No matter what your family income situation may be, the fact is that college is expensive. Unless you have the full cost of college for all of your children’s college years saved ($100,000+ per student in almost all cases), you probably are looking for help paying for today’s astronomical college prices.

It is more important than ever to understand the college financial aid system – not only how aid is awarded, but why, and what you can do to shift the odds in your favor.

Here are 5 financial aid tips that can help you do just that:

1. Start Planning Early

The importance of this cannot be overstated! This is one of the main points that we emphasize in our free workshops. If your child is in high school, you’re already late in the game!

If you are able to make any financial changes such as repositioning assets and income to lower your Expected Family Contribution (EFC), this needs to be done BEFORE your child’s Junior year of high school. This is used as your “base year” in the Federal financial aid calculations. If you wait too long, you may be unable to make any significant difference to your EFC – at least for the first year of college - which usually determines the majority of aid for the rest of the college years.

2. Assume You’re Eligible for Aid

Unless you’re told otherwise by the school itself, you should always assume that you may be able to garner some aid, and act appropriately. This means filling out all of the financial aid forms properly, no matter what your income level. Each family’s circumstances are different, and can also change from year to year. Just because you may not have qualified for financial aid for your child’s first year in college doesn’t mean you won’t for the next year – especially if you have had any family changes – such as adjustments in income, retirement, additional children entering college, etc.

So apply anyway, even if you’re not sure you will get any aid, and be sure to apply again for each year that your student will be in college.

3. Assess and (Possibly) Reposition Money Held In Your Child’s Name

While money held in the parents’ names will be assessed at about 5 1/2 percent in the Federal aid formula, money in the child’s name can count as much as 20% of the value. This can significantly increase your EFC and diminish the amount of financial aid you could otherwise qualify for. (If you have questions about the best way to do this, please contact our office for a free strategy session!)

4. Be Strategic When It Comes to Contributions From Grandparents

Many grandparents enjoy helping to contribute to their grandchildren’s college funds. This is a wonderful thing, but be sure they are doing it the right way. For example, a 529 Plan opened by a grandparent on behalf of a child may provide some money to help pay for the cost of college, but distributions from these plans may in some cases be assessed as student income, which can inflate your EFC (see Tip #3 above). If a grandparent wants to contribute to a 529 Plan, it may be more beneficial if it is one held by the parent.

Or they may wish to contribute to another fund or account in the parent’s name, so that it doesn’t count under the student and negatively impact your aid eligibility.*

5. Develop a Detailed Plan to Pay for College

Well before your first college bill comes due, you will want to thoroughly assess your family’s situation and fully understand the metrics of the college investment. This is the only way that you will know exactly how much you will need to cover each student’s college costs, and be able to make a wise investment. Most likely you will not be able to predict exactly how much financial aid you will receive, so you want to make sure you have a plan in place to cover whatever costs are not met in financial aid or other free money – either from the government, the university, or other sources.

You will need to gather all of your financial records, spend plenty of time researching grants, loans, and scholarships to be sure you clearly understand all of your options, get a good, solid estimate of your actual EFC (not just based on a college's net price calculator), and be sure you fill out all those forms correctly and on time!

We help guide families through every step of this process. If you would like some help, register for one of our FREE workshops, or just give us a call at 614-300-9498 for some one-on-one advice.

 

* Consult a qualified tax accountant for potential tax impacts.

The information presented here is for educational purposes only and is not a solicitation for the purchase of any financial product. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting financial professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.

 

Photo Credit:

Photo by Nick Youngson CC BY-SA 3.0 Pix4free.org.