The Financial Aid Scam

Introduction

If financial aid works for you, great. But like many parents I fall into the middle-class trap. I earn too much to get significant financial aid, and (far) too little to be able to send my kids anywhere, without worrying about cost.

What About Financial Aid?

By all means, explore and take financial aid. But be advised that if you "qualify" for financial aid, they are messing with your head.

By setting the price arbitrarily high, and then moving it down to the maximum amount (they judge) that you can pay, the Universities have a pretty sweet deal. And parents and students get to brag about how much student aid they got, instead of focusing on how much money they are paying.

If a school charges me $70K per year, and offers to give me $40K in student aid, I still pay $30K. That is not exactly chump change.

Then I go around a brag to the other parents that my kid got $40K in aid. Well, the University controls both the price and the aid, so they can set that number to whatever they wish. I am still paying them $30K.

What Does it Really Cost?

If you are getting financial aid, then what does your child's education cost?

It costs every penny that the University feels they can squeeze out of you, plus $10,000.

By making it seem as they are giving you something, they put themselves in the position of knowing your entire financial situation, and setting the price literally as high as you can bear. (And even a little higher.)

What About Student Loans?

The federal government will back up to $6K in loans, and these are at a reasonable interest rate. (And this money is borrowed by the student.) I really don't think any student should borrow much more than this amount per year.

Additional student loans can have high interest rates or really bad terms. Ten years after the college fun is over, these loans will be wrecking the young person's ability to buy a first house. So avoid them if possible.

Students should only borrow if they are in a major with good chances of landing a job afterwards. Students who want to major in unemployable subjects should try to pay as they go.