Wednesday, January 4, 2012

Financial Aid Planning, Reality Vs Perception

There are a group of new studies which highlight that although a college education is highly desirable it is becoming increasingly difficult for a student to achieve this dream. In a recent Pew Research Center study of perceptions about a college education, 94% of parents indicated that they wanted their children to go to college while less than half of the students will enroll in a four-year degree program. The single biggest obstacle cited by the students was a lack of money to pay for their education. Among minority students close to 70% of those students who chose not to go to college cited the lack of information about financial aid as the biggest obstacle to continuing their education. There is a big gap in wanting to go to college and ultimately being able to pay for it.
The other interesting part of the Pew study took a look at the problem from the viewpoint of college presidents. Three-quarters of all college presidents polled indicated that college was a good value for the money spent and 42 percent believe that college is affordable for most people. This compares with 60 percent of students and parents who were polled indicating that college is no longer a good value along with the 75 percent who believe that college is not affordable for the average family.
One group of respondents, the parents and students, see college costs rising and state funding dropping. The other group of respondents, the college presidents, have seen unprecedented increases in student aid over the past several years. Much of this new money is being funded directly by the colleges. So who is right?
It is a matter of where you live and what types of schools to which you apply. In many states with funding cuts the net cost of attending public schools has gone up dramatically over the past few years. However, the net cost of attending private schools has actually declined over the same period of time. Essentially financial aid has increased faster than the cost of attending at private schools. And while the federal government has poured money into financial aid in the form of grants and subsidized loans the number of students wanting to attend college has gone up dramatically as job options have been limited during the recession.
The biggest difference between the consumer and the supplier of education is simply information. Families do not hear about college funding from the college's perspective, and colleges assume that families know everything about the financial aid process. For most families developing a financial aid plan could help them become better consumers of education. In most cases reducing the cost of an education thereby making it more affordable. And colleges could make the whole financial aid process more transparent and less difficult to navigate. They would be creating a greater perception of the real value of an education. Unfortunately for the families, as the consumer, the onus is on them to pick schools wisely, based on the real costs of attending. There is a way to plan financially for a college education. Let the buyer beware!

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