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Busting the 5 Biggest Saving for College Myths
MYTH: If we save for our children's college education, they won't get any financial aid.
Truth: Saving for college will increase your options. Saving is always less expensive than borrowing. When determining eligibility for federal financial aid, only a small fraction of savings is considered available for each year of college. The value of your home and your retirement accounts are not counted on the FAFSA.
MYTH: I don't have enough money to save for college.
Truth: Even a small amount saved consistently over time will be very helpful when paying for college expenses. The key is to save every month so that it will grow steadily over time. Consider using automatic contributions or payroll deductions. Many people find that they don't miss $10-$15 a week when it's taken out automatically.
MYTH: It's too late to start saving for college.
Truth: It's never too late to start saving. It's true that the earlier you start saving, the more you are likely to earn in your savings plan; however, even with a short time to save, there are many benefits to putting aside money for college. Even saving enough money to pay for books and supplies will be beneficial and can result in not having to borrow loans for those expenses.
MYTH: I should spend any money that I have saved so I'll get more financial aid.
Truth: Spending down your savings will not help you get additional financial aid, since only a small percentage of savings is considered on the FAFSA. College students who have money saved are less likely to borrow as much from students loans.
MYTH: I shouldn't save for college because there is no way to be sure my child will go to college.
Truth: It is better to save and be prepared for your child to go to college. And, if you save in a qualified plan and the child doesn't go to college, you can move those savings to other family members for qualified higher education expenses with no penalty. Parents should encourage savings and education beyond high school. A person who goes to college usually earns more than a person who doesn't. According to the U.S. Census Bureau, annual earnings, based on degree, are:
- high school diploma, $32,500
- associate's degree, $42,000
- bachelor's degree, $53,000
- master's degree, $63,000
- and professional degrees, $100,000+