By Lisa Shrewsberry
For hundreds of graduating seniors, the countdown for heading to college this fall has already begun. Rugs, coordinating curtains, ample supply of Cinnamon Toast Crunch and laundry basket aside, if parents are just now beginning to plan for how they’ll pay for college, they may be too late for outside assistance. Loans, work-study programs, weekend and summer employment — all are self-help options still in play.
According to Shawn Schuyler, director of College Planning with Bill Kinder and Associates, most seniors are getting their financial aid award letters back now from their completed and submitted FAFSA (Free Application for Federal Student Aid). When affording college is the topic, it’s a matter of the early bird getting the worm — on all fronts — advice that can certainly help this year’s high school juniors and earlier grades with sites set on higher education.
“When filing a FAFSA, parents should start the first day in January of the year their student will attend college. They will be first in line for financial aid decisions from the colleges at that point.”
According to Schuyler, the college really makes the bulk of the decision as to who gets what in available aid. “So if you are early in line, there’s a much bigger pool of aid available for the financial aid office to distribute.”
For current juniors, Schuyler suggests, before parents complete the FAFSA next year, they have time now to consult their child’s school guidance counselor for available aid and for performance and field-related scholarships available. Making an appointment to see a financial adviser with experience in doing college planning to discuss strategies concerning parental assets is also a good idea.
“If parents have a sizable CD (certificate of deposit), for instance, it will be counted as money they are expected to spend toward college when their aid calculations are made.”
Speaking with a college planner at least a year out will give parents time to review assets, their intentions for the assets and alternative vehicles for keeping them out of the financial aid calculation.
“Funding retirement is really the same problem as funding college — there’s only one pool to reach into for both.” Sound financial advice can help couples plan for both retirement and college for the kids. “Planning could be done in such a way as to create money for college and an income stream for you at retirement age.”
Not only is there a single pool of money to fund both objectives, but the pool is getting more and more shallow. Funding an education, according to Schuyler, beats the heck out of an increase in the cost of milk, bread and gasoline.
“It’s like inflation on steroids. Tuition and fees for public four-year universities have outpaced inflation by approximately 70 percent over the last 20 years. There’s nothing else that costs an inflation-adjusted 70 percent more than it did 20 years ago.”
And if parents are counting on scholarships and grants to get their children through, that pool is also receding.
“Only 3 percent of aid you don’t have to pay back, free aid, comes from private sector scholarships. The rest comes directly from the colleges.”
A little known fact is that colleges will compete for good students. Schuyler suggests when romancing several different colleges, even if there’s only one a student really wants to go to, he or she shouldn’t lay all the cards on the table early.
“It’s process-oriented. Don’t tell yourself you make too much money to qualify for aid. Yes, financial aid calculations are based on the parents’ income and assets, but if you show a college that you have a good student and that they have competition, you may get a bigger slice of the pie.”
Schuyler tells the story of a student who had a heart set on an expensive and well-known private university.
“This was an awesome student whose parents were told by an adviser that they made too much money and to not file a FAFSA. The student should have filed anyway and (on the FAFSA) listed at least six other high profile universities of interest, but instead applied under Early Acceptance and accepted the school’s offer of zero financial aid on Early Decision.
“By the time the client came to me for help, it was already too late. It’s like walking onto a car lot and saying, ‘Hey, there’s the car I want. Is that the price there on the sticker?’” Tuition, contends Schuyler, is the ultimate sticker price.
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Here, a few tips from the trade suggested by Schuyler. For more comprehensive and individualized analysis, seek the help of a financial counselor with experience in college planning.
-- Check now with the school guidance counselor on available scholarships and for advice on the academic and social activities necessary to apply to certain colleges and for certain disciplines. Counselors can also help provide resources for filling out the FAFSA.
-- Remember, neither colleges nor banks have a keen interest in helping people secure college “discounts.” As with retirement planning, financial planners are great primary or secondary sources for exploring options at no upfront cost.
-- There’s a lot a student can do to position him or herself for more financial aid, like showing a clear, well-defined scholarly interest and doing the right amount of the right extracurricular activities.
-- It’s never too early to plan, depending on your financial capabilities. “If you have a baby you want to one day go to college, that’s an awesome time to start. One way to do it is to look at funding with life insurance.” The policies advertised on television aren’t necessarily the best products, says Schuyler, “but life insurance with a cash value that grows when the market is up but does not lose money when the market is down can be a good strategy if it is within your budget and is suitable for your overall financial goals.”
-- 529 Plans - “If you are using a 529 plan to save, you need to be comfortable with the various levels of market risk attached to the product. An experienced financial adviser can discuss all the savings vehicles available for advanced college planning.” There’s nothing wrong with relying on a 529 plan as a savings vehicle, but without a crystal ball to predict how the market will perform during the accumulation period of the plan and before it is time for your children to attend college, you should always have a Plan B. “There are no guarantees,” says Schuyler.
— For more advice on college funding, contact Shawn Schuyler at Bill Kinder and Associates, 304-250-0250.