attending college (hence the level of demand for the same pool of grants) and the cost-per-student of attending have exploded.

In her day, it was probably quite possible for a college-bound youth in the top 0.0001% of the IQ distribution to get a full-ride debt-free education on the basis of merit. But that definitely wasn't true by the time _I_ went to college, and it's getting less true all the time.

Sure, there's merit aid out there...but it's a figurative drop in the bucket, compared to what college costs nowadays. I think I got $8000, and that much only by doing so much extra work applying for small individual grants that if it weren't for the perverse aid penalty for earnings by students, I'd have been better off working at a regular job. The remaining 90% of my college costs were covered by need-based "grants" (retroactively converted to high-interest loans, in what I continue to regard as the worst financial scam since 419), worthless work-study allowances, and "parental contribution" (which, in reality, I paid out of the money I made working a 1099 job while I was in school).

My attitude remains the same...my kids (if my fiancee and I ever have any) will have as much help as we can give them if they decide to go to college...but they're still welcome in the family either way.

[plonkee]

Bob:
I'm not sure that 72% of kids could get scholarship money. I don't think it likely that there's that much scholarship money around.

Also to get merit aid from the school, you're going to need to be in the top 25% (approx) of students attending that school. Which means that you're going to a school that you'd get into easily, rather than a "better" school that you only just get into - which might be the one that suits the student more.

[MikeK.]

My wife and I discuss this issue often. We have two kids (4 and 1). We are torn between helping them as much as possible through college, vs. having them develop an unhealthy sense of entitlement (a.k.a. spoiled brats). We think we have a solution: Let the kids work, take out loans, etc. as much as possible and putting a lot of burdens on paying for college on their shoulders, and then when they graduate, pay off all their loans.