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MUCH OF THE PLAYBOOK FOR TAKING ON THE $40,000AVERAGE STICKER PRICE OF A PRIVATE SCHOOL IS OUT-OF-DATE

OR JUST PLAIN WRONG. LEARN THE RIGHT MOVES NOW.

OU'VE POllED THROUGH financialaid.' forms, lmocked the priciest schools off

,: your list, reviewed borrowing options,and nudged your kid to think more about

engineering and less about English lit. So youfig'ure you've got this college thing under control.

Not quite. Those expensive schools you ruled out? They might actu-ally cost you less in the long run than some cheaper private or publicinstitutions. The federal loans for parents.you're looking at so your ldddoesn't graduate with debt? They may not be abetter choice after all.As for thinking a technical major will be more helpful to Junior thana liberal arts degree.., sorry, it doesn't always turn out that way.

Even among savvy parents', myths and misinformation abound.Yet udth the average four-year tab ranging from $71,500 at in-statepublic colleges to $240,000 at elite private schools, the last thing youneed is to pay more than necessary, borrow more than you can han-dle, or pass up a college that can provide a great education at anaffordable price. What follow are the Straight facts you need to make

smart college chomes.

True, nearly 400 privateschools additionally usetheir own aid formula,

which may factor in homeand business equity. A highearner with substantialassets might qualify for lessor no need-based aid at those

schools as a result. Chanees

are, tl(ough, any aid you'dget would be in the form ofloans, not grants, so you'restill better off saving.Research from T. RowePrice shows that each dollaryou soek away could saveyou twice that amount infuture borrowing costs.

THE REALITY)my money you're able tosave probably wofft appre-ciably affect your chancesfor aid. Here's why: Underthe federal financial aidformula, what mattersmost is your income, which

is assessed up to 47%. Bycontrast, a maximum of just

5.64% of savings in yourname Mll be cornered--after

excluding retirement

accounts, auy small busi-

ness you own, mad yourhome equity.-A savingsaUowanee based on yourage and marital status

($30,700 for a marriedparent age 45 for 2014-15)Mll also be deducted.

As a result, parentalsavings typically have littleimpact in the governmentcalculation of expectedfamily contribution, saysfinancial aid expert MarkKantrowitz of Edvisor.com.Those savings will come inhandy, though, to help paythat high expected contri-bution fromyour income.

Saving for college willhurt your chances o1:ge.Udng financial aid.

WHAT TO DOMake friends with a 529.Only about one in fourparents who save for collegeuses a 529 plan, says Studentlender SaNe Mae. Bigmistake. You get more bangfor your buck in a 529, sincethe money grows tax-freeand withdi°awals mÿe tax-free,

too, as long as the cash isused for school. Look first to

your state's plan; more thanhalf offer a tax break toresidents. Other low-feeoptions include New York's

529, Ohio CollegeAdvantage,• and Wisconsin Edvest.Shelter your shelter. 't&llschools will assess realestate 'that isn't your

primary residence," saysfinancial aid expert KalChany at Campus Consul-tants in New York City. Ifyou own a second home oiÿ

investment property, takingout a home-equity line ofcredit arid using the moneyto pay down consumerclebt (to avoid having loan

THE MYTH

FEEDBACK: pwang@moneymdl.com I iÿ

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HDW COLLEGE SAVINGTRUHPS BDRRDWINGSocking away even a modestamount for college cansharply reduce your out-of-pocket costs for a degree.

Amount you'dneed to savein a 529,with

6% annua[ return

$32,000

Amount you;d payon an 8% loan

$61,000

$110 $670MONTHLY MONTHLYSAVINGS PAYMENTS

(birth to 18) (lO-ye.ar term)

tÿorEs: Calculations are for start of four-yearcollege period• 529: assumes 0.85% fee,Loan: Interest accrues while child is in school,iO-year repayment tern7 after graduation.SOURCE: T. Rowe Price

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proceeds count as assets)will temporarily reduce your

• equity--just make sure you

can repay the loan.Play the name game. Haveassets in a taxable accountin your kid's name? Uh-oh.

Theill be assessed at a 20%rate. Fix: Use the accountover time to buy stuff foryour child that you'd getanyway, such as a new laptopor SAT tutoring. Then put anequivalent amount into a 529in your name, where it will becounted at the lower parent

rate, says Joe Hurley, headof Saxdngforcollege.com.

BUSTIN6 THE MYTHS OF COLLEGE COSTS

THE MYTH

You can'[ afforda pdvate.college.

THE REALITYDon't confuse the

eye-popping stickerprices at privateschools--S39,500 a

year on average vs.$18,000 for the typicalpublic college--withthe price you'd actuallypay. Discounting byprivate colleges,especially for goodstudents, has become

the norm.These dishomlts are

typically awarded asmerit aid and are givenregardless of finuncialneed. As the college-

age population drops,schools are increas-

ingly competing forst'udents, sparkingan

awards arms race. In

fact, today morestudents receive merit

grants (44%) than getneed-baseoÿ aid (42%).Last year the ayeragediscount hit 45%, arecord high, says theNational Association ofCollege mad UniversityBusiness Officers.

To be sure, IvyLeague universitiesand some other topprivate schools stilloffer maiuly need-based aid, but their .definition of need oftenextends to higher-income families. Andmerit aid is availableat many other high-

quality colleges. Forinstance, Rice Univer-

sity offers academicgrants averaging$15,000 to 22% ofstudents; at Denison,about 46% of studentsget merit awards,which average $16,300.

WHAT TO DO.Look for largesse. Asyour child begins toevaluate colleges, you'll

want to assess how• generous each is withhandouts. To find thepercentage of studentswho get merit money,go to collegedata.com.For details about a spe-cific college's grants,check MeritAid.com.

Rml a price check.Get a sense of what acelÿain private college

will cost your familyin particular, factoringin aid, by using theschool's net price

caleulaton (Collegesare now required tooffer this tool on theirwebsites.) Someschools load in meritawards based on yourstudent's academic pro-

file, while others give0nly a rough estimate,Either way, the resultswill be a good startingpoint for a discussionwith the school's aidofficer. Also comparethe results with netprices at any state col-leges your child is in-terested in; meritawards are on the riseat public schools too.

Improve your odds.Most private collegesare secretive about the

formulas used toaward merit aid. In

general, your child hasa better shot if hergrades and SAT scoresrank higher than theaverages for a particu-

lar school, says LynnO'Shaughnessy, headof Thecollegesolution.com. Other factors

that may provide anedge: intended major(a less popular one can

help), communityservice, and musicaltalent. Some collegeseven rate your child'sinterest in attending--has yours taken a '

campus tour?

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THE MYTH

A liberalarts degreewon't pay.the bills.

THE REALITYSure, grads with business

or STEM (science,technology, engineering,and math) degrees tendto earn above-averagesalaries. But many liberalarts majors do as well or

better. Case in point: Thetop-earning 25% of historymajors earned a medianannual lifetime income of$85,000 vs. $82,000 forcomputer-programmingmajors, peÿ' a recentanalysis by the George-town Center on Educationand the Workforce.

And in some careers,lower salaries are offset bybetter job security. Thetypical education majorearns $42,000, but only 4%are out of work. Biomedical

engineers pull in $68,000,but 11% are unemployed.

• Major isn't the onlydeterminant of pay, either,notes Anthony Carnevale;the Georgetown Center'sdirector: "Whether your

child attends grad school,changes careers, gets

promoted, or loses a jobhas a big impact on lifetimeearnings." Besides, many

people end up in fieldsunrelated to their major--an analysis of alumni byWilliams College math.professor Satyan Devadossfound that some arts

ajors went into banking,engineering, and tech,wtdle some chem majorsended up in governmentand education, Also, aChronicle of Higher Educa-tion survey of employersfound that previous workexperience was moreimportant than one's major•

' in hiring recent grads.

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WHAT TO DOFocus on practical help.

When comparing colleges,see what each offers toassist your child in deyel-oping work skills, saysAndy Chan, VP of careerdevelopment at WakeForest University. Find outif the career office reaches

out to freshmen, offerscourses in rÿsumÿ build-

ing, and helps studentsland paid internships.Some 60% of 2012 gradswho held a paid internshipgot a job offer, according tothe National Association ofColleges and Employers.

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' THE REALITY

i-ÿ • You've heard the horror

/ÿ. . stories about college" grads hobbled by debt,

:ÿ': :: and the facts can indeed

be scary: The typicalstudent at sclÿools such

as American Universityand NYU leaves withover $35,000 in loans; 2%of all student borrowersowe more than $50,000.

• " Rising costs are one

reason for those heftydebt loads, but a less

.... ÿ,, ob'4ious problem is the

increasing time youngTHE MYTH people are taking to get

StudenL loans their degrees. Just 82%of publie college students

will cripple your and 52% who attend achild ÿinarlcially. typical private school get

THE HIDDEN PRICE RF CRNNUNITY CDLLEE?ALLending a Iow-cosL two-year school wiLh LheinÿenUon of ÿransferring seems like a cost-savingsstra!egy, but iÿ often doesn'ÿ work out as planned.

Plan to transfer to afour-year school

Actual transfer rate

Community college Four-year college

tÿora' Degree figures for first-time, full-time students, souecr. NationaI Center brEducation Statistics

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BUSTING THE MYTHS OF COLLEGE COSTS

Out in four years--taking six

years is more common,At more selective schools

like Davidson and Lafayette,on the other hand, 85% ormore of students finish infour years. Plus, such schoolstend to offer strong alumninetworks that can hell5 withjob leads. "If you can attend

a good school that helpsyou graduate on time withgreat skills and contacts,borrowing can be worth it,"says O'Shaughnessy. That's

especially true if taidngon a manageable amount

of debt will help your childattend a better school tlÿanyour family could other-wise afford. "Manageable"

is tlÿe operative word.

,

WHAT TO DOGet your ldd's statsl Checkgraduation rates for theschools your child is .interested in at collegenavigator.gov. Find thelikely salary of careershe might pursue and thetypical income of studentswho graduate from schoolson his list at PayScale.com.Use the right benchmm'k.To ensure paymentsbe bearable, your childshould borrow less thanwhat she can expect tomake in her first job, saysKantrowitz. The average.grad's $27,000 in loanswould total $33,000 witl'linterest over 10 years,if the 3.9% rate recently

THE MYTH

SLarLing aL communiLy co ege, Lhen LransFer-ring, is a great way Lo cuL Lhe cosL oF a BA.

THE REALI)'YSure, community college is alot cheaper than a four-year

school, but students who• - start there are less likely to

earn their bachelor's degree

(see the graphic at left).Pag of the problem: Many

:four-year colleges make

.) transferring credits tough.While two-thirds of states

i have articulation agreementsto ensure that commmÿity-college courses are acceptedat specitic four-year schools,loopholes abound--someallow discretion about which

= credits to accept, or a certain

i GPA may be required. And! articulation agreements): shouldn't be confused with

a guarantee that your childwill get an open slot at afour-year college, saysStephen Handel, a CollegeBoard @ecialist in eonunu-

nity colleges.For many teens, the

lack of a strong peer groupalso makes it hard to stayfocused, says TatianaMelguizo, a USC associateeducation professor;

community collegestuderits tend to be olderand attend part-time.

WHAT TO DOGo for ironclad. See ifany community colleges inyour area offer.a guaran-

teed transfer to a four=year

worked out by Congressgoes into effect. (That rateis tied to 10-year Treasur-

ies and is likely to rise incoming years for futureborrowers.) If your childearns a typical startingsalary of $45,000, shecould afford that debt.Don't fight the feds.For student borrowers,government Staffordloans, which limit debt to$31;000 over four years,are the best bet. Unlikeprivate loans, the federalprogram offers hÿcome-

based payment andpublic-service debtforgiveness, says LaurenAsher, head of the Projecton Student Debt.

school. In Virginia,23 commmlity co'lieges

guarantee admission forstudents with high GPAsinto certain progranisat 20 state four-yearschools. Others, such asPortland Commmfityand Portland StateUniversity in Oregon, offerco-enrollment programsthat allow students toshift seamlessly into thefour-year program afterearnhÿg a two-year degree•

See PLUS'as a minus.

Parent borrowers shouldjtist say no to federalloans. PLUS loans let you

borrow the ÿ cost of

college regardless ofincome, at expected ratesof about 6.4% (plus feesof at least 4%), which canrise to 10.5% for futureborrowers under the newrate formula. 'ÿou can

borrow more than ÿou canafford, at a high rate--whatcan possibly go ÿaÿong?"

says policy analyst RachelFishivan at the NewAmerican Foundation.A lower-rate option thatlimits how much you canborrow: a home-equityline of credit (4.5% to 5%):

Talk to the target: Askthe admissions office,at thefour-year schoolyour childwants to attend about thetransfer requ{rements and

how many two-year collegestudents it accepts. Thegood news: "If your childdoes transfelÿ her odds ofetting a BA are as good

as those for four-:ÿear .college students," Melguizo

says. Savings and a degree?Maybe you can affordgrad school after all. [] "