School is back in session and it is time to start thinking about college fees! In fact, the coming months are some of the most crucial in determining the future of your financial well-being with regard to college costs. Bear this in mind, even though all of your required forms might have been completed, the total work is not done. In fact, it is the activities and decisions of the next few months that will have a profound effect on the education-related bills you’ll be facing over the coming few years.
In order to make our college funding information relevant to a wide spectrum of readers, we have divided this month’s newsletter into two separate segments. First, we will focus on the most time-sensitive population of our readers – parents of graduating high school seniors who plan to attend college in the autumn. For those of you in this group, I have five crucial tips of things you can do this summer to make the most of this time and maximize your benefits down the road! These items will be of interest to our other group, those parents whose children will become seniors this coming school year. In addition, however, you will find three more suggestions for those who have one more year before college tuition and fees will come due.
SEGMENT ONE: Five Tips For Your Graduating Senior
Tip #1: Plan Ahead Now For Future College Years
Gaining a college education is not a one-year proposition, so it is an unfortunate necessity that the college funding process needs to be revisited every year of your student’s academic program. One important fact to bear in mind is that once your child begins college, every single year is going to be considered a “Base Financial Year.” This fact is discussed in more detail in the second section of this newsletter, but for now simply remember that you’ll be completing another Free Application For Federal Student Aid (FAFSA) and CSS Financial Aid Profile (PROFILE) every year that your child is in college!
Tip #2: Encourage Your Student To Find A Summer Job
Naturally, people tend to focus more on enjoying the summer weather than finding a job, but there can be very real benefits – both financial and personal – from working at least part time. The money students earn can help toward college expenses in the Fall, and the self-reliance and work ethic they gain will be a boon in school, as well. In addition, however, there is a magic number to keep in mind as you encourage summer employment for your child.
As long as your child does not earn more than $3,249 a year, their funding package won’t be affected. Part time work will usually allow them to earn that much money in a summer, offering a great sense of accomplishment… and also some financial resources that would not exist otherwise!
Tip #3: Plan For Educated And Responsible Spending
Most of us recognize that earning a full $3,249 this summer is great, but it won’t pay for everything! Many families will need some help along the way. Once you have accurately calculated your student’s tuition and living expenses, the next chore is figuring out how you’re going to meet them. For help in planning out how to do this, you can always feel free to visit our website at http://www.myschoolplans.com. We have experience in helping families achieve their educational goals, and will be happy to assist. For example, we have a useful financial strategy helping many parents pay for college on a “tax-favored” basis. It doesn’t work for all families, but in the right situation it allows parents to meet college expenses without being forced to dip into pensions or raid savings accounts. We will be happy to let you know if this plan will work for you.
One other thing to note about college expenses – they include spending money and other costs for your child. Granted, tuition and living costs might be the bulk of college bills, but textbooks, transportation, mobile phone bills, and the all-important social life are nothing to sneeze at! In the right situation, with a responsible student, some parents help their child to meet these expenses with a credit card. In this circumstance, it is crucial that the parents and student set very distinctly understood limits regarding the use of the credit card. For example, some families will use credit only for emergencies and/or travel tickets home. Others are in a situation to allow credit purchases of some meals out at restaurants, concert tickets, and recreational trips. First and foremost, parents must be able to track the spending so that there are no unpleasant financial surprises and/or credit disasters down the road.
Bear in mind that in the case of emergencies, many schools offer money through “bridge loans” or “emergency loans.” These are funds set aside by the school specifically for student emergencies. These loans usually must be repaid within 90 days, and can be a good option instead of an emergency credit card.
Tip #4: Search For “Last Minute” Strategies To Meet Your EFC
If you are still convinced, after reviewing your Expected Family Contribution (EFC) numbers, that the difference between the EFC and the amount you think you can afford to pay is more than you can afford… well, take some comfort in the fact that you’re far from alone! In fact, many parents and students find themselves in exactly the same position. If you’re still not sure how you’re going to pay your EFC, then visit our website for a free video on how to understand the process. There are a number of good options and with careful planning now, you can make the most of the money that you have available.
Tip #5: Nobody’s Perfect… So Learn From Any Mistakes!
Sure, filing that FAFSA every single year may be monotonous… but there is a benefit to the extra work! In the event that you ever make a mistake by missing a deadline, making a calculation error, or anything else, you will only pay the price for one year. In the future, you can remember what you did wrong, and fix the error for all following years.
SEGMENT TWO: Three Tips For The Last Year Of High School
Tip #1: THIS Is Your “Base Financial Year…” Craft It Wisely
This is an almost overwhelming year with regard to the reams of forms and applications you will need to fill out over the coming months. These forms are crucial because colleges will use them to review your income and assets as they determine the makeup of your college financial package. In short… your Base Financial Year starts NOW. If your child will graduate and begin college in 2008, know that your 2007 figures will be the ones that make the difference. This means that there are consequences to all your financial changes this year. Any purchases, such as a new car or home, new business expenses, pay raises, or changes to your asset portfolio will have an effect on the funds that your student can receive as part of their “need-based” aid package.
Obviously, then, families need to thoughtfully consider any financial move this year. However, that knowledge should not paralyze you when it comes to financial matters! We recommend that you arrange your finances so that you minimize out-of-pocket college expenses. If done correctly, the structure of your tax plan, placement your assets, and planning of your savings can all collectively boost your child’s education fund.
Tip #2: Start Your Student Thinking About College Options
For many high school juniors, college is a rather distant concept obscured by the present reality of the upcoming senior year! Still, this is the ideal time for students to start thinking about different colleges. Parents can request school catalogs and applications to introduce juniors to various campuses, and some families use vacations and other trips to visit schools of interest in a particular geographic area. Students who become interested early in a certain school may also find extra motivation to maximize their academic performance during their senior year.
In order to improve the odds of being accepted to at least one school, we recommend that students apply to six or seven colleges and universities. Receiving acceptance letters not only boosts your child’s confidence, but multiple offers can give the family additional options in negotiating with schools over aid packages! Certainly, the more options you have, the better.
Tip #3: Tell Your Own Future… Predict Your EFC
As mentioned above, your Expected Family Contribution (EFC) is the amount that the federal government expects you to pay for your child’s education. Regardless of where your child attends college, the EFC amount remains the same. Now, there are two ways in which the EFC is calculated; Federal Methodology and Institutional Methodology. Interestingly enough, not all schools utilize the same method for calculating this important number!
The Federal Methodology is used by most state schools, while the Institutional Methodology is usually used by private institutions. The systems are not the same… the Institutional Methodology is based on assets not included in the other system, like the value of your home. However, it also considers expenses that the Federal Methodology will not. Although these two calculation systems can be detailed and somewhat complicated, understanding them can literally mean thousands of dollars toward your child’s education.
Now, please remember that even people with higher incomes can find it a challenge pay their EFC. For many of these families, our “tax-favored” strategies can make a huge difference! If you would like to find out more about these plans, please call my office for more information – or to reserve a seat at an upcoming FREE College Funding Workshop. We also offer an informative FREE report entitled “9 New Ways To Beat The High Cost Of College”. If you’d like to reserve your copy or get a FREE copy of our college funding video, please visit out website at http://www.myschoolplans.com
By Brandon Hansen