Category Archives: financial planning

FAFSA, financial aid, financial planning

FAFSA Week: A Step-By-Step Guide to the 2021-22 FAFSA

2021-22 FAFSA

If you break it down, the 2021-22 FAFSA isn’t that complicated. Because it’s a federal form (like income taxes), many parents and students are hesitant to tackle it. If you take it step-by-step, it’s much easier. Here’s a synopsis of the requirements and the sections of the 2021-22 FAFSA.

Information you will need to complete the FAFSA

Use this list to gather all the information necessary before you begin:

  • Your FSA ID, which you can create on fsaid.ed.gov. Note that students and parents will need to create their own FSA ID and keep it private.
  • Your social security number and driver’s license, and/or alien registration number if you are not a U.S. citizen.
  • Your federal income tax returns, W-2s, and other records of money earned.
  • Your parents income tax returns, W-2 forms and 1040 forms if you’re a dependent.
  • Bank statements and records of investments (if applicable).
  • Records of untaxed income (if applicable).
  • Title IV Institution Codes for each school you’re applying to, which you can find from the FAFSA federal school code search.

Sections of the FAFSA

At each online step, a “help and hints” box pops up at the side, in case you need guidance. Here’s a short synopsis of each section from CollegeXpress.

Student eligibility

This is pretty basic: the name of your high school, what year in college you’ll be entering, and your parents’ level of education. This is also your chance to opt into federal work-study. Consider saying yes if you aren’t sure; you can always decline later if you change your mind.  

You will also be asked if you have registered with Selective Service (the military draft). Nearly all men age 18–26, including undocumented immigrants and people with disabilities, are required by law to register—and if you aren’t registered, you will be denied federal financial aid. You can register via the FAFSA form by checking a box.

School selection

Here’s where you enter the names of the colleges you plan to apply to. You can add as many as 10, but don’t worry if you haven’t finalized your list. If you want to add another or make changes, you can do it later.

For each school you include, you will be asked if you plan to live on campus, off campus, or with your parents (because you won’t need funds for room and board if you will live at home). For state aid, some states require that colleges are listed in a specific order; check the federal aid website to see if your own state is fussy about this.

Dependency determination

Colleges want to know if your parents support you or if you are an independent adult. The vast majority of high school students are considered dependent for college financial aid/FAFSA purposes. However, you’re generally considered an independent student if you are:

  • 24 years old by December 31 of the award year
  • A graduate or professional student during the award year
  • Married (or separated)
  • A parent or have other dependents who currently receive more than half their support from you
  • An orphan or a ward of the court
  • A veteran of the US Armed Forces

Otherwise, you are most likely a dependent student.

If your family situation is complex (for example, you are a minor but don’t live with your parents or don’t have access to their financial information), you can find some guidance on the federal student aid website.

Parent demographics

You fill this FAFSA section out if you are a dependent. Aid decisions will consider your parents’ age (because older parents may need to conserve more for retirement), how many children they support, and, most important, if they will have additional children in college that year. Each of these elements affects the calculation for your Expected Family Contribution (EFC), so answer the questions carefully. For example:

  • Older parents are expected to contribute less since they are closer to retirement.
  • Parental contribution is divided by the number of students in college.
  • If the parents are divorced or separated, include only the financial data of the parent with whom the student lives for the greater part of the 12 months preceding the date of the application. If that parent has remarried, the student must include that stepparent’s income and asset data as well. Note: some colleges request information on the “other” natural parent and may expect a contribution from that parent as well.

Financial information

You will need to fill in your parents’ adjusted gross income from the 1040 form, or whichever form they file. (Or your income, if you are independent.)

The IRS Data Retrieval Tool really shines with this part of the FAFSA, because it transfers your tax information directly to the form, saving time and eliminating the chance of a mistake.

You’ll also be asked about assets—both your parents’ and yours. That’s right: the money you’ve saved from summer jobs, birthdays, or bat mitzvah gifts—all of it is fair game. And your colleges will expect you to contribute a percentage of your savings to your college tuition.

Of course, your parents will need to report their savings and investments too, including money market accounts, mutual funds, 529 college savings accounts (yours and any siblings’), and investment real estate (not your family’s primary home).

Qualified retirement accounts—IRAs, 401(k), 403(b), or pension plans—aren’t counted as assets. As always, you can find guidance in the pop-up help boxes at the right side of the page.

Sign and submit

After you’ve finished the FAFSA’s financial section, you add your electronic signature with your FSA ID and hit submit. That’s it.

For a visual step-by-step guide to completing the FAFSA, follow this link:

https://www.nitrocollege.com/fafsa-application

Don’t forget to read the other articles related to FAFSA Week:

FAFSA Week: Debunking 5 FAFSA Myths

FAFSA Week: Financial Aid Q&A

FAFSA Week: 10 Reasons to File

FAFSA, financial aid, financial planning

FAFSA Week: Debunking 5 FAFSA Myths

2 Comments
fafsa myths

This week is FAFSA week. An entire week devoted to the FAFSA. Today, I am debunking some FAFSA myths.

As the week progresses, I’m going to scour the my blog, the web, and social media to find you the best information, tips and advice related to the FAFSA. If you’re not sure it’s worth your time, this advice should answer that question. If you want to be informed before you complete the form, this information will most definitely help.

Myth 1: If you can’t qualify for federal aid, there’s no point in filing out the FAFSA.

Reality: There’s more to the FAFSA than federal aid. Colleges use this form to disburse merit aid and grants. Also, if your student is considering a student loan or you are considering a Parent PLUS loan, you must complete the FAFSA. In addition, many states use your FAFSA data to determine your eligibility for their aid and many scholarships ask if you have completed the FAFSA.

Myth 2: I make too much money to qualify for financial aid.

Reality: There is no income cut-off to qualify for federal student aid. Many factors—such as the size of your family and your year in school—are taken into account. Your eligibility for financial aid is based on a number of factors and not just your income.

Myth 3: I have too many assets to qualify for aid.

Reality: Most colleges won’t care if you own a house and won’t count home equity against you if you do. The majority of schools rely on the federal aid application, FAFSA, which doesn’t ask parents if they own a home. If the college requires the CSS Profile, home equity is required, but because of the equity cap, has little impact on the award decision. In addition, money in qualified retirement plans, such as a 401(k), 403(b), IRA, pension, SEP, SIMPLE, Keogh and certain annuities, is not reported as an asset on the FAFSA.

Myth 4: I didn’t qualify for financial aid last year, so filling out the FAFSA form again is just a waste of time.

Reality: It’s super important to fill out a FAFSA form every year you’re in college. Why? Because things can change. For instance, your school or state might create a new grant or scholarship, or the factors used to calculate your aid could change from one year to the next. Either way, if you don’t submit a new FAFSA form, you’re out of luck.

Myth 5: The form is too complicated and since I’m sure I won’t qualify, it’s a waste of my time.

Reality: The FAFSA is actually pretty straightforward and can be completed in one sitting; and filing out the FAFSA is never a waste of your time. Colleges and states use this information when awarding grants and scholarships. (See Myth 1)

The bottom line: there is no excuse to not complete the FAFSA. It’s free and is well worth your time. Even if you can afford to pay for the entire cost of college, you should complete the FAFSA. Colleges use this data when dispersing merit aid as well.

Don’t forget to read these posts too:

FAFSA Week: Financial Aid Q&A

FAFSA Week: 10 Reasons to File

FAFSA, financial aid, financial planning

FAFSA Week: Financial Aid Q &A

2 Comments
financial aid

Financial aid can be a confusing part of the college application process. Even if you can afford to pay for college, it’s a good idea to learn what aid is available and apply for it. You aren’t obligated to accept it, but most students qualify for some form of aid and, if it’s available, why not use it?

What is financial aid?

Financial aid is intended to make up the difference between what your family can afford to pay and what college actually costs. With college tuition rising rapidly, more than half of the students currently enrolled in college receive some sort of financial aid to help pay for college. The system is based on the premise that anyone should be able to attend college, regardless of financial circumstances. However, students and their families are expected to contribute to the extent that they are able.

There are two types of aid: need-based, and non need-based. Need-based aid includes grants and scholarships that are issued based on the family’s ability to contribute to education costs. Non-need-based aid is allocated solely based on availability, not need.

There are three main types of financial aid: grants and scholarships, loans and work study.

What is “free” money?

Not all aid is equal and the best aid is the aid you don’t have to pay back. It’s like getting a huge coupon of savings to use for your college education.

What types of education loans are available?

Not all college loans are equal.

There are two types of government-based loans: subsidized and unsubsidized. Subsidized loans have lower interest rates and are awarded based on the student’s financial need with interest deferred until after graduation. Unsubsidized loans are awarded without regard to financial need with interest payments beginning immediately and regular payments due after graduation.

What is work study?

The Federal Work-Study Program provides a method for college students to earn funds to be used toward their education. The program is based on financial need and students must be accepted into the program to qualify which is determined by completing the Free Application for Federal Student Aid or FAFSA.

What is the FAFSA and do I need to file it?

The FAFSA is the Free Application for Federal Student Aid and you should apply if you want any chance to receive federal and state student grants, work study, loans or merit-based aid. If you don’t complete the FAFSA, you can’t apply for student loans. Colleges also use these figures when determining financial aid eligibility for grants and scholarships. Plus, many states use your FAFSA data to determine your eligibility for their aid.

The FAFSA is available on Oct. 1 of every year and you should complete it as close to that date as possible in the fall of your senior year. Aid is dispersed on a first-come, first-served basis. The sooner you apply, the more likely you will receive a portion of the financial aid pie.

What is the EFC?

The Expected Family Contribution (EFC) is how much money your family is expected to contribute to your college education for one year. Typically, the lower your EFC, the more financial aid you will receive. Factors such as family size, number of family members in college, family savings, and current earnings (information you provide on the FAFSA) are used to calculate this figure. Once your FAFSA is processed, you will receive a Student Aid Report (SAR) with your official EFC figure.

You can calculate your EFC by visiting FinAid.org.

What is an award letter and how do you use it?

As the offers of admission arrive from colleges, the financial aid award letters will follow. They can be confusing and vague. Added to the confusion is that every award letter is different, making it hard to easily compare them side by side.

Thankfully, there are tools available and information to help you look at these letters for what they are: the college’s pitch for you to accept their offer of admission. You are in control of this process and you hold the cards. It’s your decision to accept or reject their offer based on the amount of aid they are willing to give you. Money, in this situation, is everything.

If a college wants you to attend, they will back it up with money. No money means their offer is probably based on filling a quota and expecting you will decline to attend. And you should. Who wants to attend a college that doesn’t value you as a student?

FAFSA, financial aid, financial planning

FAFSA WEEK: 10 REASONS TO FILE

1 Comment
fafsa

The FAFSA for the 2021 school year will be available on October 1. The earlier you file, the better your chances of getting some of the money colleges allocate for financial aid. In order to help parents understand the FAFSA and answer some of your questions, this week is FAFSA week.

Surprisingly, many families don’t even take the time to complete the FAFSA. The most common reason is they believe they won’t qualify for financial aid; but nothing could be further from the truth. Most students receive some form of financial aid. If you don’t file, you could be missing out on some of that aid.

Here are 10 reasons to file the FAFSA:

1. College is expensive

Even if you can afford to pay for your child’s education, it’s expensive. Why would you pass up an opportunity to help with some of the cost?

2. It’s FREE

That’s right. It’s completely free to complete the FAFSA. You’ll spend some of your time completing the FAFSA and you could get thousands of dollars of financial aid in return. So one could say, it’s BEYOND free–they pay you!

3. Getting help is easy

If you get stumped, help is available. You can use the online help tool, submit a question on social media, or call the help number. You can even access the Help Center where you will find answers to their most-asked questions. Many schools even host a FAFSA day where they offer help to parents and students on how to complete the free form.

4. FREE money could be waiting for you

According to a recent Reuters article, about 1.8 million lower income undergraduates who might have qualified for aid neglected to file the FAFSA and missed out on financial aid. No matter what your income level, you should file the FAFSA because there is more money out there to be awarded than just need-based aid.

5. Federal aid

The federal government provides over $80 billion dollars in grants, loans and work-study programs every year. The only way to get Pell grants, , Stafford loans, Parent PLUS loans and other federal aid is by submitting the FAFSA. Federal loans offer the best interest rates and repayment terms for student borrowers and are superior to private student loans.

6. State aid

FAFSA is the gatekeeper for state financial aid programs. Each state’s programs are different but they all require the FAFSA to distribute the funds. Check with your state’s higher education agency for deadlines and requirements. In some states the financial eligibility ceilings are much higher.

7. Institutional aid

Colleges and private scholarship sponsors offer billions of dollars in financial aid. Even if you don’t have financial need, you may be eligible for these awards. Some school and private scholarship programs are specifically designed for students who were rejected by federal financial aid. Some schools will not award merit aid unless you complete the FAFSA.

8. Scholarship applications ask if you’ve applied

In addition to the aid that a student may receive from federal and state agencies, many scholarship applications include a box to check asking whether the student has submitted a FAFSA. According to Monica Matthews of How to Win College Scholarships, “Scholarship providers want to know that the student is doing everything possible to get financial help in paying for college and submitting the FAFSA is a very important step in the process.”

9. You have two or more children in college

With two in college, your expected family contribution (what the parents can afford to pay) drops by 50%. Even if you didn’t get financial aid with the first, file the FAFSA because having a second child in college can net you some financial aid.

10. You want to claim a “piece of the pie”

Look at it this way: FAFSA is the ONLY way to be considered for federal, state and college financial aid. Even if you don’t NEED the aid you still want to get it. Who doesn’t want FREE money?

financial planning, parenting

Teaching Financial Independence Before College

financial independence

For parents, preparing their kids for college can be a stressful time. While they are getting excited to meet new people, decorate their dorm, and pack everything for their first year on campus, parents are often focused on the nitty-gritty details. This often involves preparing their children’s finances and filling out paperwork among many other things.

As a parent, it’s important to make sure your child knows about the responsibilities they’ll need to handle in college. Helping them understand money management is especially important, as this will help them be better prepared for when they graduate. Here are some first steps to help teach your child financial independence before college.

Determine an Organization Method

Working on developing a budget with your child who is college-bound can help them be better prepared to manage their money and avoid overspending. Generally, your kids will have a limited amount of money each semester depending on what they’ve saved up, and if they have any type of financial aid or work-study income.

To help them create a budget, work with them to calculate the expenses they expect to have each semester, along with how much money they will have to spend. Write down each of these by category, and then determine how to best allocate their money. Generally, you should create categories that distinguish between necessities and other non-necessities, with a priority on payments that are not negotiable such as food, textbooks, and school supplies, as opposed to non-negotiable payments such as parties and socialization.

In order for your child to best track their budget in college, they could utilize a digital budgeting app so that they can always have a handle on their money whenever they’re on the go.

Set Up Financial Accounts

Getting your child’s financial situation in order also involves helping them get a bank account, among other financial accounts such as credit cards and loan accounts. If they don’t already have one, getting them a savings and checking account is a great way to help them be fully in control of their money.

One great way of doing this is by helping them sign up for a digital banking platform, which can allow them to control their finances from their laptop or mobile device. These often have additional features that can help them be more financially responsible, such as automatic savings and fee-free overdraft protection. These services can help students save money during the semester and contribute to their life savings over time.

Remember, they will also need to set up accounts with different service companies too including water companies. That’s why it’s important to make sure that you are exploring companies like American Water with your kids so that they can make informed decisions about their suppliers.

Discuss Credit and Loans

Finally, helping your child understand debt, credit, and loans will keep them from acquiring a low credit score throughout college or falling behind on student loan payments. Discuss with them the importance of meeting any credit card payments they have on time and paying them off immediately instead of letting the debt pile up.

You should also explain how much money they will owe for student loans and what they will need to do to pay these off after graduation. This will give them a better sense of their financial responsibilities and motivate them to be on top of their finances. You can go about this by giving them access to their student loan accounts and helping them stay aware of how much they will end up owing after graduation.

Overall, knowledge about debt and loans will come with the added benefits of motivating them to be more financially independent, so that they will be in a better position when they graduate. They may even work to find ways to avoid debt while in college, and in some cases, they can even begin to pay off loans while still in college.

Helping your child prepare to become financially independent is tricky, especially since they’re getting ready to go into a new environment. However, by teaching them the right skills, they’ll be prepared to manage their money and stay financially savvy in no time.

college planning, financial planning, parenting

Saving Money on College Costs

1 Comment

During these tough economic times, parents are committed to saving money on college costs. College tuition rises each year and there is little you can do about it; but there are other places that small savings will add up. Tuition will definitely be the huge chunk of your expenses. However, there are other expenses related to college where you can find some costs savings:

The expenses that cost the most

  • Computers—In today’s technological world a computer is no longer a luxury, it’s a necessity. When your teen goes off to college, they will need their own computer. Personally, I recommend a laptop instead of a desktop. Since it’s portable, they can take it with them to class, to the library, and to group meetings. To save some bucks, shop online for refurbished or even last year’s models. If you buy online, consider purchasing a service contract to go along with your computer purchase (Note: This will pay for itself—I learned from experience!)
  • Dorm furnishings—Most dorms come furnished with a bed, a desk and some sort of dresser. Beyond that, it’s up to you and your teen to decide what additional furniture and accessories they want. My recommendation is to buy used. You can find everything from small appliances (microwaves, coffeemakers, etc.) to furnishings (bookshelves, chairs and lighting) on Craigslist, Ebay or at local thrift stores. Be careful not to overload the room because they are traditionally small.
  • Room and board—Room and board can be a huge portion of your teen’s college expenses. One option is to live at home if the college is within driving distance. Another option to save might be to purchase a home near campus and rent it out to other students, allowing your teen to live in it. Not only will this save you on room and board, but it will also provide you with an investment and tax write off as a rental. However, make sure the home is zoned as rental property. And here’s one of the best savings of all: after freshman year, your teen can apply to become an RA (Resident Assistant) in one of the dorms, which will provide you with a huge break on room and board costs.
  • Meal plan savings—Most freshmen are required to purchase a student meal plan. But, there are usually options available. My recommendation is that unless your teen is an athlete with a large appetite, the full meal plan (3-meals a day) is costly and you will not get your money’s worth. Opt for the 1 or 2 meal a day plans. Most freshmen eat takeout with friends, microwave food in their rooms, skip meals periodically, and snack voraciously. Providing them with an in room fridge and microwave will save you some bucks in the long run.

Textbook savings

College students can spend nearly $1000-1500 a year on new textbooks. The good news is that you don’t have to spend that kind of money if you don’t want to. If you can, prior to the beginning of each semester, find out what books your teen will need (title, author and ISBN, or international standard book number). Then get busy and here’s a word of extra advice: DON’T WAIT UNTIL THE LAST MINUTE! (Note: Look at my List of Website Links in the Expert Links for all the links related to Textbooks)

  • Buy used–Never buy new textbooks if it’s possible (unless you are a fan of throwing money away). Used books are just as sufficient. Most students use their textbooks only while they are in class and end up selling them back to the bookstore at an incredibly reduced rate. (Many times the bookstore won’t buy them back because the professor changes texts or the textbook has been updated). You can easily find used books online at discounted prices and your teen will arrive on campus with their books in tow and won’t have to fight the last minute panic rush.
  • Try renting–There are numerous websites available that offer textbook rentals to students per semester. This is a fairly new concept, but seems to be taking off as more and more sites pop up offering this option.
  • Purchase Ebooks–Consider purchasing electronic textbooks. With the recent introduction of the new Kindle College version, your student can download their textbooks and carry all of them with them. Without purchasing a Kindle, they can download the ebook versions and store them on their laptop for easy access. These versions are typically 50% less than the printed text version. The only downside is that not all textbooks are offered in ebook format.
  • Share books–After freshman year, my daughter shared textbooks with her roommates. It was a huge cost savings. They were usually taking some of the same classes and would get together before classes began to discuss who would purchase which textbook. If your teen is a freshman, the likelihood of having the same courses as their roommate is extremely high. Sharing the book will save both of them money in the long run. There is also the option of using a library copy.
  • Look for free books–There are a few sites that offer free downloads of some electronic texts. Before you purchase, visit those sites to see if any of the books you need are listed and downloadable.
  • Evaluate the necessity—Do you really need the textbook? Wait a few days into class and get a feel for the professor. If he or she states that the tests will cover lecture notes, then consider not purchasing the book. Worst case scenario you can borrow one from a classmate if you truly need it or find a copy at the library.

The small things add up

It’s amazing how those little expenses can add up: gas, takeout, necessity items. But just as little expenses add up, small savings add up as well and you will be saving money on college costs.

  • Ditch the car–Many campuses don’t allow freshmen to have a car on campus. But if your teen opts to live on campus and the college allows cars, consider ditching it. Everything your teen needs can be found on campus. And many colleges offer student transportation at very inexpensive rates if they need to leave campus or there is always the option of purchasing a monthly bus pass. In emergency situations, one or more of their friends will usually have a car that they can use or will offer to drive them.
  • Use the student ID card for discounts–Most fast food restaurants and local eateries offer discounts to students with campus ID’s. Those small 10-15% discounts can add up.
  • Finish in 4 years or less–Encourage your teen to stay on track and finish in 4 years or less. Most financial aid packages are only good for 4 years. Staying an extra semester will tack on additional expense and is not necessary since most degree plans can be completed in 4 years.
  • Use family insurance coverage if allowed–Some colleges charge students for health plans. If you have a good family health plan, and the student insurance duplicates what is already covered, get any charges waived.
FAFSA, financial aid, financial planning, student loans

A Parent’s Guide to Financial aid

financial aid

Financial aid can be a confusing part of the college application process. Even if you can afford to pay for college, it’s a good idea to learn what aid is available and apply for it. You aren’t obligated to accept it, but most students qualify for some form of aid and, if it’s available, why not use it?

What is financial aid?

Financial aid is intended to make up the difference between what your family can afford to pay and what college actually costs. With college tuition rising rapidly, more than half of the students currently enrolled in college receive some sort of financial aid to help pay for college. The system is based on the premise that anyone should be able to attend college, regardless of financial circumstances. However, students and their families are expected to contribute to the extent that they are able.

There are two types of aid: need-based, and non need-based. Need-based aid includes grants and scholarships that are issued based on the family’s ability to contribute to education costs. Non-need-based aid is allocated solely based on availability, not need.

There are three main types of financial aid: grants and scholarships, loans and work study.

What is “free” money?

Not all aid is equal and the best aid is the aid you don’t have to pay back. It’s like getting a huge coupon of savings to use for your college education. Here are the types of aid you can receive that you won’t have to pay back after graduation:

  • Federal Grants – These are grants given by the federal government.
  • Pell Grant – This grant is given to students with exceptional financial need.
  • College Grants – These grants are awarded by the individual colleges based on financial need.
  • State Grants – These grants are given to students who plan to attend college in their own state (and states are strict about residency).
  • Private Scholarships – There are a multitude of private scholarships available awarded by private organizations and businesses for every type of student.
  • Institutional Scholarships – These scholarships are given by individual colleges based on the student’s qualifications or financial need.
  • Federal Scholarships – Scholarships funded by government agencies.
  • Tuition Waiver – This waiver is offered by colleges to students who meet specific criteria (e.g. child of a POW/MIA)

What types of education loans are available?

Not all college loans are equal.

There are two types of government-based loans: subsidized and unsubsidized. Subsidized loans have lower interest rates and are awarded based on the student’s financial need with interest deferred until after graduation. Unsubsidized loans are awarded without regard to financial need with interest payments beginning immediately and regular payments due after graduation. Following is a brief description of each:

  • Stafford Loan – Government based loans that can be either subsidized or unsubsidized.
  • PLUS (Federal Parent Loans for Undergraduate Students) – This loan is for creditworthy parents and has payments due beginning 60 days after it is disbursed with relatively low interest rates.
  • Private Loan – Loan offered by private lenders usually with higher interest rates than government loans.
  • Institutional Loan – A loan in which the school is the lender.

Once you have chosen the loan that best fits your needs, do the research and educate yourself about repayment, interest rates and grace periods.

To learn more about work study, the FAFSA, the EFC and award letters, read the entire article I wrote for TeenLife Online Magazine here.

financial aid, financial planning, Student debt

How To Avoid College Debt

1 Comment
college debt

Parents want what’s best for their children. I’m sure you do. You want your student to succeed in life and if that path is college, you don’t want them to be saddled with college debt after they graduate. Entering the work force with debt puts strain on your student and their ability to live independently after college.  

But with college costs rising it almost seems impossible to attend without borrowing money to pay for it. At least that’s what you might think; but with some smart planning and wise financial choices, I t can be done and here’s how:

Know how much you are willing to pay

Before even starting the college search, you should know how much you are willing to pay. Set a budget before your student starts looking at colleges. If you know how much you are willing to pay, you can avoid going over-budget on a college, even though it’s a college your student wants to attend.

Have the money talk

After you know what you’re willing to pay, have the “money talk” with your student. Discuss with them how much you are willing to pay for college and how much you expect them to contribute. Do not (I repeat do not) allow them to apply to any colleges beyond your financial reach unless your student has been working toward and receiving scholarship awards. Do not count on financial aid or merit aid to fill the gap when planning for college. If your student applies and is offered admission to a college you cannot afford it makes for a difficult conversation and a very disappointed student if you cannot pay for the tuition.

Research individual college statistics

Before applying, research the financial aid footprint of every single college on the list. How much aid do they typically give? How much debt does the average student graduate with? Use their net price calculator and determine what it will cost to attend there before applying. If your student is offered admission, there will be no surprises and disappointment if you do your due diligence before the application process begins. Colleges offering small percentages of financial aid in the form of scholarships and grant

Think outside the box

There are thousands of colleges in this country. Many families make the mistake of not researching affordable colleges before applying. Smaller private universities offer more generous financial aid packages. Recognizable names and Ivy League colleges are not the only schools offering a quality education. Don’t assume that a state university is cheaper than a private college out of state. Look at the numbers, research colleges, and think outside the box.

Consider community college

Two years at a community college will save you and your student a substantial amount of money. After completing the basics at a much lower cost, they can transfer to a four-year college and graduate. Your student may also choose an associate’s degree in a technical field and graduate from community college with a skill and a career. In the past, community college has gotten a bad reputation from parents and students for being “less than” a “real” college. But smart parents and students know the education is the same at a much lower cost.

Apply for scholarships

Until your student graduates from college they should be applying for scholarships. The sooner they begin, the better. There are scholarships for all ages and if your student accumulates awards all throughout high school and into college those awards will go a long way to help them graduate without debt. There are resources to help you and your student find and apply for scholarships—take advantage of them.

Get good grades

Scholarships and grants are disbursed by colleges based on merit. Grades are a key factor colleges use to determine merit aid. They use this aid to entice student applicants to accept their offers of admission. Putting your student at the top of the applicant pool with good grades stack the odds of merit aid in your favor. Believe it or not, a great GPA results in more scholarship money than athletics. Use this to your advantage.

Graduate in four years or less

You might be surprised to learn that most students take more than 4 years to graduate from college. On average, a college degree takes six years. That’s two years more of college costs, not to mention two years of lost income. Plan to pay for four years and make a plan for your student to stay on track.

Become a National Merit finalist

Your student doesn’t have to win a National Merit scholarship to score some generous financial aid. All they have to do is become a semi-finalist—and with a little study for the PSAT, it’s entirely possible. Colleges who have money set aside for the finalists will use merit aid to entice your student to attend: full tuition, room and board, books and fees, laptops, study abroad and even spending money. They might also offer automatic entrance into the honors college, the best housing and priority registration until graduation.

Take AP exams or CLEP tests before college

It’s possible for your student to take AP or CLEP exams and test out of freshman subjects. Your student could enter college as a sophomore, cutting a whole year off the degree. For a small test fee, your student can save thousands of dollars and time by taking advantage of these tests.

With all these options available, your student does not have to take on college debt to receive a quality education. With knowledge and hard work, your student should be able to graduate college debt-free.

financial planning

Establishing a Saving Strategy

saving strategy

One of the key elements of adulthood is learning to save for the future. Before your student leaves for college, it’s crucial to teach them how to manage money and save for the future. They will be bombarded with opportunities to spend, making saving a low priority. There will be the usual college expenses, entertainment and the temptation to frivolously spend while they are in college.

As their parent, you know the importance of saving for college and continuing to save for retirement. You can set an example by your actions and encouraging them to establish their own saving strategy. If you help them set up a savings account before college, it will be routine for them to put a portion of their earnings in the account during college; and, it establishes a good saving strategy after graduation.

Start in high school

CIT Bank can help you with their Savings Builder account. You can start an account for your student while they are in high school with as little as a $100 deposit. The savings you accumulate can be used for textbooks and any additional college expenses after high school graduation. Just a small monthly deposit of $100 quickly becomes $1000 and more to help your student with college expenses.

Here’s how it works

With $100 you can open an account with CIT Bank and earn up to 2.20% APY by making a single deposit of $100 or more every month. By using this online bank, it’s easy to grow and preserve your savings safely and securely because they are FDIC insured. There are no opening, monthly servicing, or line transfer fees.

You can easily access the funds in your account using free electronic transfers between your savings account and any other account at another bank; or, you can call and a check will be sent in the mail for free.

You can open a Savings Builder Account with CIT Bank by:

  1. Entering your information online
  2. Funding your account with a minimum of $100 with an electronic transfer or check
  3. You will receive an email confirmation and you are ready to start saving

The benefits of a saving strategy

By establishing a savings strategy for college, you are not only saving for those college expenses, but helping your student see the value and the benefit of putting money aside for the future. As the savings grow (with interest), you are teaching your student good money management and setting them up for financial success in the future.

financial aid, financial planning, student loans, Uncategorized

Paying for College: Borrow Wisely

2 Comments
borrow wisely

I received an email from a concerned parent whose student was going to be attending orientation next week. In the email, he confessed that he might need some help with information regarding financing his son’s college education. I was surprised that he waited so long. Unfortunately, I had to advise him that at this point his only options were private loans and advise his student to apply for scholarships over the summer.

Parents should consider college funding even before their student applies to college. The inevitable result of lack of planning is parents and students borrowing to pay and usually borrowing more than they can repay after graduation.

What do the statistics say?

With school starting shortly, student loan borrowing often appears in the news. It’s especially prevalent now with presidential candidates promising to erase student loan debt. Wherever you stand in the political landscape, it’s clear from the statistics that students have borrowed more than they can repay.

According to a 2018 report by the Federal Reserve Bank of New York, as many as 44.7 million Americans have student loan debt, that’s one in five adult Americans. The total amount of student loan debt is $1.47 trillion as of the end of 2018 — more than credit cards or auto loans.

How do you make wise financial choices?

Before applying to college, you and your student should investigate the cost. You can gather the information either on the college website or by using College Navigator. When viewing these figures, you should also research the college’s financial aid statistics—what percentage of students are awarded aid, how much aid is awarded and how much do students typically borrow. Since every family’s financial situation is different, these figures should help determine if the college is affordable to attend.

How does financial aid play into the equation?

If you complete the FAFSA, your student will receive some form of financial aid. The most common is student loans, but colleges also award grants and merit aid as well. Always complete the FAFSA, even if you don’t think you will qualify for aid. Colleges use the information on the FAFSA when awarding scholarships and grants. No FAFSA, no aid.

What’s the key to avoid borrowing too much?

Use repayment calculators before you sign on the dotted line. The rule of thumb is that students should only borrow as much to pay for college as their first year’s salary. By keeping your debt under one year’s salary, you won’t have to put more than about 10% of your income towards student loan payments. Borrowing more than your student can afford to repay sets them up for overwhelming debt after graduation. Your student can look at salary comparisons for their anticipated career at PayScale.com.

How can you avoid borrowing to pay for college?

The key to not borrowing to pay for college is to receive merit aid, grants, and outside scholarships. Your student should apply to a college at the top of his or her applicant pool. This means the college will be more likely to award aid to attract your student. Grades and standardized test scores are also a key factor in awarding aid. Your student should focus throughout college to pursue excellence in these areas. And, don’t forget outside scholarships. Your student should focus time and effort in applying to every scholarship he or she qualifies for. This means starting early and planning to submit the best application. Click here for scholarship application tips and see how your student can win enough money to pay for college.

Finally, borrow wisely. Only borrow what you need. Your student can borrow the maximum amount, but only borrow what is necessary. Just because you can, doesn’t mean you should. Choose the loans with the lowest interest rates first.