Figuring out the Maze of College Financial Aid

Sorting out the Maze of College Financial Aid

Figuring out the Maze of College Financial Aid

Sorting out the Maze of College Financial Aid

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Last week we talked about actual college costs and the equation that calculates the Family Need. Just as a refresher, here is the equation:
Cost of Attendance (COA) – (Effective Family Contribution (EFC) + Scholarships) = Need
We mentioned that not all COAs are created equal and to do your research to make sure you know what the final bottom line is. So, to clarify, the equation for the potential out of pocket to the family is:
                                    Out of Pocket = EFC + Need
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For lower income families, the perceived “need” can be covered by various government grants. PELL Grants come from the Federal Government and make up a fairly large portion of grants provided. Most of the PELL Grant dollars go to families with $50,000 of income or less. Information for the PELL grant program can be obtained on the Federal site. One other program is the Federal Supplement Educational Opportunity Grant (FSEOG). Information about the FSEOG dollars can be obtained on the Government site. These dollars are usually limited to families with EFCs of $0. They are used up very quickly so it is important to file the Free Application for Student Aid (FAFSA) form on Jan 1 as the dollars can be gone just that quick. The next source of “need” based aid comes from the states. Some states are more generous than others when dealing out aid to the financial needy. Again, it is important to file the FAFSA early as state dollars also run out quickly as well. Other programs that assist families are related to subsidized and unsubsidized federal loans. These loans, offer interest rates that are typically lower then convention student loans and have some other benefits as well. Do remember that we are talking about the “Need” part of the equation. The family is still responsible for the EFC part of the equation. Loans can fund the “Need” and the EFC.
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Action Time.

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Looking at these two financial aid equations, you can see that it is important to have the lowest possible EFC value. It becomes important to have your college education financial aid house in order to minimize your EFC. That is the first step in working through the process. I work with families to first estimate their current EFC and then, where ever possible, reposition resources to minimize the EFC during the four years of college. That’s right. You have to redo the EFC each year the student is in college. The first step to help me calculate your EFC is to go to my website http://lifeprepcollegeplanning.com and complete the Data Form from the tool bar at the top of the page. Know that I look forward to working with you in the maze of college financial aid.
Come over to our website specifically designed for college preparation.
www.lifeprepcollegeplanning.com
To Jump Starting Your College Life!
Coach Rossitto

 

 

 

 

The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual.
Securities and Advisory services offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC
The LPL Financial Registered Representative associated with this site may only discuss and/or transact securities business with residents of the following states: AZ, CA, MD, NY. TX
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How to Know What Your Major Should be

college planning

How to Know What Your Major Should Be: Creating a College Plan

A contest was held at a local county fair. The goal of the contest was to guess out the weight of a dressed out ox. A local statistician took the guesses and using simple math found the average of all the guesses provided by the contestants. It was within a few pounds of the actual weight of the ox, some 1800 pounds. No single guess came as close as the average of all the guesses. A similar finding was made when a submarine sank of the east coast. The location of the last radio signal provided the last known location. Time and effort to locate the sub went for naught. Again, a local statistician went to a variety of sources familiar with different aspects of ocean navigation, current strength, submarine fuel conception, etc, and asked them for their best guess. Processing their best guesses, he offered a location for the lost submarine. It was found some 200 yards from the place recommended by our local statistician. Again, this point was better than the closest estimate from any of the best of class professionals helping to find the lost vessel.
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So what’s the deal?
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Obtaining a variety of opinions from various sources and in some fashion blending them together can provide the potential for more reliable results and can lead to viable solutions. I would suggest that it can be a confidence builder when seeking out direction in many of life’s challenges.
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Action Time.
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One of the challenges of going to college is what career path should you go after. Here is what I believe offers a reasonable starting point and is a service we provide. First, you list all the efforts that you would do for free and get a buzz after doing them. Next, we have a sorting process that has the seeker sort out occupations based on most desirable to least desirable. Lastly, we obtain the results from a computer generated career profiling service and list the jobs that the client is most qualified for and is most interested it. There is usually some overlap between the three results. That’s the sweet spot of careers to consider. Next step is to job shadow professionals in those careers. That’s like going on a date! Some you want to see again and again. Others, well not so much.
After going through these steps, you can research what majors support the career and then seek colleges that best fit your career and personal aspirations. Reasonable starting point wouldn’t you say? With college and time being of great value, it makes sense to have a game plan. This is part of the college planning process we make available. I would look forward to hearing from you and helping further your career and college search.
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Come over to our website specifically designed for college preparation.
www.lifeprepcollegeplanning.com
To Jump Starting Your College Life!
Coach Rossitto
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The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual.
Securities and Advisory services offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC
The LPL Financial Registered Representative associated with this site may only discuss and/or transact securities business with residents of the following states: AZ, CA, MD, NY. TX

 

Avoid this Mistake in your College Financial Planning

Avoid this Mistake in your College Financial Planning

Avoid this Mistake in your College Financial  Planning

Avoid this Mistake in your College Financial Planning

Every now and again, I respond to questions asked of another blog site. One of the recent questions posted came from the parent of a junior in High School. The just of the question was concern over costs of college and the impact of borrowing $10,000 from the equity of their home to give to a stock broker and in doing so the impact on the FAFSA form. Now, this blog is not one to give investment advice, so let’s put that on the table up front. And, the examples we talk about are specific, may be hypothetical and probably aren’t the same as what you personally might experience. Best of all, they aren’t a guarantee of future performance or your own success. Having said all that legal stuff, let’s consider some of the issues.

When you borrow money, you have to pay interest. Let’s assume the interest rate is 5%. So, just to break even, you have to make at least 5% plus the brokers fees for investing the money cause he ain’t gonna do it for nothing. Now, the stock has to go up for you to win, then he has to sell it for you to profit and he gets a fee for selling it. Then you pay taxes in the range of 0% to 35%, depending on your tax bracket and how long you own the stock. That’s if the stock goes up. What if it goes down? OOPs! Now you have to pay back the loan with dollars that you otherwise could have used to pay for college. So far, this is a risky expensive deal.

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Now, let’s look at the impact on the FAFSA form (Free Application for Student Aid). FASFA and is an estimate of the parent’s and/or student’s ability to pay for post secondary education. It generates something called the Effective Family Contribution, EFC, which is the U.S. government’s attempt to determine how much a family can afford for college and any eligibility for student aid from either the state or federal government or the schools themselves. Parents have to declare lots of assets. Home equity isn’t one of them. So, putting money into a brokerage account usually raises their Effective Family Contribution. It could be as high as 25% of the account value. That could raise their EFC by $2500. That means reducing their College Aid by $2500/year. Sounding worse as we go. Now, let’s say they are fortunate enough to make a profit and they sell it. The gain is considered income and causes the income part of the FAFSA to go up or as they make a profit but don’t sell it, the whole value of the account is causing their effective family contribution to go up $0.25 for every $1 they make. What that could mean is they have to make a 30% return each year to offset the cost of the interest and the impact on the FAFSA score. Do you know any place that can guarantee 30%/year without any risk? If so please let me know.

Action Time.

Planning for college is a complex progress. Sometimes we have the best of intentions but shoot ourselves in the foot. For this person, that appears to be the case. A couple of options are available. One would be to make use of some of the various cost calculators that various sites offer and input the data with and without the money in the brokerage account and see what the EFC turns out to be.   If there is an increase in the EFC, calculate that into the return you would have to make including the interest charge just to break even. That offers a reasonable picture as to the risk. If the return is pretty high, an alternative may be to use the equity to pay the college bill and pay the loan off over time. This doesn’t impact the FAFSA or any student aid and may offer some tax deductions, based on their personal situation. If your path is somewhat muddy, I would look forward to hearing about your circumstances and seeing how I might be of assistance.

Examples presented in material are meant for illustrative and or informational purposes only, and not indicative of any specific investment product. Individual circumstances will vary. Please see your investment and/or tax professional regarding education planning.

 

Come over to our website specifically designed for college preparation.
www.lifeprepcollegeplanning.com
To Jump Starting Your College Life!
Coach Rossitto
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The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual.
Securities and Advisory services offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC
The LPL Financial Registered Representative associated with this site may only discuss and/or transact securities business with residents of the following states: AZ, CA, MD, NY. TX

 

FAFSA college tuition, college fees

Preparing for the Free Application For Student Aid (FAFSA)

FAFSA college tuition, college fees

Preparing for the Free Application For Student Aid (FAFSA)

Some years ago, the Federal Government put together a process to try to level the tuition playing field for families of differing incomes and assets. They devised a Worksheet for the student/parent to complete and thus determine what the family, in theory, should afford in putting a student through college. It’s this thing called the Free Application for Student Aid or FAFSA form. Parents and students divulge their income and resources and the government calculates some number called the Effective Family Contribution or EFC. The number goes to all the schools that you list on the form. The schools use the EFC number and their “List Price’ and their own financial aid formula to determine how much if any they might be willing to give you in the form of Student Aid. So, they usually send you an offer in the spring as to what you will need to spend and what they are willing to offer in the form of Aid. That is the quick and dirty. The FAFSA can be sent in as early as January 2nd for the following school year and it is important to get it in on the 2nd as the results quickly go out to schools and the schools start their budgeting process. Late filers seldom obtain school grants as the “early bird catches the worm!” (How does it feel being called a “worm?”)

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Well, one important process is to get the EFC down as low as you can and that can take some preparation. First you need to know what assets and income are reportable and counted toward the EFC. Some assets that aren’t counted are: home equity, 401k/IRA/403B values, annuity values, life insurance cash values, values of business with less than 100 employees, family farms, restricted bank accounts and some other unexpected financial aid. So, those are all the things off the radar scene. Now, EFC calculating guys don’t take into consideration your cash flow. They are just interested in how much your family makes and how much cash or reserves you have. So, one thing to consider is if your family has some cash and you have some existing debt and the interest on the debt is more than what you are getting on the account, pay down the debt. For some, they can put more into their retirement accounts and live off savings to draw down the savings account prior to completing the FAFSA form. You need to be careful here as there can be a look back period as to how much you contribute to your retirement accounts and that will be added back into your income. This whole FAFSA thing can be challenging as the rules get convoluted very quickly.

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Action Time.

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 The process can be challenging and somewhat frustrating. I know you won’t consider fudging the books as you are too honest to do that. Besides, many of the FAFSA applications are audited and it is considered a crime to cook the books. One helpful website is www. bigfuturecollegeboard.org it offers a variety of useful resources and some valuable answers to some questions for the do it yourself. On the other hand, you can go to a pro. We work with you to prepare the FAFSA. Check out our site at www.lifeprecollegeplanning.com. You will find a button called “Data Form” you will find a Fact Finder that organizes your information. Then, we work with you to determine your current EFC and potential ways to reduce it. Advanced preparation is really important. Be the Early Bird.

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Come over to our website specifically designed for college preparation.
www.lifeprepcollegeplanning.com
To Jump Starting Your College Life!
Coach Rossitto
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photo credit: Internet Archive Book Images via photopin cc

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The opinions voiced in this material are for general information and are not intended to provide specific advice or recommendations for any individual.
Securities and Advisory services offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC
The LPL Financial Registered Representative associated with this site may only discuss and/or transact securities business with residents of the following states: AZ, CA, MD, NY. TX