We thought it might be helpful to give you answers to your most commonly asked college financing questions.
This article will be divided into two parts. Part I will deal with commonly asked questions for college-bound high school seniors. Part II will give you answers to your most commonly asked questions if you're the parent of a high school junior.
So, without further ado, let's get started...
Part I - Commonly Asked High School Senior Questions:
Q: We recently accepted a financial aid package at my child's #1 college choice, but we still have to come up with $12,000 out of our own pocket. We don't have any idea how we're going to pay for this out of our current income?
A: Luckily, there are other options available instead of paying for those expenses out of your current income.
To start with, if you have saved money in your child's name for the purpose of paying for college, now is the time to use it. Money saved in your child's name is weighted much more heavily in the financial aid formulas, and probably increased your "out-of-pocket" contribution for the first year. Don't make the same mistake for year two through four. Use your child's savings first.
Another option is to borrow from either the PLUS loan program or from a commercial loan program. The only problem we have with these programs is that the interest on these loans is not tax-deductible.
In most cases, you would be served far better by taking out a tax-deductible home equity loan which allows you to "tax deduct" your interest payments. If you would like more information on this option, give us a call at 631-864-3688.
Q: Do we have to re-apply again next year?
A: Absolutely. You have to re-apply for financial aid every single year your child is in college. This is because the schools want to know if your income or assets have changed significantly either upward or downward.
This can work in your favor if you have a business reversal, medical problem, or any other financial hardship. It can also work against you if your income increases.
Q: If my income and assets remain the same, will I get the same exact package every year my child goes to college?
A: Unfortunately, it depends on the school your child is going to.
Some schools have great policies of renewing financial aid packages from year to year as long as your financial situation doesn't change significantly.
Other schools use "Bait and Switch" tactics by offering excellent first year packages, and then mediocre to awful packages in years two through four.
Make sure you find out what the school's policy is on renewing financial aid packages after the freshman year.
Q: We still haven't filled out the financial aid forms, are we too late?
A: Yes, you are late, but you can still fill out the forms. You can actually fill out the forms all the way through May of 2001. The only problem is that you probably won't get a lot of financial aid since aid is awarded on a first come, first served basis.
If anything, expect to be offered a subsidized Stafford loan, and possibly a Pell Grant if you have extreme "need".
But, there's a more important reason for you to apply. Many colleges will not offer you financial aid in future years if you do not apply for funding for your child's freshman year. Based on this alone, we highly recommend filling out the financial aid forms as soon as humanly possible.
Part II - Commonly Asked High School Junior Questions:
Q: My child is a junior in high school - is it too early for us to start planning on how to pay for her education?
A: Actually, it's kind of late for you to be starting your planning. If we had our way, parents would start the planning process as soon as their children were born, but we all know this rarely happens.
At the bare minimum, you should start your planning in your child's junior year of high school, preferably before January. The reason is that the college funding formulas are based on your previous year's income, which in your case is the 2000 tax year if your child plans to attend college in 2001/2002.
Therefore, any financial moves you make right now will affect your eligibility for college funding.
So, take our advice - start your planning right now, and be careful who you listen to. A good college funding advisor can show you how to legally and ethically plan out your financial situation before you apply for funding next year. This can significantly increase your chances of receiving funding.
Q: OK, I'll start my planning now, but what can I do?
A: To begin with, you can find out what your "Expected Family Contribution" is to determine what the minimum amount of money you'll be expected to pay at any school. This way, you can start saving to cover your minimum contribution.
Next, you can start doing income and asset planning strategies to make sure you set up your finances in the most favorable terms possible. You need to understand which assets are included versus excluded, how to value your home, where to keep your assets, should your child get a high paying summer job, etc.
Proper planning now can have a significant impact on your eligibility for funding when your child starts applying for college funding next year.
Q: I've heard there are millions of dollars of unclaimed private scholarships out there-how can I find them?
A: First of all, let's debunk some myths. Private scholarships only make up 1% of all the money available for college funding. The other 99% of funding comes from the Federal government, the state you live in, and the colleges and universities themselves.
Private scholarships do exist, but don't plan on using one to finance your child's college education.
We recommend spending a lot more of your time focusing on "real" forms of funding first, and then if you want to take a shot, go ahead and do a private scholarship search. Just don't spend a lot of time or money on a scholarship search service, and definitely don't expect to get a lot of money from these private foundations and organizations.
Be forewarned - your chances of getting a private scholarship are about the same as winning the lottery!
If you're still confused, we'd be happy to see if we can help you. If you're the parent of a college-bound high school senior, we can still show you some cost-saving strategies to help you pay for your "Family Contribution" so you don't have to spend your life's savings, or pay for tuition out of your "after-tax" income.
Or, if you're the parent of a college-bound high school junior, you can get a copy of our FREE Report, "7 New Ways To Beat The High Cost Of College" by sending us an email with your name, address and phone number to Lernerespo@aol.com. Finally, you can call our office directly at 631-864-3688 for a schedule of our upcoming FREE College Funding Workshops in your area.
Jan and Tony Esposito