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.

Six Insider Secrets About College Funding – That Can Start Saving You Money Today!

At long last, spring is here and the school year is about to come to an end... this is a crucial time for your family’s financial planning, whether your child is among those planning to head off to their freshman year of college, or looking forward to their senior year of high school. Let’s face it, the stresses your student will face with their studies could actually pale in comparison to your own efforts in getting ready to shoulder the monetary costs of that higher education!

Naturally, every family looks to apply for college funding assistance, but there are a lot of elements involved in making that a reality. In addition to the reams of paperwork for you and your child to wade through, your student needs to pull his/her weight in racking up the best grades and entrance exam scores possible. And atop all of these worries, you’ll probably want to arrange your family’s finances so as to bring in maximum aid possible, while keeping the taxes at a minimum. How is all of this possible?

Well, fortunately we have closely observed this cycle a few times, and we’ve put together this list of “Six Important Things To Know...” before you send in the forms! We hope that you find them useful in your own preparations.

1. Private scholarships are nice... but don’t bank on them!

Considering college costs these days, it is no surprise that people tend to immediately think about private scholarships when they look at college funding. Scholarships are great – they consist of free money awarded to a student for excellence in academics, athletics, or other pursuits... but like most free things, there are some challenges involved!

For example, while you may see listings for “thousands” of scholarships available, there usually are not very many that match up with the specific backgrounds of most students. As a matter of fact, only a tiny percentage of financial aid comes in the form of scholarships at all. You will find that the bulk of financial aid is made up of loans, grants, and work-study programs coming directly from the government or the schools. In addition, while scholarships look great on the resume, they usually tend to “nickel and dime” the overall cost of college – you’ll get a few hundred dollars here or there, but most private scholarships won’t come close to covering a university education.

With that rather sobering thought in mind, please remember that we do not recommend that you ignore scholarships altogether! Certainly every bit of money helps, and we have already mentioned that being awarded a scholarship always looks good later on. If you and your student don’t mind putting forth some time and effort in the library (or on-line) you may find some promising organizations and places to apply.

A word to the wise, however. If your child is selected for a scholarship, it is possible that his/her college of choice may actually reduce their own financial aid package! While you might be able to negotiate this fact with the school, it is possible that your extensive efforts may have garnered a scholarship into the coffers of the institution, and not for your child. Scholarships or no, you simply can’t replace the reliability of a complete funding package.

2. The early bird gets the worm... but there are still a few out there.

In a perfect world, everyone would submit their FAFSA and CSS PROFILE documents as early as possible. In real life, however... well, let’s be honest. Not everyone manages to get this important step done as quickly as they hoped. Happily, if you have a student in your home who plans to begin college this fall, and you still haven’t submitted your financial aid forms, there is still a little time to pick up some college money.

When we say a little, though, we are not kidding! Latecomers are definitely under the gun to send those forms in right now. The reason for this is that such a high percentage of the funding has already been awarded that you will need to jump right on it in order to receive any of the assistance that’s left.

Remember that this is an exercise that will bring you dividends both now and in the future! This important first year of college is the always the very best chance to come up with a good financial aid package for your child. This is in part because schools will often utilize their most competitive financial aid offers to try to encourage incoming freshmen to their doors, which will raise enrollment and usually ensure their attendance throughout an entire degree program! Therefore, the deal you negotiate with the school for this first year will affect future years, as well!

If you have a graduating senior and your forms aren’t submitted yet, now is the time! Complete and submit those applications today.

3. Applications are like anniversaries – they come every year, and you don’t want to forget them.

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Negotiating For The Best Package

Now is the time that parents and students are beginning to accept offers from schools and there are a few things that you should be aware of in the negotiating process.

1. Don't be afraid to negotiate. Think about the last time that you bought a car or your home. Very rarely do you agree to pay full price. There are always some negotiating that goes on and the financial aid offices are willing to talk. You just need to know the right way to approach it. Don't go into the negotiating screaming and threatning, but don't be soft either.
2. Send a pre-approach letter before you make any phone calls. In the letter, express gratitude for being accepted and that you appreciate their consideration. Then explain any financial hardships that you or our family may be going through.
3. When you see your award packages, take all the free money they offer. If they offer certain loans, try and get them to change those to grants. If you are un-successful then be slow in accepting their loans. Sometimes you can find better deals or more scholarships from third party sources and this may be a better route to go. There are some thir party places that are pretty good like ScholarshipExperts.com, or
   Find free money for college or an advanced degree. FastWeb's Free Scholarships Search.
4. It's okay to live at the dorms and sell your car or not drive quite a nice car. I think that many parents and students think that the student should live the same lifestyle at school as they did at home when the fact of the matter is that student life is different then home life in many ways, financially is one of them. Get rid of the credit cards for shopping and dinners. Live on a cash budget and control your spending.

Well, following these few simple rules will help you to save as much money as you can at school.

Interesting Trends in College Funding

An interesting trend is beginning to take form throughout the country, and it is a little disturbing.

In an article by the Detroit News today, it says:

More college freshmen say they need to take remedial college classes to make
up for what they didn't learn before they reached the campus. And an
increasing number also face problems in paying for college. Too many just
can't afford it.

and later in the article:

Another disturbing trend: rising inequality in terms of the ability to pay
for college. In 1971, the freshmen's' median parental income was $13,200, which
was 46 percent higher than the national average.
Today, the freshman family median income is $74,000, 60 percent higher than the average -- a trend that accelerated during the mid-1980s.
Multiple factors are at work here. Rising income and wealth inequality among Americans is an issue, while the growing cost of college tuition and fees is also at play. Students from wealthier families can afford the rising price for a university degree; it's much tougher for less well-off students.

All the more reason to make sure that you are properly educated to learn how to pay for college using all the advantages and knowledge that you can get.

Sallie Mae and Attorney General Settle

Here is an interesting article coming out of Albany, NY.

Apparently there were a lot of conflicts of interest in the student loan industry and the Attorney General put a hold on that.

Power of Goals

I subscribe to a service called the Genius Network, sponsored by Joe Polish and every month they send out a CD program covering many different topics.

One of the tapes that you can get for free (and I highly recommend that you do) is an interview Joe does with Brian Tracy. By the way, if you do not know who Brian Tracy is, he is a best-selling author who never graduated high school. He has many CD programs as well as books that are a must for anyone at any point in their life.

So the question that is answered in the program is "How do you get from where you are to where you want to be?"

Where do you want to be in 5 years? If your life were perfect, what would it look like? What would you be doing? How much would you weigh, how much money would you be eraning?

Now what are the specific steps you would have to take to get to where you want to be. The next step is to take out a piece of paper, write goals and today's date at the top.

Write a minimum of ten goals written in the present tense. All the goals start with "I am" or "I weigh"  i.e. - "I earn $x amount of money per year." "I drive a __________ car." "I weigh ______ lbs." Look over your goals and pick one and write down, "Which one goal, if I achieved it would have the greatest positive impact on my future. Go over your list and choose one that will help you the very most.

Write that goal on a seperate sheet of paper and set a deadline to achieve it by. Make a list of everything that you could do to achieve the goal. Organize the list in order of what needs to be done at any certain time and prioritize the list.

The turning point is to then take action on the list and do something immediatly to take action on your plan every day to get you closer to the goal.

Keep in mind, you will experience a lot of resistance when developing your new habits. Don't get discouraged.

In the CD, Brian shares a quote from Ed Foreman that says "Bad habits are easy to form and hard to live with and good habits are hard to form and easy to live with." Successful people have good habits and act in accordance with their habits. Do stuff over and over again until you developed these habits.

Good luck, and set goals that make you stretch and grow every day. 

College Funding Revealed eBook or Course

I am in the process of creating an eBook or eCourse that details the complete college funding steps as well as some tips and strategies to getting the most money for college. I am not sure if I should create it as an eBook of eCourse. There are advantages and disadvantages of each. Both will be fairly similar in content.

Right now I am leaning more towards the eCourse for one main reason.

1. When most people read a book, they read it and maybe take a few notes in it, but then they put it down without taking action. In the eCourse I am going to give specific assignments to complete after each course and specific steps to take to complete them

I will have it ready to go and online in a week or less. Perhaps as a bonus to the course I will include a the eBook so if you want to look through that then you would be able to.

The Horrible Reality of College Admissions

Reading online today and found this article by Seth Godin about the horrible reality of college admissions.

http://sethgodin.typepad.com/the_dip/2007/04/the_horrible_re.html

Sad, but true.

Episode 13 - How to Select the Right School for You and Your Finances

Spring is in the air and we seem to be thawing out from this past winter. We are also seeing a lot of students that are receiving their admission and acceptance letters. Now the question becomes, what do you do with them. How do you pick the one that fits your budget and make the right choice. There are a few things that you must do, and the podcast will help you figure those out.

Accepting All Finnacial Aid Offers

You are going to begin receiving financial aid awards in the next few months, if not weeks. When you review the award letters and determine what you are going to accept - save yourself time and accept everything (from the school that you are planning on attending).

You may wonder why I say that.

Well, this is the reason.

You can always turn down portions of the award at a later date. If you accept the award in full now, you have the option of turning down portions of it at a later date, but if you turn it down now, you cannot get it back later.

For example, let's say that you have the option of taking a loan from the school but decide that you want to turn it down because your parents were going to pay for it out of pocket. A few months go by and the stock market crashes or they loose their income or any number of a thousand reasons that they do not pay for it like you thought they would, it is going to be very hard to go back and get the money back from the school.

On the other hand, if you accept the offer and something happens to the funds you were expecting, no big deal. But if your parents do pay for it at that point, then you can turn down or pay off the loan that you took from the college. No big deal.

Evaluating College Award Letters

When you filled out your FAFSA (Free Application for Federal Student Aid) form, you had a chance to list different schools or colleges you wish to attend. As a result, that triggered a report to be sent to the colleges on your list, as well as one to you, which is the SAR (Student Aid Report) that you will be receiving shortly, if not already.

Now what?

Well, the colleges take this information and create an offer for you based on certain criteria that is unique to them. They will create and offer an award for you, commonly known as a package, which is delivered to you in the form of an award letter. This award letter not only contains the federal financial aid you are eligible for, but it also includes the financial aid the college is willing to give you. The federal aid has to be awarded based on the government's criteria as indicated and will be the same for you from school to school, but their personal funds vary from school to school. So in other words, a more expensive school may have more money to award you, therefore making your "out of pocket" expense potentially less than a "less expensive" college.

Many of the more prestigious institutions have large endowment funds and can award more money, so don't rule these out.

In addition to the tuition on the award letter, it will also list the annual expenses such as room and board, books and supplies, transportation, medical benefits and personal money (cost of living). When you look at the total of these expenses, it is easy to estimate what you will have to pay out of your pocket for each school or institution. Add up the awards and make sure to check your EFC(Expected Family Contribution) located in the upper right hand corner of the SAR report matches the figure in the award letter. If there is a significant difference, contact the financial aid office immediately.

Have a great day.