Archive for ‘back to basics’

April 14, 2015

A college financial planning timeline

by Grace

Don’t wait until your child’s senior year of high school to begin planning how to pay for college.  The first 18 years go quickly, and it’s never too soon to begin preparing.

Here’s one simplified approach showing some important steps along the timeline to college, with a focus on the financial planning aspect of the process.

20150412.COCPlanningTimelineB

 

Before High School

Start saving for college ASAP:  This is the relatively uncomplicated part.  Although we can’t predict the costs of college over a child’s lifetime, it almost always makes sense to begin saving early on.  Even if MOOCs or other innovations make higher education more affordable in the future, there’s usually not much of a risk in saving too much since there are options for dealing with “left-over money in your 529 plan”.

Before Junior Year of High School

  • NMS potential:  If your child tends to score in the 95%ile of standardized tests, he may have a shot at earning a National Merit Scholarship.  A little test prep can make the difference in qualifying for significant merit financial aid.
  • Base Income Year (BIY): If there is a chance your family may qualify for need-based financial aid, you should explore ways to minimize income during the BIY, the 12-month period that begins January 1 during your child’s junior year.  Since the BIY is used as a snapshot for determining financial need, you may want to consider strategies such as not selling stocks or property that will create large capital gains, refrain from converting to a Roth IRA, or defer bonus or other income.

Junior Year of High School

  • Create list of schools:  Get serious and make a realistic list that includes academic and financial safeties.
  • Can we afford it? 1-2-3:  Determine affordability by using the 1-2-3 Method or something similar.

Senior Year of High School

Senior year is the busiest time for families as they handle the many details of the college application process, including final determination of how they will be paying.  Some important acronyms:

The two main forms used in determining financial aid eligibility are the FAFSA and PROFILE.
FAFSA is the acronym for Free Application for Federal Financial Aid. It is a form submitted to the government that collects the financial information needed to decide your eligibility for federal FA. It’s also used by many colleges to determine institutional aid.
PROFILE is a financial aid application service offered by the College Board, used by about 400 colleges to learn if students qualify for non-federal student aid. There is a fee to submit a PROFILE, whereby the FAFSA is free.

The SAR (Student Aid Report) is a summary of your FAFSA responses and provides “some basic information about your eligibility for federal student aid”.


It’s important to get started.

While this outline only hits the highlights along the road to paying for college, it can be used as a springboard for further research and action.  It makes sense to start with an outline, and then fill in the details as you go along.

April 13, 2015

Only some colleges count home equity in financial aid calculations

by Grace

While most colleges that use the CSS/Financial Aid PROFILE do include the value of your home in calculating eligibility for financial aid, there are some exceptions.

PROFILE Schools That Ignore Home Equity*

  • Bard College
  • Bucknell University
  • California Institute of Technology
  • DePauw University
  • Hamilton College
  • Harvard University
  • Princeton University
  • Santa Clara University
  • University of Virginia
  • Washington University, St. Louis
  • Whitman College

*This list was compiled last year, and changes may have occurred since then.

Additional information about how other PROFILE schools treat home equity can be found by clicking the link above.

Summary:

  • Schools that only use the FAFSA (Free Application for Federal Student Aid) to determine eligibility for financial aid do not use home equity in the calculation.
  • Schools that use the CSS/Financial Aid PROFILE to determine eligibility usually use home equity in the calculation, but often the amount is capped as a percentage of a family’s income.

Running the Net Price Price calculator for a particular college will usually show if home equity is counted, but the best way to be sure is to ask the school.

Schools can be flexible in awarding financial aid, and Lynn O’Shaughnessy reminds us of this important point:

By the way, how schools treat home equity can also depend on how desirable an applicant is.

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Lynn O’Shaughnessy, “Will Your Home Equity Hurt Financial Aid Chances?”, The College Solution, August 7, 2014.

April 8, 2015

How to ask for more college financial aid

by Grace

College financial aid letters have just been sent, and you may want to think about how to negotiate for more money.

Many families don’t realize it, but there is often a little wiggle room in financial aid awards. FAFSA, the form the government and colleges use to determine need- and some merit-based aid, doesn’t capture all circumstances that might affect a family’s ability to pay for school. For instance, there’s no line to include the cost of caring for an elderly parent or special needs child, the kind of expenses that could warrant more aid, said Mark Kantrowitz, publisher of Edvisors.com, a college planning Web site. So if you weren’t able to share that kind of information with the school, now is the time to bring it up to see if that shakes free some more assistance.

You can request a professional judgement review.

If you do decide to negotiate, you can appeal to the school’s financial aid administrator for what’s known as a professional judgment review. Gather up every piece of documentation of any changes to your family finances or special circumstances that could impact your ability to pay for school. If the financial impact is significant enough, the school may adjust your child’s award.

Don’t attempt to haggle.

“Colleges are not car dealerships, where bluff and bluster can get you a better deal. Very few colleges will make a revised financial aid offer when a student gets a more generous financial aid offer from a competitor,” he said.

But some schools, like Cornell and Carnegie Mellon, will consider matching offers of peer institutions.

You “should be careful in the language and manner” of your approach.

“We won’t ‘negotiate,’ but we might ‘review.”

Looking for more tips?  “Want to appeal your college financial aid? Go for it”

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Danielle Douglas-Gabriel, “How to negotiate a better financial aid package”, Washington Post, April 2, 2015.

March 4, 2015

Can we afford this college? The 1-2-3 approach

by Grace

One of the most basic questions during the college planning process is often one of the hardest for a family to answer.

Can we afford this college?

The hard part is usually not in knowing what you can afford to pay, but in trying to find what the net cost of attendance will be for your child.  Here’s a three-step process that may help you answer this question.

  1. Run the Net Price Calculator
  2. Check the college website to find answers to the College Board “dirty dozen” questions
  3. Contact the school’s financial aid administrator


1.  Run the Net Price Calculator (NPC)

The NPC is an online tool that is a useful first step in comparing affordability.  Every college website has a calculator, which typically requires entering family financial information such as income and assets before the estimated net price of attending is generated.  Remember, this is an estimate and may not produce accurate results for business owners and other situations.  Proceed with caution, and check for online resources like the CollegeBoard tip sheet to help in the process.

2.  Check the college website to find answers to the College Board “dirty dozen” questions

A list of 12 questions to get you started on gathering information about a school’s financial aid policies is provided by the CollegeBoard.  In my experience, the answers to most of these questions can usually be found on college websites.  Going through these questions often prompts families to consider other important questions about college costs.

3.  Contact the school’s financial aid administrator

Okay, so not all your answers about costs and financial aid were easily found on the college website or other online resources?  Contact the college’s financial aid office and get the information directly from them.  They should be able to give you information rather quickly, and if they don’t it might be an indication of how transparent and helpful they are in other situations.

For organized families, it’s not a bad idea to create a spreadsheet that can capture important information and allow for efficient comparisons.

January 19, 2015

Completing the FAFSA

by Grace

Students and parents often find the Free Application for Federal Student Aid (FAFSA) to be a little intimidating. The form asks more than 100 questions about family finances and demographic details. The FAFSA is slightly more complicated than the typical federal income tax return. Officially, the form should take less than an hour to complete, but most parents don’t have advanced degrees in economics. Some parents want help completing the FAFSA, because they worry that making a mistake on the FAFSA will affect their ability to pay for college, ruining their child’s life forever.

Don’t panic! Take a deep breath. Relax.

Edvisors offers an online Step-by-Step FAFSA Tutorial

… This step-by-step guide provides a tutorial overview of completing the Free Application for Federal Student Aid (FAFSA). It is based on the bestselling book, Filing the FAFSA.

The book is available for free download at the link.

The Federal Reserve Bank of St. Louis offers a video that guides you through completing the FAFSA.

FAFSA 101
Take a stroll through each screen of the online FAFSA to see what information you’ll need on hand to complete the application quickly and accurately.

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November 17, 2014

The value of A.P. classes

by Grace

The New York Times Motherlode blog asks the question, “To A.P. or Not to A.P”?

Students, parents, and school administrators have mixed feelings about A.P. classes.  Students sometimes feel pressured to take these advanced courses even when it’s not appropriate, but in many cases taking at least a few A.P. courses is the right decision.

When taught well, A.P. and I.B. courses can offer high school students the opportunity to study college-level material while in high school. Administrators and teachers may be divided on the merits of offering A.P. courses, but they agree that secondary schools feel pressure to offer them to appear academically rigorous.

A.P. courses usually look good on college applications.  Selective colleges want to know if students have taken the “the most rigorous academic program available”, so the natural inclination is to take as many A.P. classes as possible.  While some experts advise students that more is not necessarily better, it’s hard to believe that in a competitive situation more high A.P. scores will not add points on a college application.

… “Selective colleges make it clear these days that they will not consider candidates that have not done AP or IB.”…

Students and parents often blame the Ivy League and other selective colleges for perpetuating the current cutthroat environment, insofar as such schools advise taking “the most rigorous academic program available” (as stated on the University of Virginia’s admissions website).

“What parents are saying is that ‘until colleges change their message, I’m not going to let my kid be the sacrificial lamb,’ ” Pope observes.

But colleges say it’s the literal interpretation of this advice that gets students into trouble.

“What admission officers almost always say…is focus on what lights your fire and take advantage of the most challenging offerings in those areas,” urges NACAC’s Hawkins. “That’s a very different message from, ‘Take all of the AP classes.’ ”…

Why take A.P. courses?

A.P. courses can be the appropriately challenging level of study for advanced students, and a way to avoid being bored in classes that are too easy.

Students can earn college credit for A.P. courses when test scores are above a certain level.  This can save money and time, even enable graduation in less than four years.

In some cases colleges do not give credit, but use A.P. test scores to allow a student to skip over introductory classes.  This can be a benefit, but in some cases students should still take the lower-level college class.  For example, a STEM major may wish to take the college calculus course as a way to establish a stronger foundation for advanced course work.

Why avoid A.P. courses?

For some students, A.P. classes add excessive stress, either because of the extra work involved or because the student is not prepared to perform at the higher level.  In these cases, the lower-level course is the more appropriate placement.

There are borderline cases, where the question is whether it’s better to get an A in a regular college prep course or a lower grade in an A.P. course.

The answer that most colleges will give you is that, it’s better to get an A in the Honors/AP class.  Well, of course.  And most highly selective colleges will expect that you do.  But in reality, most colleges would rather see a B in an Honors or AP course.  They want to see that you are truly challenging yourself, but that you are still mastering the material….

The decision to take or skip A.P. courses is not always easy.  Consider it carefully.

ADDED:  Gas station without pumps blog gives commentary and advice on How many AP courses are too many?

Probably the most reasonable course is for students to take AP courses (and exams!) in those subjects that most interest them and pursue interests outside the AP classroom. Community college courses that go beyond the AP courses are also a cost-effective choice, if you can get in.

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Jessica Lahey, “To A.P. or Not to A.P., That Is the Question”, New York Times, November 13, 2014.

Amy Brecount White, “Under Pressure”, Arlington Magazine, September-October 2014.

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November 13, 2014

A reminder to look at net costs when comparing colleges

by Grace

Families should look at the net costs, after financial aid of all types, when assessing potential colleges.

Parents comparing college costs would be doing themselves and their kids a huge disservice if they just pay attention to listed tuition prices. What really matters is how much the school will cost you after financial aid and outside scholarships. And frankly some schools offer more scholarships than others….

Reyna Gobel offers a three-step method for getting started on a college list.

1. Have your son or daughter gather a list of 10 schools they’re interested in attending….

2. Use the net price calculators on each school’s website….

3. Talk to the high school counselor for your teen….

Net price calculators are imperfect estimators, so be aware of the cases where they are more likely to produce inaccurate results.

Related:  Are you eligible for a college tuition discount?

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Reyna Gobel, “Why Applying to Schools Based on Tuition Prices Can Cost Families Money”, Forbes, 8/31/2014.

November 11, 2014

What is Work-Study?

by Grace

Federal Work-Study is a program that provides part-time jobs for undergraduate and graduate college students with financial need, allowing them to earn money to help pay education expenses.

How does it work?

You apply for work-study just like you do all other forms of financial aid: by filling out and submitting the Free Application for Federal Student Aid (FAFSA). Your financial need usually determines the amount of work-study you are eligible for.

You find work-study jobs through job banks or postings by the financial aid or college employment offices. In most cases, students will have the opportunity to interview with potential work-study employers. The interviews help students and employers find out if the job is a good fit. Sometimes the college arranges these interviews; sometimes the student does. Even if you are eligible for work-study, there is no guarantee you’ll get a work-study job. In the end, whether or not you are hired is up to the employer.

What kinds of jobs are available?

If you get a work-study job on campus, the college will usually be your employer. Typical jobs include working in the library or bookstore, serving other students in the dining hall, and assisting with college events. Off-campus work usually benefits the public in some way and should relate as closely as possible to your course of study.

How can work be considered financial aid?

Sometimes it’s difficult to see how working part-time during college could be considered “financial aid.” Keep in mind that the money you make from a work-study job does not need to be repaid, nor does it count against you when you apply for aid the following year. Plus, the smooth hiring process, flexible hours, choice and availability of jobs, and preset salaries of a typical work-study program usually make finding a work-study job easier than finding work on your own.

Work-Study can be an important benefit, with advantages over other types of jobs. Contact colleges to obtain details about their programs.  The federal student aid site is a good source of information:

Federal Work-Study jobs help students earn money to pay for college or career school.

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“How Work-Study Works”, College Data.

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October 9, 2014

Colleges want students who ‘can pay full price’

by Grace

Here’s a sobering reminder for students working on their college applications now.  It’s number 8 on the list of “10 things the college admissions office won’t tell you”.

We’d rather admit someone who can pay full price

All other things being equal, a full pay student often has a better chance of admission than a student who needs financial aid.

According to the College Board, 10% of college freshmen in 2013 were foreign students. One reason colleges woo these international scholars: Many are wealthy enough to pay the full price of tuition.

At publicly funded state universities, higher tuition for out-of-state students often helps subsidize education for state residents. For example, for an undergraduate at the University of California at Berkeley, in-state tuition is about $13,000 a year; for an out-of-state or foreign student, tuition is about $36,000 a year.

Full pay can be an admissions boost for marginal students.

The interest in full-pay students is so strong that 10 percent of four-year colleges report that the full-pay students they are admitting have lower grades and test scores than do other admitted applicants.

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Daniel Goldstein, “10 things the college admissions office won’t tell you”, MarketWatch, Oct 4, 2014.

September 15, 2014

Which top colleges are most welcoming to low-income students?

by Grace

Which top colleges are most welcoming to low-income students?  The Upshot used the percentage of students receiving Pell grants along with net price of attendance for low- and middle-income families to find the most economically diverse top colleges.

Most Economically Diverse
Vassar
Grinnell
U.N.C.-Chapel Hill
Smith
Amherst
Harvard
Pomona
St. Mary’s (Ind.)
Susquehanna
Columbia

The biggest theme to emerge from our analysis is that otherwise similar colleges often have very different levels of commitment to economic diversity….

Similarly, by looking at schools on the list like Barnard and U.N.C.-Chapel Hill, it’s clear that otherwise dissimilar colleges show similar economic diversity.

How many low-income students actually graduate?

An additional data point that would be informative is the graduation rates for Pell grant recipients at these schools.  That’s a significant measure of how well a college serves its low-income students.

Low-income families can look at these lists and search out other information to help them understand how welcoming a particular college would be for their child.  Schools that partner with the Posse Foundation, a support program for that enjoys a 90% graduation rate for its participants, should be considered.

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David Leonhardt, “Top Colleges That Enroll Rich, Middle Class and Poor, New York Times, Sept. 8, 2014.

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