A Jumpstart Guide:
Rock Solid Advice To Help You
Lower Your Out-of-Pocket College Costs!

Week 9 of 12

What should you do when the school year is finally over? If you’re thinking that this is the time to kick back, relax and enjoy the time you have left before your child starts college then… you’re going to have to think again. It’s true that the deadlines are behind you and the form-filling is done, but what you do this summer can still have a strong effect on your child’s college expenses.

This week’s course has two parts. First, I’m going to talk directly to parents of seniors who will be starting college in the fall; second, I’m going to explain how parents of juniors can already start preparing for their children’s college expenses.

Part I: 5 Tips For Parents Of Seniors

1. Get Your Child Working This Summer.

Obviously, if your child can earn some money to put towards his or her own college expenses, that’s going to make life easier for you and mean more independence for him or her.

Your child can earn around $3,500 per year without affecting their aid package. If they can find summer job and squirrel away money for the upcoming year, it will be a great help for you and a great habit for your child to develop.

2. Give Your Child A Spending Allowance

You should have a pretty good idea how much you’ll need to spend next year on tuition, room, board and everything else. (If you’re not sure how you’re going to handle all those expenses, give us a call at (908) 857-4200. We can show you some very useful financial strategies that could help you pay for college on a “tax-favored” basis without sacrificing your retirement, your savings or your standard of living.)

Now is the time to decide how much spending money you’re going to give your child throughout the year. After all, it’s not just classes and housing you’re going to have to pay for; you’re also going to have to finance books, transportation, social life and all sorts of other things. If you decide to give your child a credit card to meet these expenses, you need to set limits and determine what they can use the card for: is the card just for
emergencies or is it also for parties and Spring Break tickets? You also want to find a way to make sure that their spending stays on track so that you don’t get hit by a giant bill at the end of the month.

Bear in mind that many schools offer “bridge loans” specifically for student emergencies. They would usually have 90 days to repay the money and that can be a good substitute for an emergency credit card.

3. Find “Last Minute” Methods To Meet Your EFC

There’s often a big gap between the amount that parents think they can pay and their Expected Family Contribution (EFC). If you’re still scratching your head and wondering how you’re going to meet these expenses, then give my office a call at (908) 857-4200. We offer a 100% money back guarantee, if you are not completely satisfied, you pay us nothing— there’s no way you can lose. You do have options and some smart planning now is the only way to make the most of the resources you have available.

4. Remember That Applying For Financial Aid Is An Annual Process

When your child is attending college, you’ll still have to fill out the Free Application For Federal Student Aid (FAFSA) and possibly a CSS Financial Aid Profile at the beginning of each academic year. Deadlines still apply, don’t get careless now.

5. Learn From Your Mistakes

While re-applying every year can be a real nuisance, it also means that if you missed a deadline or made some other mistake you only have to live with the consequences for one year. If you can learn your lesson, you can improve the process before the beginning of next year and better your position.

Part II: 3 Tips For Parents Of Juniors

1. Plan Your “Base Financial Year” Carefully

Once you’ve sent in your college financial aid applications, the colleges will start reviewing your income and assets to calculate your financial aid package. This is your Base Financial Year and it starts now. If your child will start college in 2010, then your 2009 figures will be the ones the colleges use.

This means that any financial decision you make this year: accepting a pay raise, refinancing your home, building a new kitchen, buying or selling stocks, and even getting a divorce will all have an impact on the money your child receives as part of their “needbased” aid package.

It is crucial that you plan your finances for this year very, very carefully. You want to make sure that any changes that you make to your finances this year will maximize your child’s chances for financial aid.

How you structure your taxes, where you place your assets, what you liquidate and how you arrange your savings can all increase the amount of money your child receives. Obviously, there’s no universal solution but if you call my office at (908) 857-4200 we’ll create a Customized College Funding Solution that guarantees results.

2. Interest Your Child In Potential Colleges

Your child might still have a long time to make a decision but it’s certainly not too early to begin looking at colleges. Request catalogs and admission applications, and start identifying the criteria that most interest your child. You could even make trips this summer to see some prospective campuses.

If you can get your child excited about going to a particular school now, you can give him or her some extra motivation to work harder and maintain their grades over the next year.

In general, I recommend that students apply to at least six to eight schools. That number increases the chances of being accepted by at least one school, boosting their confidence and giving you more options and negotiating power when you start examining each school’s aid package. It’s not unusual to be able to get schools bidding competitively for students that they want.

3. Try Guestimating Your Expected Family Contribution (EFC)

The EFC is the amount of money that the federal government expects you to contribute towards your child’s education. Whichever school accepts your child, this amount will remain exactly the same.

There are two ways to calculate the EFC: Federal Methodology and Institutional Methodology.

The Federal Methodology is generally used by state schools. Most (although not all) private schools prefer to use the Institutional Methodology. This counts a bunch of other assets, including your home, that are not included in the Federal formula. Obviously, that means an EFC calculated by using the Institutional Methodology may be higher (leaving you with more money to pay) than an EFC calculated using the Federal Methodology.

I realize that all these methodologies and base financial years and so on all sound very complicated. But it’s worth fighting through: the result will be a great education for your child.

You should remember though that even if you make a six-figure income, you may still to find a way to pay the EFC. There are a number of little-known “tax-favored” strategies that can help you meet your required payments without dipping into your retirement funds or changing your standard of living. If you want to find out how, just call my office for more information.

That’s it for this week. We’ll talk again next week.

Best Wishes,

Ian Welham
Certified College Funding Advisor
(908) 857-4200
Email: Ian@CompleteCollegePlanningSolutions.com

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Haven’t read earlier articles in the series?

Go to part 8

Go to part 7

Go to part 6

Go to part 5

Go to part 4

Go to part 3

Go to part 2

Go to part 1

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Ian R. Welham, Certified College Planning Advisor  -  Tel: 973.467.0101