Lessons Learned after Sending Four Kids Off to College- PART 2
Lessons Learned after Sending Four Kids Off to College
How do you pay for your kids to go to college? In this blog, we will dig deeper into the financial aid process and how to evaluate different schools.
1.Fill out the FAFSA (Free Application for Federal Student Aid)as early as possible even if you don’t think you will qualify for any financial aid.
I know, no one likes completing the FAFSA but every school requires it. If your child receives a merit scholarship you may still have to complete the FAFSA form each year even though the merit scholarship had nothing to do with financial aid.
Reach out to me if you need help completing the FAFSA.
2. Understand How Your Assets affect Financial Aid.
Parents worry about how their assets might sabotage their chances for need-based aid. Aid formulas typically don’t consider retirement assets for financial aid purposes. The FAFSA form doesn’t ask about the value of a family’s retirement accounts.
The FAFSA, which is universally used by schools participating in the federal financial aid system, also doesn’t ask parents if they own a primary residence. Consequently, home equity won’t hurt your chances of receiving financial aid.
In addition, the aid application isn’t concerned with the assets of family-owned businesses with 100 or less full-time employees.
3. Some Colleges/Universities require the CSS/Financial Aid PROFILE.
Four hundred schools, nearly all private, use an additional aid application called the CSS Profile which takes a much deeper look at family finances. This is a very difficult form to complete so call me if you would like my assistance in completing the form.
They request that you send your supporting tax documents to a PO Box. I was uncomfortable with that so I sent the documents FedEx directly to the schools. Call beforehand because not every college will allow you to do this. While PROFILE schools also ignore retirement accounts, they do inquire about home equity and family-owned businesses.
4. In my opinion, it is very important for the parents to stay very involved in the process.
I don’t agree that the student should go through this process with little support. There is too much at stake and the expense of college is too much of an investment. I know some guidance counselors and parents will disagree with me. This is just my opinion. I think your child (and they are only 17/18 years old) will make a better decision if you all dig deep into the statistics and all are involved in the decision. Without guidance, students put too much weight on their “gut feeling”, look of the campus and the cafeteria food.
5. Know the Statistics that Count.
Since we were dealing with twins heading off to college, it became even more important to stay organized in comparing schools. It also became imperative to keep track of what applications, essays, FAFSA and CSS Profile forms were submitted and received. We kept an excel spreadsheet with the following information:
· Room and Board
· % of students who graduate in 4 years and then in 6 years
· Retention rate-% of students who stay after Freshman year
· Range of GPA admitted
· Range of ACT or SAT Scores admitted
· % admitted
· # of students
· safe, target or reach school
· Interested major/minor offered
· Location, cost of travel
· Likelihood of internships
· Student/Faculty ratio
· % of students who get scholarships
· % that get financial aid
· ROI or Best Value
· CSS Profile required and completed
6. Check out the college's ROI or whether they are considered a “Best Value”.
The following website provides the return on investment (ROI) for colleges. The results may surprise you. However, if the college or university offers mostly technical majors (science, math, engineering etc.) that will also affect the ROI. It is interesting that some of the most expensive schools do not fare as well as more modestly priced schools. www.payscale.com/college-education-value.
7. Check out Net Price Calculators.
Net price calculators are invaluable new tools that are now having a dramatic impact on higher-education practices.
A net price calculator will provide you with a personal estimate of what a particular school will cost after scholarships or grants are subtracted. To use the calculator, you will need to have information from your latest tax returns and investment statements.
The federal government has mandated that all schools maintain a net price calculator on their website. Often the easiest way to find the calculator for an institution is to Google the name of the school and “net price calculator.” If the net prices are way beyond your budget, you can then search for schools that may be more affordable.
8. Decide on your family philosophy toward paying for college when comparing offers.
Know how much you are willing to spend towards your child's education and how much you expect them to pay. Decide on how much debt, if any, you are willing to have your child take on after graduation. Discuss this with them early on in the process. Discuss early whether you expect them to work during the school year or summers to help pay as well.
We found it very helpful to multiply the tuition and scholarships by 4 (hopefully they graduate in 4 years). A $10,000 tuition difference in one year may not seem like such a determining factor. However, $40,000 may influence your decision.
9. Their debt is your debt.
Many have written that they think that student debt is the next bubble and I tend to agree. According to JP Morgan Asset Management, student debt represents 9% of all debts in America. That is higher than credit card debt and auto loans. Few student loans allow the student to borrow alone. The parents are often cosigner or loan guarantors. Student debts are the only debts you cannot walk away from even in the event of a bankruptcy. Thus, be realistic about how much you all can afford to pay back. Students with too much debt usually have to delay going on to higher education, saving for a house, retirement or starting a family.
10. Discuss the major they are interested in studying and the likelihood and difficulty paying off their debt based on the salary they expect to earn.
Encourage your child to research the earning potential for the major they are interested in studying. If they want to go for a major that has low earnings potential, they need to be realistic about the debt they take on.
Please call me if you have any questions in regards to any of these issues. I'd be happy to discuss it with you further.