College Funding

For some parents, the words college tuition can cause panic.  They worry about how they will pay for their children's college education when college costs continue to go higher and higher every year.   Fortunately I understand the ins and outs of college funding and the financial aid process.  I became interested in the topic when I discovered that the investment recommended to me years ago to save for my kid's college education was now one of the worst investments I could own when it came to filing the FAFSA (Free Application for Federal Student Aid) to apply for financial aid.

I started talking to other financial planners and CPA’s and found out that almost every one of them was unaware of how to optimize a family's chances of qualifying for more financial aid.  I began reading numerous articles and books on the topic.  What I’ve learned is that many parents leave money on the table when it comes to paying for college. 

Your ability to receive financial aid is determined by several factors like income, assets and age.  Also, your kid's assets and income can make a big difference on how much aid they might receive.  Even investments not earmarked for college can potentially hurt your chances of qualifying for financial aid.  Some red flags are cash (checking and savings/money market) CD’s, bonds, UGMA/UTMA custodial accounts, non-retirement investments and even 529 accounts.

The net result of all of these factors is used to produce your family's EFC (Expected Family Contribution).  This is the dollar amount your family is expected to contribute to the total cost of college that year.  Your EFC can change each year as your income, assets and number of kids attending college changes.  The lower your EFC the better your chances are of qualifying for financial aid.  Financial aid can come in many forms such as loans which require repayment; or work study, grants and scholarships that do not require repayment. 

 Here’s an example of how the EFC is used. The EFC in this example was randomly chosen.

       COA (Cost of Attendence per year)                $30,000  

     - EFC (Expected Family Contribution)           - $12,000 

     = RN  (Remaining Need)                               = $18,000 

        RN is where you are looking for financial aid of some kind

 Note:  This is for illustrative purposes only and may not be indicative of your situation.

My goal is to help you qualify for more financial aid by using strategies that are both legal and ethical.  The less you spend on college, the more you have for your retirement and the sooner you can pursue a better life. 

 In my opinion the biggest mistake parents make is not taking action soon enough.  Paying for college is one of the biggest expenses your family will experience.