Summer Step #3: Realize That Summer Study Can Be A GOOD Thing!

Yes, parents are on the hook for some work this summer, obviously, as far as getting all the finances optimally arranged, and counseling with your advisor regarding the possibility of your home equity offering a tax-preferred method for college funding. Let’s even out the workload here, and focus on things that your child can do, as well!

It might sound silly at first, but one of the most productive things your student can do to prepare for (and pay for!) college is… hit the books. OK, obviously… children who achieve higher marks at school usually will have more options when it comes to better colleges. That makes sense. However, the not only does the quality of schools improve with better grades… the financial aid gets better, as well!

Here is the reason. Every college in the country is trying to attract the best and brightest students available. Excellent students (and, over time, outstanding alumni) are instrumental in helping any school to boost their reputation, bring in more sharp students in the future, and attract donations. To make this a reality, colleges and universities offer scholarships, grants, low-interest (or even no-interest!) loans and other benefits of all kinds, and they will even compete with each other for a desirable student! The fact is, if your child gets high grades and high test scores, you will likely see lower college bills.

DISCLAIMER: We must hasten to add that we do NOT suggest that your child suffer through endless studies during summer vacation! Certainly, they have earned some time off, and we hope that they enjoy it! However, they will be better off in the Fall if their minds have not stagnated completely for almost three months…

Some savvy parents seek out a part-time tutor or academic program to assist their child in improving their studies over the summer. This can be accomplished either by focusing on areas in which the child needs some additional attention, or even by getting a jump on the material to be tackled in the upcoming academic year. This can be a huge benefit to students (and their grade point averages!), and please note that the time invested does not have to undermine their summer recreational activities.

Summer may be the “off season” for school, but we hope that these three tips will give you a solid guide for some practical things you can do to improve your college finances. Most people find that after the start of the school year, it actually gets more difficult to complete all of the forms and organize all of the necessary information. By getting a head start during the lazy days of summer, we are confident that the remainder of your year will progress in a much simpler and more successful manner!

I hope these three summer strategies can help you in your quest to send your children to the college of their choice without spending your life's savings.

Summer Step #2: Investigate Better Ways To Fund Your EFC

The advice of a professional college funding advisor can be some of the most savvy and effective counsel that you will receive during this time of college preparation. A good advisor will assist you in preparing your finances so that you can effectively limit your EFC to a lower level than you might have initially thought. Even with this knowledge and professional help, however, most families cannot bank on the funding authorities agreeing to cover all of their child’s college costs… or even that the EFC number they calculate will be one that the family can manage without difficulty.

Because this is so often the case, many families choose to bridge the EFC gap in one of two ways – taking out a loan, or diminishing the family’s expenses. Either of these plans could be something you’re willing to consider. You can certainly always cancel vacations, raid retirement accounts, and talk to the bank about loan options. Frankly, however, these are rarely the best solutions to the challenge, and we find that there are often far better choices available for meeting the costs of college.

We are pleased to announce that we have created a very effective solution to the college funding problem. For people in the right set of circumstances, we can demonstrate a plan to pay for your child’s education on a tax-favored basis… and do so without altering your current lifestyle, or touching your hard-earned pension plan.

Of course, like many plans, it is an absolutely tremendous boon to the college funding challenge if it works for you, but we also must frankly admit that it doesn’t work for everyone. If you are interested in learning more, and finding out if the plan can assist you in your situation, please feel free to email us at info@myschoolplans.com.

Summer Step #1: Strategically Prepare Your Base Financial Year"

Among the many numbers you will be facing this coming year, you will likely recall that the Expected Family Contribution (EFC) is absolutely key. Think about it this way – for the immediate future, this EFC number will have a bigger effect on your cash flow than your mortgage rate, tax payments, or credit card interest rates. Yes… it’s that important. The EFC will literally determine what you’re expected to pay toward your child’s education for the coming year.

Your EFC is determined based on a number of things. Of course, they will look at your salary, but it goes beyond that. Also included in the calculations will be your investment portfolio… in fact, if your child attends a private institution, they will probably also include the equity on your home. If it appears that it’s feasible for your family to foot the bill for your child’s higher education, the funding authorities are out to make sure you are on the hook for it.

Of course, we do not expect that you will actually agree with the decisions of the funding authorities! Including assets like your pension, home equity, and other finances may seem unreasonable in many ways, since these things have little or nothing to do with paying for the college education of your family. Well, be that as it may, the funding authorities look at it through their own set of lenses. Rest assured, they will dutifully calculate their statistics based on these numbers when they determine your EFC… and if history is any judge, they are likely to come up with a whopping number that will probably make you wince when you look at it.

With this reality in mind, you will want to ascertain that your finances are arranged with the utmost care this year! This is every bit as important as consulting a tax advisor before you submit your tax returns. Parents should not attempt to create their base financial year without first consulting a knowledgeable college funding advisor who can assist in making the most effective choices for this year and the college years to come.

The kicker: you should be doing this now! College funding is a process that ideally starts long before the submission of application forms, and well before the start of a new academic year. In fact, if you can complete the financial work at some point during this month, you’ll see almost immediate dividends – in terms of diminished stress now and down the road, and also in improved college funding circumstances!

Three "Off Season" Summer Strategies That Can Help You Pay For College

Well, the heat of summer has arrived in earnest, and I hope that you are enjoying some excellent weather as well as the opportunity for some well-deserved vacation time. Perhaps you are sending the children off to that terrific, long-awaited summer camp… or, closer to home, maybe even just relishing beautifully warm weekends filled with family fun, good food, and relaxation.

Let’s be honest, you will need to grab that relaxation while you can! No matter whether this coming Fall represents your teenager’s last year in high school, or whether he or she will begin that exciting college career, the upcoming year will be one of significant adjustments and startling financial realities for both you and your family.

The amount of paperwork involved if your child is about to become a high school senior is, well, simply mind-boggling. Like most families with college-bound children, you’ll be facing stacks of college forms and financial aid applications. In addition to this, it will be necessary to review your assets to ascertain the best strategy for your financial situation. Add to this the crucial task of assisting your student to the selection of a college that will offer the best educational experience possible, and I think you will agree that you have your work cut out for you!

On the other hand, if this summer represents the brief repose before college starts for your child, then not only are you facing some imposing tuition bills, you’re also going to have to complete all of the paperwork (yikes… all the same stuff you have already done this year!) in order to bring down your future Expected Family Contribution (EFC). This will assist you in keeping your financial outlay down for next year, as well. After all, the financial aid forms have to be submitted each and every year your child attends college!

However, like any other valuable plan that involves work, no-one will force your hand to make you complete all of these steps! Many people will ignore these steps and choose to focus in on the carefree days of summer in earnest. In the long run, though, choosing to do just that could make the Autumn considerably less carefree, when you discover that the available financial aid sources are dwindling… and the government and schools are of the opinion that you can afford a lot more money than you think you can.

You can either choose to be prepared, or put it off and pay the price in the future.

Should you make the wise decision to start now, (and I sincerely hope that you will), your family’s college and financial aid application process will be smoother and easier… and you will boost the golden opportunities to obtain all the college money available to your child.

For your consideration, in the next couple posts we will be pleased to suggest three excellent summertime strategies – things that you can do right now – in order to assist your child in earning an acceptance letter from a wonderful college… and a way to pay for it!

So be looking forward during the next couple weeks for the helpful summertime strategies.

College Funding Timeline

Time is upon us and school has started for most students and the thought of another year has finally become a reality.

I have created a timeline that will help any parent of a college bound student navigate the process in an effective and efficient manner. It talks about everything you should do, starting in the High School Sophomore year.

To receive a copy of it, sign up for my free eCourse at www.myschoolplans.com and you will receive it shortly.

Another Word on Scholarships

Okay, if you are in the process of figuring out how to pay for college for yourself or a child, you probably have received some or all of the acceptance letters from the various schools that you have applied for.

Now you are wondering, "is this all they will give me?" You are probably a little shocked to see that you are going to owe some money for your family contribution and you may be wondering how to cover it.

If you have followed my blog for any length of time, you have probably heard me talk about how scholarships are nice, but don't count on them. Of all the money that is awarded on an average basis, only about 3% of it comes in the form of scholarships. That doesn't mean that you shouldn't look around for them. Now you want to get as much money as you can and scholarships are a viable option.

Here are some tips on locating scholarships.

1. First of all, it isn't easy. It is hard work to locate scholarships, but is could be worth the time you put into it.
2. There are a number of local organizations that offer scholarships that you should check into. Look into scholarships offered by banks, credit unions, businesses around town, real estate companies and even the city council or local chambers of commerce. Also, check with your local public service organizations such as Kiwanis Club, Rotary Club, Lions Club and Toastmasters International. They can all be sources of potential scholarships.
3. Think of scholarship searching almost in the same terms as looking for a job.

Scholarships are usually not need-based, meaning that you probably won't have to demonstrate a need, but this varies from source to source.

I'll cover some scholarship myths and other facts in upcoming blog posts, so stay tuned.

Endowments - And What They Can Mean For Your Student

There is a lot of talk about endowment funds and what they mean for schools and, more importantly, your student.

Endowments are gifts of cash, property or basically any asset that is donated to a school or university. It is not uncommon to have several hundred million dollars in a school's endowment fund. What happens is it is invested and used for projects, updates in various areas of the school and, most important to you - scholarships.

It is rare to spend much of the endowment fund each year, with the average across the country being about 5% of the fund. So if an endowment fund has $1,000,000, they might spend $50,000 annually. The rest of the fund is kept invested to protect from recessions in the future and to re-invest so that it continues to grow.

Kansas incorporated its first public school district endowment association in Paola, Kansas, a small town of 5000 population, in 1983. Today it has approximately two million dollars in endowed principal which generates approximately $110,000 annually to distribute in scholarships to high school graduates and fund special projects in the district which can not be afforded by the tax base. (Stat quoted from Wikipedia.

It is is interesting to see which schools have the largest endowment funds. Here is a graph that will give you an idea of where your school falls in the mix of things.

Scholarship Search

Although I say often that you should not rely on scholarships to heavily for your children's college education, the College Board has some good information on their website that will help you understand the role that scholarships play in the award package.

Check out the page here.

Recent Changes

I have thought about a lot of things in the last couple months. We are in the process of moving our office and have a chance to make some pretty significant changes to the business plan (which currently is non-existant so any change will be achange in the right direction) and also some changes to our market. I have been used to trying to sork with anyone that would talk to me but now, I am focusing my market towards parents that have high school juniors and/or seniors that are planning on attending college, and do not know how to market to them.
There is a lot that goes into this market besides traditional type planning. After some consideration, I have put together a rough outline of some of the value that we are going to provide, in addition to the more traditional advice of getting the "moat that will protect their financial castle", or in other words, getting the LEAP model built for them.
We will:
Help them with income and asset planning recommendations to reduce, or eliminate their out of pocket outlay for any and all increases in investments, including sending their children to college
Help them understand which schools have the best chance of offering aid and a good package. Some schools have the ability to give money and some don't and they need to understand which ones will give them the best packages
People hate forms and they hate filling them out. We are going to fill out all the financial aid forms for them and offer a report that is easy to understand and easy to make sense of
Offer a Student Aid Report or SAR. This is the output from the government, after the financial aid form
Negotiate with all the schools to take a look at their award leters to make sure they were offered what they were entitiled to. A lot of people don't get what they deserve and they have no idea what they should get. We will help them with all negotiating, including letter writing and phone calls
Show them how to pay for their Estimated Family Contribution or EFC with little or no out of pocket expense. There are tax favored ways of helping those with high incomes that might not realize they can get the aid they deserve. No more taking the EFC out of income or high rate, non-tax deductible commercial loans
Unlimited telephone support and handholding throughout the entire process
Other investment advice indirectly related to the planning and paying of college tuition
This will be a positive move on our part that will provide a valuable service to a selected market. We are going to offer free teleconferences and webconferences, as well as live workshops to offer advice and help.

A Word on Scholarships

When most people think about funding their children's college education, they are so focused on getting that scholarship they feel they deserve. Little do they know that of all the money that is available for college, only about 3% of it comes from private scholarships. Why is it that most people spend their time looking for these programs?

While you shouldn't spend much time looking for them, scholarships are still a viable option for some funding and deserve a little consideration. What I recommend is that they perform a simple scholarship search and see what happens. I use it from time to time and am somewhat suprised at the results.

I have also provided a link on my blogroll for anyone interested.

Advice to Give College Grads

There is an article in the current issue of Money Magazine that talks about advice to give college grads (I couldn't find the reprint on their website, so I just scanned the page and attached it here).

In my opinion, it isn't advice that is reserved just for the college grad. Everyone should head the advice.

Episode 16 - Six Insider Secrets About College Funding - Secret 4, 5 & 6

I have published the new podcast.

To listen to it, just click on the player to the right.

Episode 15 - Six Insider Secrets About College Funding - Secret 2 & 3

Steps 2 & 3 in the 6 Insider Secrets About College Funding.

How Stuff Works

Here is an interesting article about how the basics of colege funding works.

It is always good to understand the process to better prepare yourself for the upcoming 3 or 4 years.

Episode 14 - Six Insider Secrets About College Funding - Step 1

At long last spring is here and the school year is about to end. This is a crucial time for your families financial planning when it comes to financial aid and planning for college.

Over the next 6 weeks we will be discussing the "6 Insider Secrets About College Funding - That Can Start Saving You Money Today"

Paying for College - Pre-High School Savings and Financial Aid

Negotiating Your Way To A Better Award Package

Okay, so you have the award letters in hand from the different schools and are ready to accept one of them.

Not so fast!

First, there are some things that you MUST do if you are not sure the package is as good as it should be. Even if you are not sure, isn't it worth a little time and effort to go through the award and try to get a little better offer, even if it is only a couple thousand dollars?

Hopefully you started thinking about this when you filled out your FAFSA form. There is a spot on the form where you can list the schools that you want the report sent to for possible acceptance at their school. What I would reccommend is on that form, list two or three schools that you are considering, even if you know there is only one that you would want to attend. Pick competing schools to list because when you get the Student Aid Report you can compare and when the reports go out and schools see that they may be competing with another school, they may be more willing to give favorable awards. Also, when you are ready to negotiate you can compare offers and have a stronger foothold to state your claims.

Here are some steps to follow in negotiating:

1. Try and figure out where you stand in the eyes of the FAO's. In other words, a good rule of thumb is if you are in the top 25% of applicants (which is hard to determine, but possible) then you stand a good chance at getting favorable offers. You can look on the schools website and find what the average scores on ACT/SAT and averages GPA's are of all incoming applicants and if you are higher than the average, that is a good thing.
2. Prepare your claim - before you call or write. If you received a better offer from a comperable school, have that in front of you and be prepared to send the information in as proof. They may even require to see it, so don't lie about this - it just makes you look stupid.
3. Explain your financial circumstances. If you feel like the school doesn't fully understand your situation, explain it. Aid is awarded on previous years income and if you had an unusually good year last year and made more money then is normal, explain that to them. If you have a high debt to income ratio, explain that. If you have become divorced, widowed or seperated since the form was filled out, explain that also.
4. If you live within driving distance of the school, go see them. If not, your best bet is the telephone. Avoid sending letters too much because they are easily set aside and ignored. When you do call, be cordial and frank. Don't start yelling and screaming. Try to speak to the dead FAO. Make sure you write down all names of everyone you talk to and the date and time that you talked.
5. Have a figure in your head of what you think would be fair. Don't go overboard, but be reasonable because if the FAO ask what you can afford, you do not want to say "I don't know" or be undecisive. Have a clear number in your head.
6. Be reasonable and avoid arguing or any other confrontational language. Avoid the words like "bargain" or "negotiate".
7. Ask for extensions in deadlines if applicable.
8. The parents should do the negotiating, not students. It just hold more credibility to the conversation.

Remember, it never hurts to ask. The worst that comes out of the conversation is that they may say "no". They cannot take back any awards or offers that they have given to you up until now.

The Truth of the PLUS Loan

Basically, there are two types of loans for colleg, the need-based loan, which are meant to mees the family's need and the type (like a PLUS loan) that is meant for families that dojn't have the cash to pay their EFC, which is most families.

The second type of loan does not and should not appear on the aid package. Your EFC is your business and the colleges do not care how you pay for it, but many times they include them in the aid package - like the PLUS and Unsubsidized Stafford.

Virtually any parent can get a PLUS loan for the amount of attendance minus the financial aid that is offered through the school (as long as the parents credit score justifies the risk).

There are a couple downsides of the PLUS loan that need to be understood when considering the PLUS loan.

1. The PLUS loan repayment generally has to begin within 60 days of the date the loan was made
2. You may eventually run out of credit, or be overextended and the lender will refuse additional PLUS loans to you

When you get your award letters and there is a PLUS loan in the award package, be aware that the college has NOT met your need in full and an award package that includes a PLUS loan is not as valuable as one that doesn't.

In a future post, I will talk about alternatives to PLUS loans.

Some Helpful Definitions

I have talked to some people and a re-accuring theme that I have seen is a lack of knowledge of the definitions of some words. Here are some of the more important that you should know. First some more well known, then some lesser known

• FAFSA (Free Application for Federal Student Aid) - The need analysis document written by the U.S. Department of Education. This form is required for virtually all students seeking financial aid including the unsubsidized Stafford Loan.
• EFC (Expected Family Contribution) - The amount of money the family is expected to contribute for the year toward the student's cost of attendance. This figure is compared to the Cost of Attendance to determine a studen't aid eligibility.
• Profile Form - A need analysis form that is needed in addition to the FAFSA form which is administered by the College Board. It is much more detailed in the questions that it asks and some of the more prestige universities will require it if you are applying for aid. The form costs $5 to register for it and $18 per college that you are applying to, so make sure that you are serious about applying. Read the registration guide under the sidebar link under the College Board Guide link
• Self-Help - The portion of the aid package relating to student loans and/or work study.
• Work Study - A federally funded aid program that provides jobs for students. Eligibilty is based on need.
• Gift Aid - Financail aid, usually a grant or scholarship, that doesn't have to be paid back and that does not involve employment.
• ACT (American College Testing Program) - The administrator of a group of standardized tests in Englich. mathmatics, reading, science, and reasoning.
• COA (Cost of Attendance) - A figure, estimated by the school, that includes the cost of tuition, fees, room, board, books, and supplies as well as an allowance for transportation and personal expenses. The figure is compared to the EFC to determine a studen's aid eligibility.
• Perkins loan - Federally funded need-based program that provides low interest loansto undergraduate and graduate students and ins administered by school's financial aid office. In most cases, the aid dosn't have to be paid back until 9 months after the student graduates or leaves school. There are no interest charges while in school and fixed rate (currently) at 5% after school.
• Half-Time Status - Refers to students taking at least 6 credits per semester, or the equivalent.
• Pell Grant - Federally funded need-based grant program for first-time undergraduate students. Usually awarded to low income families. Typically if your EFC is $3000 or lower you have a shot at this money.
• PLUS Loans (Parent Loans For Undergraduate Students) - Federally subsidized educational loan program in which parents can borrow up to the total cost of attendance minus any financial aid received for each child in an undergraduate program. Eilgibilty is not based on need. The interest rate is variable, currently with a 9% cap.
• SSL (Stafford Student Loan) Program - Federally funded program provides low interet loans to undergraduate and graduate students and is administered by a bank of other lending institution, which can be the college itself. In most cases, repayment doesn't begin until 6 months after the student graduates or leaves school and there are no interest charges while in school. SUBSIDIZED Stafford Loans are need based and the government pays the interest while the student is in school. UNSUBSIDIZED Stafford Loans are non-need-based and can be taken out by virtually all students, In many cases, the student can elect to let the interest accumulate until after the graduate.
  

Should You Turn Down Parts of An Award Package?

Many parents think that by turning down part of the financial aid package, they are turning donw current (and in some cases future) aid that could be awarded by the school. In some cases, this may be true, but when you have a chance to get grants, scholarships, work-study or need-based loans, take them all. If you tell the FAO's that you are turning down the loan or offer, they are going to give it to someone that "needs" it and you probably will have a difficult time getting it if you want it later.

The best thing to do if you are not sure if you need the money is to accept it now. You can always turn around and pay if off later if something else comes up.