I recently had a client approach me with the idea of setting up a trust for their student, hoping that it would disqualify the money from the financial aid formulas. Thank goodness they asked before moving forward. The cold reality is, a trust is one of the worst ways to go if you are hoping for financial aid. Why, you may ask? Let me tell you…
First, trusts are generally considered a tool of the ultra wealthy used to avoid paying taxes. This is a common misconception, but the operating word here is “common”. Many financial aid officers will look at an applicant with a trust and mentally stick a silver spoon in the student’s mouth. Unfair or no, this is going to work against you when you’re competing for grants and scholarships against other students who do not have a trust.
But let’s just say that you have a financial aid officer that understands that not all “trust babies” are wealthy. You’re still fighting an uphill battle from a financial aid standpoint.
This is because the financial aid office considers the the trust to be an asset, and the money contained therein as available for college expenses. This is true regardless of the terms set forth in the trust document. Even if the student can’t access the money until they’re 30, the college is going to consider that money from a financial aid eligibility standpoint. So let’s look at what that means when we run it through the formula.
If your child is the beneficiary of a trust, whether or not the trust is available, the FAFSA will reduce aid eligibility by 20%. There is no Asset Protection Allowance for the student. This means that for every $10,000 put in a trust for your student your EFC will increase by $2000.00. Over four years that’s an $8,000 reduction for every ten grand, which works out to 80%. The same goes for UTMA’s, UGMA’s and (sadly) gifts from grandma and grandpa, if done through typical estate planning strategies.
Bottom line, if your child is the beneficiary of a trust, it’s going to hurt come financial aid time.
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Are you the parent of a high school student wondering “How am I going to pay for college?”
You are not alone!
Brannon Lloyd of The College Money Guys in Houston, Texas, recently shared valuable funding tips and myths with high school parents at Fort Bend Christian Academy’s College Financial Aid night. As a parent with one already in college plus a high school junior, I was eager to find out how to maximize the funding I missed the first time and to effectively evaluate college choices! Here are some of the best tips I learned:
Tip #1 Know the Real Cost
Don’t let the college sticker prices scare you! Every college has an average “Cost of Attendance” (COA)which includes tuition, room and board, fees, books, and supplies. Not included on the list are personal expenses and travel costs to and from the college which may impact your family based on the school’s location.
Your “Estimated Family Contribution” (EFC) is the amount colleges expect you to pay based on the numbers calculated on the FAFSA form (Free Application for Federal Student Aid). Colleges determine your financial need by subtracting the EFC from the COA.
The real cost, or net price, is the amount you pay out-of-pocket after your unmet financial need, EFC, gift aids (scholarships, grants), and self-help aids (work-study, loans) have been deducted from the COA.
Why is this important to know? By comparing the net price of various colleges, you might discover that the school with the higher sticker price is actually the more affordable option!
Tip #2 Ask Every School This Question
To assist in evaluating and comparing college costs even further, you should ask:
- What is the average time to graduate (ATG) from your school?
In the U.S. the average time to graduate from state schools is 5.7 years. Private schools have a shorter time of 4.1 years. State schools (unlike private schools) have restrictions on class sizes, times offered, etc. which could potentially lengthen the amount of time needed to complete graduation requirements. The ATG could make a significant difference in costs over the long run!
Tip #3 DON’T Do These Things
Mr. Lloyd offered a great list of “Don’ts” when stepping through the college admissions process with your student:
- Don’t procrastinate – start working on your college financial aid planning at the beginning of your student’s junior year to maximize your financial aid eligibility and to start saving!
- Don’t assume the college admissions process is easy – it takes time to write essays, gather your financial information for completing the FAFSA from, visiting campuses, and prepping for the SAT and ACT tests.
- Especially for Parents:
- Don’t write your child’s essay for him! College admissions officers can compare application essays with his SAT exam essay and quickly figure out they don’t match in style and vocabulary.
- Don’t talk to the admissions office. Let your student communicate with them regarding their application, deadlines, or any other important questions.
- Don’t blow off senior year–all semesters in high school are important to college admissions officers!
- Don’t list any colleges (to send scores to) on the SAT or ACT tests. Don’t display your favorite college on your social media channels. It’s in your best financial interest to not let your top college choice be known to admissions!
- Don’t have an unprofessional email address and be sure and check it often. Important information regarding deadlines, financial aid awards, etc. will be sent via email.
Tip #4 The Number One Way to Get More Money!
According to Brannon, the #1 way to get more college money is to…
Apply to 8 schools!
For some reason, this number of applications seems to be the sweet spot when prompting competing offers from colleges. Simple enough, but definitely requires planning and time to complete the process. Mr. Lloyd suggested breaking down the schools into stretch schools, safety schools, and a mix of private and state colleges. When filling out your FAFSA form and listing the schools you have applied to, be sure and list them in alphabetical order so that you’re top college choices won’t be evident at the top of the list!
Planning and paying for college can be a daunting task. Hopefully, some of these tips will make the college admissions process a little less stressful!
Fort Bend Christian Academy, one of the premier private schools in Houston, exists to glorify God through excellence in college preparatory Christian education. We invite you to visit the high school, middle, and/or elementary school campuses of Fort Bend Christian Academy and discover for yourself the FBCA difference!
Article Posted by Kim Rice at Fort Bend Christian Academy’s Website click here to view the entire article
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Mayor Annise Parker and Brannon Lloyd
Following one of our college planning workshops in Clear Lake. Mayor Annise Parker stopped by to talk with Brannon Lloyd, CEO of The College Money Guys, and spent some time discussing the high cost of sending a student to college. If you’d like to come to one of our free workshops and let us show you how to get more free money for college (grants and scholarships, not student loans), click here to get more information.
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Here is a heads up from the NCAA Student Athlete Eligibility Center
· Do you have a student who is considering competing at the collegiate level?
* Did you know that the NCAA’s initial-eligibility academic standards are changing for student-athletes enrolling at an NCAA Division I university on or after August 1, 2016 (this equates to being this year’s high school sophomore class and younger)?
For additional information on these requirements, please visit www.eligibilitycenter.org
Please don’t keep us a secret! If you know other parents of High School Students we might be able to support please share your experience or our workshop website with them: http://www.mylanderpages.com/collegemoneyguys/workshops
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If you are even thinking about going to college in the next few years, visiting your potential colleges is one of the most important steps that you can take. Just like you wouldn’t buy a car without going for a test drive, you would be amazed at what you can learn about a school in just a few hours. So, to help you get started, here are some tips to make the most of your visits:
1. Start by visiting one type of each college you are considering.
For instance, if you are not sure whether you would like a smaller or larger college, visit a couple of schools that are close by that represent each type, like a large public school and then a smaller private school. At least now, you’ll have something to compare.
2. Do your homework before you go, and narrow your choices by using a good school selection program.
You can find some good ones online or contact my office at the address below for our suggestions. Also, make sure that the schools you are considering actually have the major you are interested in. I know it sounds obvious, but you’d be surprised at how often people skip this step.
3. Schedule your visit when school is in session.
I can’t stress this one enough, but it is very important to see not only what the campus looks like, but what the students and faculty are like as well. We want to make sure that you will feel like you ‘belong’ once you are there, so we want you to see the student body and not just a bunch of buildings.
4. Make an appointment to take a tour.
Schools will have certain times of the day or week set aside to give new people tours. This is always a great place to start. However, don’t be afraid to go with your instincts. If you pull up to the school and realize you just don’t like it, there’s no point sticking around. Also, staying overnight in a dorm, if the school offers it, is a great way to get to really get the college experience.
5. Ditch the tour guide.
Once you’ve learned some of the main features of the school, the best way to see the campus is by wandering around on your own for awhile. This will give you a chance to see what everything is really like. Be sure to sit in on a class or two, or at least poke your head in the door.
6. Get a soda or coffee in one of the student lounges.
While you’re at it, get something to eat as well. You might as well find out now what the food is like now. Some schools are known for having 5 star cuisine, while others have food that is barely edible. You’re going to be there for four to five years, so this is an important step. We don’t want you to starve!
7. Check out the library, computer lab, gym, and laundry.
Even though this isn’t directly related to what you’ll be studying and your major, you’ll be spending plenty of time at all of these areas, so be sure to take a look at them as well.
While this list isn’t comprehensive, hopefully it will give you a real good feel for what each campus is like. You will do much better at a school that you are happy at and enjoy attending, so don’t assume that all schools are the same and that this step isn’t necessary. Or, worse, don’t make the mistake of waiting until you hear if you’re in or not before arranging a visit. We want to make sure the schools that you apply to are schools that you actually want to attend. Most of all, be sure to have fun.
The College Money Guys are the nation’s leading expert on all things related to college and careers. For more information please call 281 822 6200.
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In need of financial aid but think you don’t qualify?
You may have participated in or over-heard parents discussing the high cost of college. These conversations typically end up with everyone agreeing that they make too much money for financial aid or that they are not from the ‘right’ ethnic group to qualify for free money. In reality these thoughts are actually myths. There are several myths circulating out there; so I wanted to offer some clarity on the five we hear about the most.
People think that they make way too much money to get aid so they don’t try for it. Or if they do fill out the forms they do so without reading the instructions or taking much care, because they are convinced they will not qualify. Don’t let this self-fulfilling prophesy catch you! Many of the families that do apply have six figure incomes and still get aid. So don’t assume you don’t qualify.
People think that only student athletes or academically gifted students will receive financial aid, or that they automatically get money. On the contrary, financial aid is based solely on the financial need of the student, not their position or education level. Every student has to go through the same application process and get evaluated based on financial need.
People think that because their student is a minority, they won’t qualify for money. Or, if their student is not a minority, they will later lose the money they are entitled to. Just as with myth 2, the same applies to myth 3. Minorities have to go through the same process and fill out the application. Their determination is based solely on financial need. The college goes by a formula of COA (Cost of Attendance) – FC (Family Contribution) to arrive at the student’s financial aid need or FN. There are exceptions to this rule. For example, if a Caucasian student was thinking about attending Howard University, a predominantly African American school, they may be offered additional money from the school that is looking to diversify their student body. Another example would be an engineering department giving precedence to a female over a male. Other than this, the process of filing for college and financial aid still has to be followed.
Guidance counselors are trained to help your student get into college. This couldn’t be further from the truth. Their job is to help your child graduate high school – period! Most of them don’t even know the process of applying to colleges, and often give damaging advice. Unfortunately they are often assigned to far more students than they are able to serve effectively, which simply compounds the problem.
Colleges and Universities can help. Again, this is not true. They may not be the enemy, but asking them how you can get more money for college is like asking the IRS how you can lower your taxes.
By being aware of the myths you can make informed decisions about the college admission and application process. Feel free to explore our blog where you will find additional information to help you navigate this journey. In addition, you are welcome to register for one of our workshops where you will learn how to pay for college without going broke!
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