financial aid

To FAFSA or not to FAFSA?

The FAFSA opened up this morning and we’d like to take this time to go over a few basics of financial aid.   First we will talk background, next process and finally some general guidelines.  

The FAFSA started back in 1965 as part of the higher education act.    It is a standardized approach for institutions to structure need-based aid.  From the FAFSA federal loans and grants are offered.  The loans are broken down by parent and student.  Student loans are further divided in to subsidized and unsubsidized.  If you consider taking the loan, note there is a process to apply as well as have the funds sent to the school.   

The FAFSA process starts with the FSA IDs.  A parent and the student need to create FSA IDs.  This involves entering basic information, setting up security questions and verification.  Take your time, if you don’t completely create a FSA ID, you won’t be able to begin the FAFSA.  One of the most frequent questions is why does  parent need an FSA ID for each child?  The parent creates one FSA ID which can be used for different children who also have their own unique FSA ID.   

The FAFSA is available via an app or on the web.  Before you begin gather the necessary information:

  •  Parent Federal Tax Forms & Supporting Documents
  • Student Federal Tax Forms & Supporting Documents
  • Account balances for liquid assets (checking/saving accounts) , investments and basic property information.

Here are things we have found useful.  Always create a save key, that way you don’t have to finish it all at once.  Read each question carefully.  Be sure to your mobile phone number as a way to access your FSA ID so when you forget that password next year, it will be easier.  And most importantly, fill out the FAFSA even if you don’t qualify for need-based aid because there are some schools who may require it for merit aid.  
 

Financial Decisions that can sink your college funding plans

cost-of-college

“Well-Intentioned (Or Uninformed)
Financial Decisions That Can Sink
Your College Funding Plans”

 

Optimally preparing for the requirements related to future academic endeavors is no easy task… as college funding professionals who have access to the best and most accurate information regarding the admissions process, we have garnered the experience and understanding for these challenges!

However, we also know that parents can make some very damaging decisions if they make their financial decisions on their own, or if they decide to take some poor advice that would make sense under other circumstances… but NOT when considering the college financial situation. We are certain that it is important to make the best decisions with all factors being considered, and there are a number of excellent reasons for making sure that this is so.

Preparing for college funding does not always follow the traditional common sense regarding savings and planning, because simply put, the rules are different (and they tend to change a lot, making an already confusing situation even more puzzling for most people). For this reason, it makes all the sense in the world to make certain that the correct rules are being followed, and that the efforts are not going to actually turn into more of a problem later on. There are a number of things that can interfere with a family’s best efforts.

For this month’s newsletter, we are presenting some common errors made by well-meaning parents and families when managing these details. Should any questions about these college preparation subjects pop up, or other similar issues arise, please be sure to give us a call. We have all of the pertinent details in these areas and provide the beat and most current information when it comes to managing college preparation efforts.

Please make sure that you do not fall victim to these well-intentioned problems!

1. Not Understanding Exactly What The Financial Aid Offer Says

This seems like it would not be a problem, but, sadly, for many families it is. Many families will receive an aid package from a college and not fully understand the nature of the aid stated in the package. Colleges are not always very clear about making the distinctions between loans and grants and that lack of clarity can get incoming students and their parents into trouble.

Many of the packages do not fully disclose interest rates or reveal the average monthly payments, etc. This can make it very difficult for parents to understand exactly what is being offered to their child. Moreover, many parents will look at the loan offer and make the assumption that it will reduce the cost of the tuition. This is, obviously, not the case. Only grants will reduce the cost of tuition and other college fees.

This lack of clarity may or may not be intentional on the part of colleges. In many cases, mathematicians are the only ones who can fully decipher a financial aid offer and calculate the ultimate cost over time. One of the ways to solve this problems is to ask questions.

Parents should ask whether or not loans will be ‘front-loaded’ meaning that the bulk will be offered during the first year but taper off over the following years. Finding out where the loan money is originated is also important to know.

Ultimately, if it is not explicitly shown… then be sure to ask and verify the answers. It is the only safe course of action.

2. Reporting Assets Incorrectly

Many families end up ‘over-reporting.’ This means that parents will include assets on the FAFSA (Free Application for Federal Student Aid) that are not actually required on the application. Many parents will state their retirement assets and their home equity on the FAFSA when that is actually not a requirement on the form.

Look very carefully on the form to determine exactly what is and is not required. Or, better yet, ask for your help from your college funding counselor who can guide you in the right direction and help you optimize your situation.

3. Co-Signing for a Student Loan Without Full Understanding

Parents will often gladly co-sign on a loan for their son or daughter thinking that it will release them from any obligation to that loan. That could not be further from the truth. Any person on a loan is equally responsible for the repayment of that loan. If a son or daughter fails to make payments on the loan, then the repayment obligation automatically falls to the co-signer. For parents, that means that they are on the hook as a co-signer.

Many parents think that because they are not the primary person on the loan that it absolves them from making any payments on that loan. It just simply isn’t so.

It is important to understand exactly what is being signed – especially when it comes to student loans. Those obligations can almost never be discharged in bankruptcy, so students (and sometimes parents) will certainly be responsible for them.

4. Opting For a Private Loan Instead of a Federal Loan

Private lenders can be pretty tricky. Many interest rates that are advertised lately are as low as around 3%. Those low rates can look very attractive to prospective students and their parents. When compared to unsubsidized Stafford loans, which might be around 6 %, it  can seem that one is getting a really good deal. That does not tell the full story, however.

The main difference with private loans is that the loans are underwritten. This means that the loan must be scrutinized by an underwriter and will often require a cosigner. The rates are often a ‘come on’ and do not reflect the actual rates that will be received after going through the loan approval process.

Another drawback is that these loans are often variable. That means that after the low introductory rate, the loan will go up in interest even to the double digits. The loans also do not have the same repayment options offered to those who get federally funded loans. The repayment process is often much more strict and that can be a strain on newly graduated students who do not have the income to make the full payments required on the loan.

5. Saving “Too Much”

The old adage, “A penny saved is a penny earned,” takes on an even stronger meaning when it comes to college funding – and the rules for college funding can even turn this saying right on its ear. Let’s say, for example, that your child has worked hard over many vacations and has $10,000 saved in a savings account under his or her name. That is just terrific, right? Well, maybe… but not so fast.

About 20% of those hard earned savings could well be added to the EFC (or Estimated Family Contribution) when the fed begins calculating eligibility for aid… which can often mean that the overall amount of financial aid eligibility is actually adversely affected by the student’s own hard work and savings!

Now, there are other strategies to help work around this sort of situation legally, including continuing to save for your child’s education – but it may be worth looking into doing so under a parent’s name in another bank account. This is definitely a case where a chat with a professional college funding advisor can make a huge difference.

As you can see, making wise and prudent decisions regarding higher education financial planning – as well as college application strategies – can be an extremely challenging endeavor. It only makes sense to approach this effort teamed up with a college funding professional. Doing so allows families to understand and select the optimal strategies that correspond to their own financial and academic situations, meaning that the chances of success (both financially and academically) will climb.
All of the actions discussed in this month’s newsletter are not rare – they happen each and every year to unsuspecting college-bound kids and their parents – and we view it as part of our professional responsibility to assist families in avoiding these problems, as well and many others like them. We have a number of tools to assist in this effort.
One of our most dynamic and effective options for the education of parents with high school kids who will attend college is through in-person attendance at one of our College Funding Workshops. These presentations are moderated and instructed by some of the finest college funding professionals available. We see these workshops as a dedicated, in-person option for parents who wish to inform themselves with the best informational set about all manner of financial “dos and don’ts,” as well as governmental regulations related to their family and their higher education planning.

Our  workshops have no admission cost, and are being held in larger venues to allow for social distancing.  If you don’t want to venture out quite yet, we have a short virtual talk which runs daily. Despite having no admission fee for attendance, we must make certain that each event has a group size that manages both space limits and our experiences with creating a successful learning environment. Because of this, we insist on advance reservations for the best possible planning and delivery of a quality event. Thank you for understanding.

Until next month

 

How Procrastination Affects Admissions and Financial Aid

“Five Ways That Procrastination
Can Undermine Both College Admissions
And College Funding

Dear Parent,

One of the most important elements of college preparation – both for admissions and for college funding – is simply being prepared in advance for the process. Even the best-laid plans are not fail-safe if they are implemented too late in the game, and this is a reality that we see year after year, time and time again in this business. For this reason, we are constantly encouraging students and their families to start their college preparations early on, so that they can be best prepared for every eventuality.

There is no question that it is a big job, however, and this is probably one of the biggest reasons that people can tend to put off their action steps until deadlines approach – and as we have seen many times, at this point it is often simply too late to have a significantly positive effect on the outcomes of applications and financial preparations.

As college funding advisors who understand the ins and outs of the application and financial aid processes, we stand ready to serve families with college-bound kids, and we also know exactly what steps need to be taken at each stage of the high school years. The simple fact is that ignoring these steps early on can have a deleterious effect on a young person’s college opportunities, both through the admissions cycle and through the realities of college funding.

We have decided this month to share some of the pitfalls that can be avoided by proper planning and preparation in advance, in the hopes that more families will take the steps needed to avoid procrastination and create the best options for their child’s experience in higher education. The good news is that this sort of preparation, when undertaken properly, dramatically lowers the workload for both parents and students later in the high school years. The better prepared a family is for college, both academically and financially, the more options are available after high school – and the less they will stress out during the senior year of high school! Starting early is honestly not that difficult, if you know what you are trying to accomplish and what you are trying to avoid, so we urge you to have a look at these viable and vital reasons to avoid procrastinating college preparation.

Should you happen to have any questions, of course we are always ready to assist – because it is certain that procrastination of these important steps can definitely come back to bite a family later!

**********

Not Starting The Process Early Enough

When a child is born, to the minds of the parents he or she is perfect, and represents all the best possibilities in the world. At that time, however, it’s often difficult for new parents to imagine that in only 18 short years, that baby will be heading off to college. Planning early will be the best decision a parent can make concerning his college funding.

It is no secret that, in many areas, college costs are spiraling out of control and they are overwhelming to many parents. One of the first things that parents can do is calculate what they think will be needed for college for their child. This can give a rough estimate on what needs to be saved each month. However, it is a good idea to have some reasonable input from a knowledgeable source before planning with these numbers.

With that said, this amount is not hard and fast. It’s there to give an indication. The point is, parents should start planning as early as possible for college, and the best way to do that is through consultation with a College Funding Advisor. Frankly, most people do not start really working on this when their child is small, but it certainly can make a huge difference later.

As the old Chinese proverb goes, however “The best time to plant a tree was twenty years ago… the second best time is now.” So if you have a college bound child – now is the time to take some positive steps!

Not Strategically Moving Assets Soon Enough

Retirement assets will usually (hopefully!) take decades to deplete. However, college funding will usually be used up in a narrow time frame – usually within 5 years, unless graduate or professional school is involved. This shortened amount of time means that one does not have the flexibility to ‘ride it out’ in the event of a major market fluctuation like they would a regular retirement account. This is one big reason that there are different types of college funding options to consider.

When it comes to preparing your child for college, having access to educational funds is vitally important. Regular, high-risk investments might be able to tolerate the ups and downs when one does not need access to the money in the near future. However, it is a good idea to discuss college funding options with an expert to find options with the most stability. If one procrastinates then those funds may not be there when they are needed.

Waiting Too Long to Apply for Aid

Filling out the FAFSA is not exactly something any parent looks forward to. However, waiting too long to fill out these types of forms, or simply getting them turned in by the posted deadlines may be a serious mistake. Many schools have a much earlier deadline than FAFSA’s and that could make it impossible to qualify for most financial aid.

The FAFSA form takes approximately 30 minutes to fill out. It is a good idea to simply do it as soon as possible to avoid have any complications with acquiring aid for the coming school year. It is also something that should be discussed with an expert to make sure nothing is missed and all of the information is properly completed.

Comparing the deadlines for all of the colleges and universities your child is interested in applying for and making doubly sure that all of the financial information is ready to go when filling out the FAFSA will pay dividends if done early. Of course, that will also assume that parents need to have their taxes prepared and filed so that all of the information is ready and can be provided on the appropriate forms. Whatever you do, do not miss these deadlines!

Forgetting the FAFSA is Required Every Year

Just because parents have dutifully filled out the FAFSA one time does NOT mean all is well in that regard moving forward to the following years. Your child’s eligibility for financial aid from one year, unfortunately, will not necessarily carry over to the following year. Each year’s decision is based on new financial information, so the form must be filled out each and every year of college. Remember that family circumstances can change from year to year and those changes may affect eligibility.

If your child is still in college then a form will need to be filled out for the following year. It’s just as simple as that. On the good side, if you have a College Funding Advisor – then you also have a built-in reminder service!

Not Curbing Procrastination Habits Early

Procrastinating high school students almost invariably will become procrastinating college students. Habits take time to form and if procrastinating to get things done while in high school is how things were accomplished, there is a very reasonable worry that the same behavior will continue at the next level. High school is often demanding and rigorous, but not nearly as much as students will see in college. The college or university life lacks the automatic structure of parents, as well as attendance requirement from high school. Students who don’t show up to class and/or procrastinate doing their course work don’t just get a bad grade, they’re wasting a lot of money!

For this reason, it is vital to curb procrastinating ways sooner rather than later, and high school is the place to get that done. If distractions are a problem, find a space that is free from distractions. Create a place where your child can study that is calm and will allow him or her to focus without being tempted to turn on the TV or peruse the internet.

Staying focused, being disciplined and meeting deadlines is extremely important not just for getting into college, but for everything that will come after college!

**********
As you are aware, college financial planning and application services are the key elements of our efforts as college funding professionals. It is our overarching goal to help parents discover and implement the most beneficial strategies with regard to their personal circumstances, both financially and academically. This is the best way for us to optimize the college future of any young person who wants to attend college or university. We have found year after year that the best results come for families and students who have prepared themselves well ahead of the college game, so to speak.
One of our best educational options that we offer to the parents of college-bound high school students is found through attendance at our outstanding, live College Funding Workshop program. These workshops are presented live by some of the best college funding professionals anywhere. The presentations are offered via a special, face-to-face appearance to parents who wish to be better informed about the most important details regarding rules, regulations, and financial requirements related to their high school student’s academic future.
These workshops are invariably offered without any admission cost or obligation, and we make sure to plan the workshops at times that make sense for busy parents (including some evening and weekend options). However, please note that while there are no admissions charges for the workshops, we are dedicated to keeping each audience to a size that allows for a good learning environment. Because of this we do require advance reservations for admission, and we appreciate your understanding this condition.
For additional information with regard to College Funding Workshops coming up in your area, simply place a call to our helpful workshop team at 614.934.1515. They will be able to assist with the pertinent details about locations, schedules, and even some more details about the workshops themselves if you have any questions. Of course, they can also arrange a reservation for upcoming workshops, if you already know that you want to secure a seat for one coming up in your area.

For the latest information on college planning, admissions, and financial aid; follow us on Facebook or Twitter.

Until next month,

marc signature

 

 

Financial Aid Eligibility and Family Finances

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

Dear Parent,

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.
In addition to our monthly newsletters, like this one, one of the key ways that we endeavor to assist the parents of high school kids in learning the details about financial preparation for higher education is with our highly-regarded, live College Funding Workshops. These workshops, which offer in-person contact with a number of the finest college funding professionals in the area, are designed to offer more in-depth knowledge to parents who wish to understand the financial elements and considerations with regard to their preparations for their child’s future college or university education. The important details provided at these workshops are always kept current (not to mention accurate with regard to the ever-changing laws and requirements), and we are extremely proud of them!
The workshops are available without any obligations or fees for attendees, but because of logistical considerations we do insist on advance reservations. If you would like more information about any College Funding Workshops planned for your area, you can call the workshop staff members t614-934-1515.
The members of this crew will be happy to assist with further details regarding upcoming times and dates, workshop locations, or any other considerations you might have about future workshop events. Of course, they can also assist you with a reservation, should you already know that you would like to attend.
Additionally, we have published a special report for parents who are in search of detailed written information regarding the best preparations for managing college funding. The report is titled “Nine New Ways To Beat The High Cost of College” and just like the workshops, we send it out to parents absolutely free of cost or obligation. In order to receive your very own copy of “Nine New Ways To Beat The High Cost of College,” you can simply call our staff at 614-934-1515. We will be more than happy to send one out to you without delay.
Happy Spring!
Until next month,