Financial Aid and Rising Tuition Costs
When considering colleges cost should never factor in to a student’s decision regarding whether or not to apply anywhere, regardless of a family’s income or the cost of a college’s tuition. The financial aid process is a complex system that varies by college; students should not limit future choices based on the price of college but rather keep their options open until they can assess the feasibility of attending a college.
Paying the hefty tuition bills at most private colleges presents a sobering reality to parents who a) do not count themselves among the small percentage of extremely wealthy people in the United States, or b) have raised their children in poverty and managed to inspire a student to aim for the best and earn a full scholarship. Just about everyone else falls into the 90% of Americans who possess too much wealth for colleges to grant 100% need based financial aid but not nearly wealthy enough to write a check for the tuition without a second thought.
What can families do to preserve the wealth they have while still sending a son or daughter to a $45,000+/year college? Know the facts.
1) Merit Scholarships
Each year about there is about $30 billion available in scholarship money. In fact, about $7 billion goes unclaimed. Everyone – regardless of grades, finances, background or any other characteristic that may dissuade one from considering scholarships – should apply for as many as possible.
2) The Wealthy Relative
If you have a relative willing to cover the tuition for a student, make sure to deposit any funds until after the student receives the financial aid package from the college. Colleges consider any cash in a student’s name fair game.
3) Students and Accounts
As indicated above, colleges consider any cash on hand in a student’s name money ripe for the taking. They believe the education belongs to the student, so no harm in taking any money that also belongs to the student.
4) Retirement Plans
Any funds saved in a retirement plan before a student enters college remains “safe” from consideration for financial aid. Colleges will not expect families to dip in to retirement funds to pay a student’s college tuition. However, once a student begins college they will factor retirement funds back in to a parent’s income in order to determine the student’s need.
5) The Hope Scholarship Tax Credit
Many families will qualify for tax credit based on earnings. Every eligible family should take advantage of this credit on their income taxes.
6) Scholarships
Money for college remains in abundance even though most people do not necessarily realize it exists. Each year students pass up the opportunity to take advantage of available funds. On the other hand, some savvy students earn enough in scholarships to pay for an entire year of college fees – and sometimes more than they need.
7) FAFSA
Parents of any student seeking financial aid must complete the federal aid form. The process is not at all painful, though most families seem vey intimidated by the form. One simply needs to refer to the website and complete the form online. Be sure to send the form to all colleges where the student has applied.
8) CSS Profile
Some colleges may also require the CSS Profile, which may also be completed online. Check the list of colleges that require this form and be sure to send to it all required colleges.
9) Beware credit cards
With the help of data collected by the College Board and other research firms many banks possess college student information and reach out to unsuspecting students with attractive credit card offers. Students should beware of these ploys and avoid taking advantage of these offers as they typically lead to overspending and financial debt. If possible, parents should oversee a student’s credit card for at the first year at college so a student slowly learns how best to manage money while also building a solid credit history.
Questions to ask the Office of Financial Aid at Colleges
A) Does the college primarily rely on merit or need aid? In other words, does the bulk of financial aid funds go to students who “need” it or students who have “earned” it.
B) If a student earns a merit scholarship outside the scope of the college’s financial aid package does the college factor that in the financial aid package or is the student free to allocate the funds for colleges expenses as he or she chooses?
C) Clarify all the forms required by individual colleges. All require the FAFSA, some require the CSS Profile (created and monitored by the College Board) and some ask student to complete forms unique to the college.
D) Does the college re-evaluate the aid package each year or does the decision package that applies to the freshman years remain the same for the entirety of the student’s college years? This question could become important for students for many reasons in future years.
E) Does the college cap the amount of loans a student’s is expected to take on? Many colleges limit the amount of student indebtedness because they want graduates to pursue careers they choose as a result of a passion and avoid accepting jobs simply to pay back student loans.
Please note: I am not a financial advisor. For details that pertain to your individual situation consult a tax expert. This article offers an overview only.
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