College Funding Nightmares: Mistakes That Keep Parents Up At Night

By Joe Messinger, CFP®

October 13, 2021

4 min READ

Do money worries keep you up at night?

The truth is, paying for college can be scary stuff. It can cause nightmares for parents. As financial planners who help college-bound families balance paying for higher education with their other goals (like retirement savings), our job is to help dispel some of your worries by helping you get organized and plan ahead.

We’ve collected some of the biggest mistakes families can make that can cause some scary financial struggles. Let’s try to turn those nightmares into sweet dreams.

Nightmare #1: Not having the parent money talk BEFORE starting the college search.

We can’t all afford a Porsche, right? So, why go out and test drive one if you are going to have your heart broken when you can’t afford the payments?

We feel strongly the same concept can be applied to your student’s college search.

Although we always mention that families rarely pay the full college sticker price, you still need to be aware of how much a college will cost you after all the available aid, savings, and other strategies or resources you have to pay for it.

Sit down with your student before starting college visits to talk about what you can afford, what would need to be paid for with loans, your loan comfort level, and how you want to approach the search in a smart financial way. (We have a great blog on with some guidelines on the family talk here.)

Once everyone is on the same page financially, no one’s heart gets broken.

Nightmare #2: Being unaware of your Expected Family Contribution.

Part of that parent money talk is knowing your Expected Family Contribution (EFC). The EFC is the amount the government expects a family to be responsible to pay towards college. This number may be a ridiculously high figure, but knowing it is the key to understanding whether you are a need-based candidate or not. Your college search can hinge on this knowledge.

Our free College Money Report™ can help you to understand your Expected Family Contribution (EFC), and compare the sticker price of your top three colleges.

Nightmare #3: Not filing for financial aid (completing the FAFSA).

We’ve mentioned it before – billions of potential college grant dollars go unclaimed every year because people do not file the FAFSA. Even if you do not think you’ll be eligible for need-based financial aid, fill out the FAFSA anyway.

Having a FAFSA on file is helpful in case something changes your financial situation in the future, like illness or unemployment. Also, the FAFSA is required for federal student loans, and some colleges require it for scholarship consideration.

Nightmare #4: Not being organized.

The second most important thing about the FAFSA (first, is filling it out), is filing it on time. When financial aid money is gone, it is gone. If you forget to file on time, it could be too late to correct it later when you realize your mistake. We urge everyone to finish filing their FAFSA by the deadline in order to give you (and your student) the best possible shot at receiving aid.

Organization shouldn’t start and stop with the FAFSA! Student loans are part of the picture for most families. Once students become graduates, stay organized and aware of your financial commitments.

We’ve heard stories about students forgetting about the existence of some of their loans, and missing payments along the way. This lack of organization will put you into a big financial hole, affecting your credit and condition.

Part of being organized includes staying on top of your situation if making student loan payments becomes a struggle. Don’t wait to investigate consolidation, deferment, and other options until you are practically in default. Credit histories have been wrecked by waiting.

Nightmare #5: Being unfamiliar with your scholarship terms and conditions.

If you are an academically talented student, you may be offered scholarships from your college. This is great news, but sometimes students forget the terms and conditions of their scholarships a year later. You want to make sure you check in each year to make sure you don’t lose it because you forgot an action item.

Most colleges require scholarship students to maintain a certain GPA and a minimum number of credit hours to keep their scholarship. If a student only takes 12 credit hours per semester, they may fail to meet their scholarship conditions. If their GPA drops below a 3.0 or 3.5 (depending on the school), suddenly their sophomore year costs more than they planned for.

Many scholarships are only offered for a 4-year period. When you are thinking about changing majors (see the next point), remember a 5th or 6th year could be without a scholarship.

Nightmare #6: Changing the major.

Changing the major – possibly the biggest nightmare a parent may have. We (and probably you, too) hear stories all the time about a friend’s student who is changing their major and extending their college journey by 1-2 years.

Choosing the right major can be trickier than anticipated for students. To help combat this, students need to be exploring their interests in high school and considering career paths early on. (If you need direction in this area, our friends at At The Core are a great resource.)

Nightmare #7: Taking out parent loans or private loans when federal loans are the better option.

We strongly discourage parents from taking out loans in their names to pay for college. Loans in the student’s name are the best option.

Borrowers over 60 are the fastest-growing segment of student loan debtors as parents choose to take on the loan burden for their kids. The result is a nightmare for retirement.

Nightmare #8: Being taken advantage of.

Our final nightmare scenario we hear about is scams. We simply say:

Beware.

Scholarship scam services charge you high fees for something you could do on your own. FAFSA filers want to charge you to file the FAFSA, which you can do for free.

Plenty of great FREE resources are out there to help. We strive to share them with you (with resources like our blog library and newsletter.)

So, let’s avoid these nightmare situations with some pre-planning and awareness, and sweet dreams will be had by all.

Updated October 2021