The Northeast International Business Journal
Debunking the myths of financing a college education in the 90s is what Jeffrey Morrison’s College Solutions consultancy in Portland is all about. Actively involved in the college application and financing processes for 20 years, with the principals of nine Maine high schools on his list of satisfied customers, Morrison makes it his business to help you get the biggest bang for your education buck.
For this special issue, we talked with him about the ins and outs of financing a college degree. Here's a recap of what we learned:
Myth #1: Attending a state college is less expensive than attending a private college.
According to Morrison, the most common mistake families make in the process of choosing a college and seeking financial aid is presuming that selection and financial aid are mutually exclusive. He's accustomed to dealing with people who think that if money is an issue, you're better off sending your kids to a state college—and that, he insists, is often a very expensive mistake.
“It's better to go to a $29,000 school that will give you $25,000 in aid,” he reasons, “than to go to an $11,000 school that will give you nothing but loans.”
Consider the cost-to-value ratio also, he says, in deciding between a state college and a seemingly more expensive private one. It's not uncommon for a state college to require 5 years to graduate a student, for example, as opposed to a private school, which is likely to accomplish the same thing in 4 years. Because state college costs are increasing at a much higher rate, percentage wise, than costs at private colleges, the fifth year is sure to be the most expensive.
Myth #2: The more you have in income, the less you can expect in financial aid.
Debunking this myth, says Morrison, is about knowing how colleges use financial aid formulas to parents' advantage.
“We have clients who are earning $100,000 a year and getting financial aid, and we have clients who are earning $25,000 a year and getting no aid,” Morrison says.
At College Solutions, the average client earns more than $70,000 a year. Still, in 1997 the average financial aid award for Morrison's clients was about $18,000 a year. Of that, he says, the average entitlement portion (monies that need never be repaid) was about $14,000 a year.
It's not whether you qualify for aid, he says, it's whether the school you're dealing with has the wherewithal to deliver the aid. And most state colleges are very, very poor from a financial-aid standpoint.
Typically, he explains, state colleges give out money in the form of loans that the state and/or the federal government gives them, and irrespective of what colleges and guidance officers may say, the important thing to bear in mind as you go through the process, he suggests, is that loans are not financial aid.
Most people mistakenly perceive that financial aid is a matter of filling out forms. From Morrison's perspective, that's no more accurate than saying that the act of tax planning is no more than filling out the 1040. The exercise is not to fill out the 1040, he says, the exercise is to determine what you can do in advance of filling out that form.
“If someone is going to use an accountant”, he notes, “what they should do is sit down with the accountant before the end of the year, and the accountant should say, you should move this from your right pocket to your left pocket, you should defer this, you should accelerate that, you should transfer this. And instead of paying $14,000 in taxes, you'll only pay $9,000 in taxes.”
Like a good accountant, College Solutions suggests people prepare themselves ahead of time for filling out financial aid forms. That means knowing how best to present their financial situation, based firmly on what colleges look for in the evaluation process.
For years, people have been talking about putting college savings in their kids' name because they're in a lower tax bracket. According to Morrison, that's the single worst thing that you can do in preparation for seeking college financial aid.
“The Uniform Gift to Minors Act is a very bad thing relative to college financial aid,” he notes, “because you lose 35 cents in aid for every dollar in the student's name, plus you lose 50 percent on any interest and dividends that emanate from that.” Whereas colleges expect students to contribute 35 percent of their savings each year, only about 6 percent of family assets are considered in the financial aid formula.
Myth #3: Attending a college close to home is less expensive than attending a college outside New England.
Most colleges today are interested in fostering diversity and establishing geographical distribution, and kids in Maine are historically geographically unadventuresome. They're like a captive audience, Morrison believes, and New England schools, knowing our kids are going to want to attend college nearby, can afford to offer them significantly less in the way of financial aid.
An important part of the College Solutions approach is to sit down with the student to hear what he or she has to say.
Morrison believes that even though his young clients don't know everything they want in a college, they do know what they like and what they don't like. So, he asks them about a lot of different things, he says,—“preppy,” “yuppie,” “artsy,” “techy,” “homogeneous,” “diversity”—things that will help determine whether the student will be happy or not. After 20 years in the business, the last 8 in Maine, Morrison's prepared for the answers when the questions hinge on distance from home:
“How far south do you want to go?” he asks.
“Massachusetts,” they say.
“How far west do you want to go?” he asks.
“Massachusetts,” they say.
Morrison suggests that when a Maine student applies to seven or eight prospective colleges with the same forms, and out of that level playing field seven award packages are generated, he can predict that offers from nearby schools will be significantly less because the colleges know Maine students are likely to attend a nearby school anyway.
Even terrific grades won't guarantee acceptance or aid for Maine students interested in attending college in the New England region. Morrison recalls a Maine student who applied to Tufts last year, a student with more than 1,400 on the SATs who had placed in the top one percent of her class.
Although 1,300 on the SATs and placing in the top 10 percent of your class would normally guarantee acceptance, the Maine student was not accepted there. Morrison cites the college's drive for geographical distribution as the deciding factor.