Further proof that when you take our advice and follow our system, you get fantastic results…
The College Money Guys is pleased to announce that our final scholarship numbers for our class of 2015 students have just been finalized. We were able to help last year’s Seniors achieve over $10,151,330.00 in free money for college! That’s an average of over $150,000.00 PER STUDENT for 2015. This is grant and scholarship money and does not include any loans (which only make college more expensive).
In addition, we are over the Five Million dollar mark for our class of 2016 Seniors and not even half of our 2016 class have reported yet.
Thanks to our students and their families for another record year!
Please follow and like us:
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.
Please follow and like us:
A few days ago, I was talking with one of our clients about their daughter’s Spanish classes. She is struggling (a little… she currently has a “B”) with the class and they wanted to know if she should drop the class and take a different elective, perhaps one in which she could easily get an “A”. Many students (and parents!) struggle with this question. They often wonder if taking two years of one language in high school is enough. Here’s the thing – it’s not just about the grade; it’s about what your transcript is telling the admissions office. It’s about the message you’re sending; the message beyond what any transcript will ever show.
I was on the Texas Classical Society’s website and came across a number of quotes from admissions personnel that specifically address this issue. Any time you can get inside the head of an admissions officer it’s a valuable exercise. Remember, scholarships and grants are greatly influenced by how much interest the college or university has in your son or daughter. Any time you can give yourself a leg up over the competition you not only increase the likelihood of admission, you also increase the likelihood of receiving free money for college. I can’t emphasize this point enough. Financial aid is often used as MARKETING.
So… having said that, here’s what college admissions personnel are saying when they look at the language section of an applicant’s high school transcript.
“[. . .] the student studying for four years has a genuine interest in knowledge and education, not just in fulfilling minimum foreign language requirements.” – Matthew Potts, Admissions Counselor, University of Notre Dame
“We give the most consideration to students who have taken the highest level language available at their school.” – Robert Killion, Office of Admissions, Haverford College
“Our recommendation is that, in terms of high school preparation, students take 4 years of a single language, believing that achieving proficiency in a language is preferable to not quite achieving proficiency in two.” – Steve LeMenager, Director of Admissions, Princeton University
“[. . .] the more years of a language, the better—it shows that the student has gone beyond the minimum requirement.” – Lia Brassord, Assistant Director of Admissions, Smith College
“While most colleges do not require four years of a language or a science for admission, dropping a discipline can be detrimental to a student’s chances of being admitted. Admission Officers are looking for students who have challenged themselves in many areas. At the most competitive colleges in the country, Admission Officers are making distinctions between thousands of overly qualified applicants. In speaking with students about senior year course selection, we encourage students to think carefully before dropping a language.” – Andrea Thomas, Assistant Dean of Admission, Hamilton College
“[. . .] depth and mastery are important in the serious study of any discipline. The student who is willing to do more than the minimum is always more appealing.” – Ray Brown, Dean of Admissions, Texas Christian University
“We look for at least three years of study of the same language for many of our programs. If not completed before admission, it must be made up with a year of college-level study.” – B.J. Ore, Sr. Associate Director of Admissions, University of Pittsburgh
“Ideally a student will present at least 4 years of the same language (classical or modern) if the curriculum allows.” – Terry Cowdrey, Dean of Admissions and Financial Aid, St. Lawrence University
“The more years in one language the better it shows commitment and desire for proficiency.” – Dennis O’Driscoll, Director of Admissions, Creighton University
“Three to four years of a language shows follow-through and a deeper level of interest.” – Michael C. Behnke, Vice President for Enrollment, University of Chicago
© 2012, Texas Classical Association. This survey was made possible by support from the American Classical League.
Permission to copy and distribute is granted and encouraged.
Please follow and like us:
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.
Please follow and like us:
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!
Please follow and like us:
If you’re thinking about joining a 529 plan, or if you’ve already opened an account, you might be concerned about how 529 funds will affect your child’s chances of receiving financial aid. Of all the areas related to 529 plans, financial aid is perhaps the most uncertain, and the one most likely to change in the future. But here’s where things stand now.
First, why should you be concerned?
The financial aid process is all about assessing what a family can afford to pay for college and trying to fill the gap. To do this, the institutions that offer financial aid examine a family’s income and assets to determine how much a family should be expected to contribute before receiving financial aid. Financial aid formulas weigh assets differently, depending on whether they are owned by the parent or the child. So, it’s important to know how your college savings plan account or your prepaid tuition plan account will be classified, because this will affect the amount of your child’s financial aid award.
A general word about financial aid
Financial aid is money given to a student to help that student pay for college or graduate school. This money can consist of one or more of the following:
- A loan (which must be repaid in the future)
- A grant (which doesn’t need to be repaid)
- A scholarship
- A work-study job (where the student gets a part-time job either on campus or in the community and earns money for tuition)
The typical financial aid package contains all of these types of aid. Obviously, grants are more favorable than loans because they don’t need to be repaid. However, over the past few decades, the percentage of loans in the average aid package has been steadily increasing, while the percentage of grants has been steadily decreasing. This trend puts into perspective what qualifying for more financial aid can mean. There are no guarantees that a larger financial aid award will consist of favorable grants and scholarships–your child may simply get (and have to pay back) more loans.
The two main sources of financial aid are the federal government and colleges. In determining a student’s financial need, the federal government uses a formula known as the federal methodology, while colleges use a formula known as the institutional methodology. The treatment of your 529 plan may differ, depending on the formula used.
How is your child’s financial need determined?
Though the federal government and colleges use different formulas to assess financial need, the basic process is the same. You and your child fill out a financial aid application by listing your current assets and income (exactly what assets must be listed will depend on the formula used). The federal application is known as the FAFSA (Free Application for Federal Student Aid); colleges generally use an application known as the PROFILE.
Your family’s asset and income information is run through a specific formula to determine your expected family contribution (EFC). The EFC represents the amount of money that your family is considered to have available to put toward college costs for that year. The federal government uses its EFC figure in distributing federal aid; a college uses its EFC figure in distributing its own private aid. The difference between your EFC and the cost of attendance (COA) at your child’s college equals your child’s financial need. The COA generally includes tuition, fees, room and board, books, supplies, transportation, and personal expenses. It’s important to remember that the amount of your child’s financial need will vary, depending on the cost of a particular school.
The results of your FAFSA are sent to every college that your child applies to. Every college that accepts a student will then attempt to craft a financial aid package to meet that student’s financial need. In addition to the federal EFC figure, the college has its own EFC figure to work with. Eventually, the financial aid administrator will create an aid package made up of loans, grants, scholarships, and work-study jobs. Some of the aid will be from federal programs (e.g., Stafford Loan, Perkins Loan, Pell Grant), and the rest will be from the college’s own endowment funds. Keep in mind that colleges aren’t obligated to meet all of your child’s financial need. If they don’t, you’re responsible for the shortfall.
The federal methodology and 529 plans
Now let’s see how a 529 account will affect federal financial aid. Under the federal methodology, 529 plans–both college savings plans and prepaid tuition plans–are considered an asset of the parent, if the parent is the account owner.
So, if you’re the parent and the account owner of a 529 plan, you must list the value of the account as an asset on the FAFSA. Under the federal formula, a parent’s assets are assessed (or counted) at a rate of no more than 5.6 percent. This means that every year, the federal government treats 5.6 percent of a parent’s assets as available to help pay college costs. By contrast, student assets are currently assessed at a rate of 20 percent.
There are two points to keep in mind regarding the classification of 529 plans as a parental asset:
- A parent is required to list a 529 plan as an asset only if he or she is the account owner of the plan. If a grandparent, other relative, or friend is the account owner, then the 529 plan doesn’t need to be listed on the FAFSA. Similarly, if the student is considered the account owner (as may be the case with a “custodial 529 account,” which results when UGMA/UTMA assets are transferred to an existing 529 account), then the 529 plan doesn’t need to be listed on the FAFSA.
- If your adjusted gross income is less than $50,000 and you meet a few other requirements, the federal government doesn’t count any of your assets in determining your EFC. So, your 529 plan wouldn’t affect financial aid eligibility at all.
Distributions (withdrawals) from a 529 plan that are used to pay the beneficiary’s qualified education expenses aren’t classified as either parent or student income on the FAFSA.
The federal methodology and other college savings options
How do other college savings options fare under the federal system? Coverdell education savings accounts, mutual funds, and U.S. savings bonds (e.g., Series EE and Series I) owned by a parent are considered parental assets and counted at a rate of 5.6 percent. However, UGMA/UTMA custodial accounts and trusts are considered student assets. Under the federal methodology, student assets are assessed at a rate of 20 percent in calculating the EFC.
Also, distributions (withdrawals) from a Coverdell ESA that are used to pay qualified education expenses are treated the same as distributions from a 529 plan–they aren’t counted as either parent or student income on the FAFSA, so they don’t reduce financial aid eligibility.
One final point to note is that the federal government excludes some assets entirely from consideration in the financial aid process. These assets include all retirement accounts (e.g., traditional IRAs, Roth IRAs, employer-sponsored retirement plans), cash value life insurance, home equity, and annuities.
The institutional methodology and 529 plans
When distributing aid from their own endowment funds, colleges aren’t required to use the federal methodology. As noted, most colleges use the PROFILE application (a few colleges use their own individual application). Generally speaking, the PROFILE digs a bit deeper into your family finances than the FAFSA.
Regarding 529 plans, the PROFILE treats both college savings plans and prepaid tuition plans as a parental asset. And once funds are withdrawn, colleges generally treat the entire amount (contributions plus earnings) from either type of plan as student income.
Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing. More information about specific 529 plans is available in the issuer’s official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits.
Please follow and like us: