One of my favorite newspapers is the Wall Street Journal because (a) I love to read about personal finance, and, more importantly, (b) I find the overall quality of reporting to be excellent. This is especially true when it comes to information about paying for college. A recent article by Kelly Greene in the Saturday/Sunday edition of the Wall Street Journal (June 8-9, 2013) provides a lot of great information about 529 plans. What Greene says, essentially, is that even though your financial aid award will take a slight hit based on how much you contribute to 529 plans, the advantages greatly outweigh the disadvantages. This comports with what every financial aid administrator has told me over the past 13 years – that it is almost always better for families to contribute to 529 plans than not to do so even if there is financial need as evidenced via the FAFSA.
What I also really enjoyed about her article is that she mentioned that only up to 5.6% of parents assets are included in the federal financial aid formula. This is a very important piece of information. Many families believe that colleges are going to confiscate the vast majority of their net worth and assets when everything is said and done. But this really is not the fact.
The total net worth of what colleges expect a family to contribute for a child’s college education is not terribly high. Yes, student loans are exploding, and yes, student indebtedness is a national disgrace. But one thing that is generally not happening is that parents are not being bankrupted based upon what colleges are asking for parental contributions for college.
Congratulations to Kelly Greene for dispelling some common myths about college costs!