Myth: “I have the Florida Prepaid program so I’m covered for college”

Many Florida families begin their college plan by saving into either the Florida Pre-paid program, 529 savings plan, or a UTMA account. Saving money for college is a great way to pay for college, but the real name of the game is to reduce what you end up paying. Proponents of prepaid programs argue that they reduce your ultimate costs.
All pre-paid programs work on the same principal: you pay the cost of tuition today and receive “tuition credits” that can be redeemed in the future. The idea being that as tuition goes up, you have locked in today’s lower rates. This is the good news. Our experience is that in order to keep their monthly payments lower, most Florida families purchase the 4-year tuition and fees program. Here is the issue: in Florida, tuition is a relatively small portion of the TOTAL COSTS. According to the Prepaid website, tuition and fees only represent about 23% of the total costs of sending your kid to a public university. Therefore, in this case, you have only saved for 23% of your future costs and that leaves a 77% gap that will need to be met.
Additionally, all the deposits that you have made into the Prepaid account count against you in the financial aid formulas. The formula will reduce any potential aid by 5.64% times the redemption value. This information is reported each year your student is in college and reduces the benefit of the program.

Myth: “My Kid is Going to Get Private Scholarships to Pay for College”

As the proud father of three daughters with three colleges to pay for (and three weddings!) – I feel you on this one.

Every college parent dreams of the “free ride”. Everyone wants their child to attend the very best college for as little money as possible. Let me say that there are several excellent reasons for your student to apply for and hopefully win a private scholarship. They include recognition, admissions, and resume enhancement. However, private scholarships are rarely a financial boon for families. Part of the reason is that if your student does receive a scholarship, the university will reduce the financial aid package dollar for dollar. You pay the same, and the university pockets the scholarship! This is called re-sourcing.

There is approximately $1.6 BILLION in private scholarships available each year.
While this sounds like a ton of money that is all just one little essay away, here is the reality:

How does that $1.6 Billion in scholarships break down per family?
Assuming EVERY one of the 17.5 million students found every dollar
available, that works out to:

$1,600,000,000 / 17,500,000 = $91.43 per student.

This is less than $100 per student.

Here is the bottom line – the pursuit of private scholarships is an extremely poor financial planning strategy. Your student’s time is better spent getting good grades, applying to the right “fit” colleges, colleges that compete with each other, and colleges that place a high value on your students’ particular attributes.