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Academic

Financial Aid Eligibility and Family Finances

“Important Money Decisions That
Can Dramatically Affect Both
Aid Eligibility And Family Finances”

As the academic year drags on it can seem unending to students who find themselves in a seemingly endless cycle of tests and quizzes and papers and projects. The purpose of all this work, at least for those forward-thinking students who have an eye firmly fixed toward attending college or university after graduation, is naturally to continue the educational experience at the next level. However, there is a lot more knowledge that is needed to optimize this opportunity than just the class work they are completing in high school.

As college funding professionals, when it comes to fully preparing for a child’s higher education – starting with applications and admissions processes, all the way down to the details of financial preparation for the college years – we are duty-bound to remind families of the best ways to focus on both ends of this process.

Honing in on the financial aspect of college preparation involved a significant amount of different types of planning. Families who fail to do so, whether it is because they are unfamiliar with the process, or because they simply did not get around to it, will usually end up costing themselves a significant amount of money and stress in the long run. Because of this, we take our work extremely seriously.

Because the completion of a degree is a vital springboard to a young person’s success, we deem it important to help families understand the overall consequences of their financial decisions in the years leading up to high school graduation and college. You see, there are a lot of potential mistakes that families can make during the high school years that would not seem like a problem at all – UNTIL they are viewed through the lens of college financial aid and preparation! Then, suddenly, a seemingly benign financial decision can have some quite significant consequences, indeed.

With this in mind, we are using this month’s newsletter to focus on some of the more important financial decisions that can have an effect on college aid eligibility and family finances throughout the years of higher education. Remember that circumstances can vary somewhat from family to family, based on income, family size, and other considerations, so the best thing to do when reviewing money decisions in the high school years can often be to discuss them with an expert on college funding.

1. FAFSA Filing and Income Tax Return

Many people assume that one cannot file the Free Application for Federal Student Aid (FAFSA) without having first completed their income tax form. This is not the case. One is able to estimate their taxes so they are able to compete and file the FAFSA. It is actually very important to file the form as soon as possible because aid eligibility is determined on a first come, first served basis. One has the opportunity to update the tax details on the application as soon as the tax return has been fully completed.

2. Remarrying and Its Consequences on Aid

Single parents who plan on having their son or daughter having a high eligibility for aid for school may be in for a big surprise if they marry shortly before their child applies for college. The income for the new spouse will now be taken into consideration even if the plan was that the new spouse would not assume any financial responsibility for the child.

According to the Higher Education Act that came into effect in 1965, parents who have remarried must include the income of their newly married spouse and that income will be factored into the aid eligibility of the child. Not being aware of this law if a parent is counting on receiving a lot of aid may come as a shock. This is important to know and may help when making decisions about timing for big events.

3. NOT Applying For Aid (Because You Think You Won’t Be Eligible)

If you are one of the fortunate folks who are financially stable and secure, that is wonderful! The thing that you might not be aware of, however, is that your child may still be eligible for financial aid during the college years. This may only be an unsubsidized Stafford loan but this can make much more financial sense than any private loan, most of which are often loaded with more risk and higher interest rates.

4. NOT Listing Extenuating Circumstances

Life is nothing if not unpredictable, and the unforeseen can happen at any time. Someone in the family could have an accident. Or you could experience the death of a loved one. The loss of a job could be both emotionally and financially devastating. Many families who are hit by difficult circumstances feel embarrassed or unwilling to share details with their child’s future university. The important thing to know is that colleges are not staffed with insensitive robots who do not have any feelings or consideration for others.

If there have been extenuating circumstances that have occurred in your family, it is important to strongly consider sharing them with the college financial aid officer. In light of the new information, the school may want to reconsider or adjust your child’s aid package – after all, they are also vested in having their student body attend and graduate. Should you need assistance with the best way to manage this communication with an institution, a college funding advisor will certainly be able to help.

5. Buying a Vacation Home

If you are planning on buying a vacation home or other similar property, you may want to consider waiting just a few years until after college. This is because making such a purchase at the wrong time could adversely impact your child’s financial aid eligibility. Colleges will frequently look at recent purchases, like an additional vacation home, as “extra liquid assets.” This could severely affect the amount of money that your child could be eligible to receive, so it is important to make these kinds of major purchases on the proper timeline.

6. Taking Out an Equity Loan

Taking out an equity loan may seem like the right choice in the short term, but this could have a deleterious effect on your child’s ability to receive funds. Regardless of where the money comes from, these extra funds will appear to the financial aid officers as if there’s a substantial amount of cash ‘lying around’ and your child could be penalized for it as a result. This happens if the funds are taken out in a lump sum and added to the checking account. If you want to take out an equity loan, you could consider an equity line of credit – which is more akin to a credit card.

7. Managing Grandma’s Loan/Gift

Grandmas and Grandpas are wonderful. They have been known to do special and meaningful things for their grandchildren, such as providing sums of cash to help assist with college expenses. These gifts of cash, however, can have a detrimental effect on loan eligibility – especially if given at the wrong time. Unfortunately, depending on the circumstances, gifts from family members can make it substantially more difficult to receive aid.

However, if the grandparent decides to loan funds for college, they can usually do so without creating difficulties. They cannot, however, simply ‘call’ it a loan. It must be an official loan and they will need to charge current market interest rates on the loan. These funds, also, must be spent prior to the signing of the loan application. Failing to do so would result in the funds being included as an asset belonging to the student. This can be a complicated circumstance, and a college funding advisor can be extremely helpful in determining how to proceed with the generosity of relatives!

8. Including Retirement Assets

The FAFSA form will ask for the net worth of investments. They do not need to know about the assets in IRAs (Individual Retirement Accounts), 401(k), 403(b) or other pension plans. Parents who list these assets not understanding that this information is not required could seriously damage their child’s chances for receiving ‘need-’based’ financial aid funds.

9. Including Home Equity

The home equity on your primary residence is not a requirement on the FAFSA as a declaration of assets. If parents do include this information on the form this could seriously affect the ability of a student to receive needed aid. However, there are some schools (around 200) – mainly private institutions – that will ask for such information on their institutional aid forms. For this reason, it is best to do the research on the particular schools that your child will be applying to and then you can decide how to move forward. Once again, a college funding advisor can be a godsend in these kinds of circumstances.

As you can see, there are a number of considerations that can play a role in properly preparing for the college years with regard to family finances. If you would like some personal assistance in that regard, especially with consideration of your individual circumstances, we would be happy to help however we can.

Happy Spring!
Until next month,

Start Planning for College Today

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“Turning The High School Years Into

Effective College Preparation Time”

Dear Parent,

It can be a tough job for both parents and college-bound high school students when it comes to preparing optimally for future academic endeavors… as college funding professionals with detailed knowledge into the admissions process, we recognize that all elements of the subject can be stressful and challenging from beginning to end!  However, the challenges related to college preparation can be effectively managed with some planning and insights in advance – and there is not doubt that it increases if college details are ignored throughout the high school years.

This is why we are here to help!

For this month’s newsletter, we are dedicating these pages to help you understand why the preparations are important, and how to make them happen.  Remember, if you have any questions about these important college preparation subjects, we urge you to give us a call.  College funding and application professionals are experienced and knowledgeable in these areas and can offer tailor-made explanations, planning, and information when it comes to these important college preparation efforts.

Investigate Early College Credit Options

One great way for students to get a head start on their college experience is to look for opportunities to earn college credits while still attending high school.  There can be a variety of options, and they are all worth looking into.  Some schools will offer Advanced Placement (AP) courses than can actually count for future credit at many colleges and universities.  Of course, these courses presuppose that the student has demonstrated some strong aptitude in the subject matter, and are not available to every single student who expresses interest – but if the chance is there, and the student has the interest and the academic chops to handle it, then it can be a terrific alternative to the rank and file coursework.

Another possibility for some students, depending on locality and arrangements, is the completion of individual college courses during high school.  This is sometimes on a special agreement with a local community college or public university, but it can be a great way for students to get their feet wet early on, and even get a jump on completing some of their core curriculum classes at the next level before they have ever officially matriculated as a college freshman!

These options can make sense academically, putting the student ahead of the curve and building confidence early on… but it can also make a lot of sense financially.  You see, courses that a student completes before setting foot on campus are courses that will not show up on the college tuition bill later, and on that front every little bit helps!  If a student can shave off as much as a term or semester from the eventual course of their undergraduate degree, then the amount of tuition saved can be pretty darned significant.

Seek Out Academic and Extracurricular Experiences

High school is a great time in a young person’s life, but there are many instances where students will feel pressure (whether external or internal) to follow the proverbial “path of least resistance.”  Advance Placement courses are not the only way for students to excel, and can sometimes be the wrong choice for a student due to academic interest, motivation, or other considerations.

It is vital for students to seek out opportunities to truly discover what their interests are, what experiences inspire them the most, and to begin to develop an understanding of what they want out of life.  Of course, those answers will often not come completely during the high school years, while there will be other students who may have known since they were five years old that they wanted to become a pilot, or an architect, or a doctor.

The point of high school is not to pigeonhole a student into a specific academic track prematurely, but rather to offer a chance for learning and growth, as well as an opportunity to demonstrate abilities, talents, and interests.  This can only really happen if the high school experience is treated appropriately, and not viewed as sheer drudgery to be endured only until graduation springs a student onward to the thrills of university life.

Yes, we all know that high school can be rough at times, and we all have memories of certain classes that were… well, yes, probably sheer drudgery… but we are convinced that it is important to seek out whatever intriguing and inspiring options can be found in the high school experience.  Some semesters this may be more challenging than others, due to different teachers or social pressures or family challenges, whatever the case my be, but it is well worth the effort to seek out the best things that a high school has to offer.  This includes academic offerings, clubs, sports, theater, community involvement – really, anything that interests and inspires your child to a higher level.

Doing so will help the high school experience to serve as a springboard to bigger and better things at the college or university level, and hopefully help to convey and nurture a love of learning and growth that will last a lifetime, as well as providing a financially viable and fulfilling professional future.

Communicate With Counselors Regularly

There can certainly be a benefit derived from keeping the lines of communication open with high school and college counselors.  While the individual value can depend a lot on the counselor himself or herself, there are basic college preparatory courses and requirements with which most counselors are quite well-versed.  It is important for college-bound kids to be familiar with these tidbits, even if some guidance counselors do not have a lot to offer beyond that (which is sadly sometimes the case).  Maintaining a respectful and cordial relationship with these counselors can only help later when it comes time for letters of recommendation or paperwork for college application, regardless of how much or how little a specific counselor has to offer.

We also recommend good communication with the colleges and universities that are of the highest interest to your student, as well as obtaining a firm understanding of the requirements for specific programs to which they wish to apply.  Remember, especially for private schools or institutions in other parts of the nation, local high schools simply may not have access to the information about the programs that your child desires!  Even within the same major or area of academic emphasis, there can be differences between the requirements of different colleges and universities, so these things need to be carefully investigated beforehand.

With this in mind, as College Funding and Admissions Professionals, we also view ourselves as counselors in this arena, and we know that we bring the most up-to-date and actionable information for both college-bound students and their parents.  We have access to the information about the schools that interest your child, no matter where in the country they might be located.  We are the most reliable experts in managing the college funding challenges.  We really are here to help with all aspects of the college preparation experience.

As you know, higher education financial planning and college application services stand at the very foundation of our work as college funding professionals.  This leads us to an ultimate goal of assisting parents in seeking the very best strategies for the management of their financial circumstances, as well as the proper utilization of assets to create the best situation possible with regard to the college options for the academic future.  This entire process works best, very simply put, if the parents are well-prepared ahead of time, with a clear set of guidelines to help along the way to preparation for their student’s future college and university years… as well as the attending college and university expenses!

Until next month,

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