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FUNDING COLLEGE FOR YOUR KIDS

Notes by Shuneet Thomson during a presentation by Marcia Sullivan of College Funding Advisors, Bedford, MA. April 2013

Anticipated college costs for the kid/s loom like a dark cloud over the horizon for most parents. How can one prepare? How can one maximize the financial aid when the child finally applies? Unless cost is not a concern for you, doing nothing is your worst possible option.

It is a good idea to be informed and start preparing early-on. Ironically, according to the experts at CFA, the more prestigious and expensive schools can cost less to attend. This happens if the student-child does his/her job which is to study well and develop a well-rounded profile.

How is financial aid determined?

Financial aid fills the gap between the assessed family contribution (FC) and the cost of the tuition. Your goal is to set your finances such that the college requires as low a contribution as possible by the family: lower family contribution = higher financial aid. The FC assessment is based on finances (income and assets) of parents and student during the previous calendar year. Whatever modifications you want to make in the way your finances are set up should therefore be in place in the year prior to date of application.

Savings

Savings compound over the years: it is a good idea to save to the extent that you can.
Place the savings in an account under the parent's name: student's income and assets are assessed at a much higher rate for their contribution to the college costs.
529 accounts are owned by the parent. However, private colleges will treat the money withdrawn from a 529 account as the student's income in the financial assessment of the following year [this suggests that if you only have enough saved for one year of private college in your 529, it would be best to apply it to the last year of college, S.T].
Home equity counts as a parent's asset by private colleges. State colleges disregard it.
Tax exempt savings are not counted. One approach to minimize FC is to maximize tax exempt savings.
Trusts that name the student as beneficiary are considered student assets, even if the trust funds are not currently accessible to the student.

College Financial Aid Application Forms

The College's Form. Each college has its own form - make sure you get it in good time.
CSS. This is the application for financial aid that is required by private colleges.
FAFSA This is the Federal application form, which is required by all colleges, state and private.

Thus, in state colleges you will have to fill out two forms; in private colleges - all three.
Make sure the information you plug in is the same across all financial aid applications.
Be very careful to apply ahead of the deadline. Missed deadlines greatly reduce support

If you are divorced

If divorced and remarried, private colleges will take your new spouse's income and assets into account in determining the family contribution. State colleges do not.

Being divorced is an advantage when filing FAFSA only, because only one parent's financial data is counted. Only the custodial parent files FAFSA for state colleges.

Resources

For private scholarships: collegeboard.org, fastweb.com, high school guidance, your employer.
For college loan info: simpletuition.com, salliemae.com, mefa.org, teri.org, the college, your bank.