Student Financial Aid News

From US News & World Report:

Many college savings plans have been hammered by the same kinds of investment bubbles and scandals that other investment plans have faced in the past year, causing thousands of Americans to halt their contributions to college savings and a few to file lawsuits alleging they were misled. Oregon’s “Conservative” 529 option, which lost more than 30 percent of its value in the 12 months that ended March 31 because OppenheimerFunds put some of the money into derivatives. Pennsylvania’s “guaranteed” college savings plan, which promised parents their contributions would grow at the same rate as tuition. But the state recently informed parents that the guarantee actually is only backed by the fund itself. Because of the stock market crash, the fund now has enough money to pay college bills only for the next eight years, even though some families invested in the hopes that their young children would be protected 10, 12, or even 18 years from now. Analysts say that investors in many other state 529 plans—which are named after the section of federal law that created the state-sponsored, tax-protected college savings accounts—have suffered similar, though often smaller, losses. Little wonder, then, that investors across the country appear to be pulling back on their contributions.

Commentary

We’ve talked about this in the past – the difference between saving and investing. 529 plans are investments, not savings. Any form of putting money aside that contains more than nominal risk (i.e. not FDIC insured) is a form of investing, in which you can lose everything.

So how should you be saving for college?

Full disclosure: I am not a certified financial planner, CPA, or hold any form of certification or qualification for financial advising. As with all financial advice you find on the Internet, take it with a grain of salt and understand that you are solely responsible for the choices you make.

Decide how much risk you want to take. There’s a direct correlation between risk and return on investment – the more you risk, the more you could win or lose. Investing is exactly like gambling at a roulette wheel. Some bets are riskier than others; some promise huge payouts but are far more likely to cause huge losses. (incidentally, roulette odds are currently better than stock market returns – food for thought)

If you’re comfortable with a lot of risk, invest accordingly. If you’re not comfortable with any risk, save your money in FDIC insured options like savings accounts, bank certificates of deposit, or in other backed instruments like US Treasury Bonds and Bills. These forms of saving have very low returns – you’ll earn a penny or two on the dollar at most – but you can’t lose the money you put in unless something goes horribly wrong.

Once you’ve decided on risk, start putting money aside. Even a dollar a week is something. The sooner you can start saving money, the more freedom you’ll have down the road. If you have siblings who are younger than you, encourage them to start saving as well, no matter what age they are.

Finally, find an additional source of income. Even if your secondary source is only earning you $5 a week, that’s money you can put aside and save. Here’s a short tutorial on starting an affiliate program with Amazon.com.

Scholarship Update

Okay, folks. Let it be said that if you’re not getting scholarships, you’re just not trying hard enough. There are scholarships BEGGING for more applicants on MySpace, such as today’s scholarship – with over $130,000 they WANT to give away.

I discover tons of new scholarships every day. You can, too. Get our free Scholarship Search Secrets eBook and start applying for scholarships like today’s, which is begging for more people to apply.

In the interest of providing additional opportunities to potential students, the Florida Association of Postsecondary Schools and Colleges has once again moved the deadline for submission for a $1,000 or $5,000 Dade Medical College scholarship to June 30th, 2009. There is still more than $130K available for various programs of study at the Miami and Hialeah campuses of the college, including Diagnostic Cardiac Sonography, Diagnostic Medical Ultrasound, General Radiologic Technologist and more.

FAPSC Deputy Executive Director Wanda Taylor offers this on the second extension: “With budget cuts at public institutions and economic conditions negatively affecting many Florida families, the FAPSC Board of Directors extended the deadline for students to apply. We hope students will take advantage of this opportunity and contact us for information.”

To be considered for a scholarship, the student must have been a Florida high school senior with a 2.0 GPA or higher and have graduated during the 2008 – 2009 school year or awarded a GED between March 1, 2008 and February 27, 2009.

Details at our free college scholarship search site.

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