Maximizing Financial Aid

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Considering the ever-increasing cost of a college education, maximizing financial aid is a required component of every family’s properly designed and implemented college planning campaign.

Recent FAFSA (Free Application for Federal Student Aid) changes moved the initial submission date from January 1 to October 1 of a high school student’s senior year. This change also required income earned a year earlier to be reported.

For example, students beginning college in Fall 2018 must report income from 2016 rather than 2017 (as previously would have been required). Accordingly, financial decisions designed to improve eligibility for financial aid must be made prior to January 1 of the student’s sophomore year in high school.

Contact us for assistance in designing and implementing your college planning campaign, not only with respect to the proper financial decisions, but also with respect to identifying the right schools based on academics, geography, size, culture, and the most favorable financial aid formulas.

Most Families: Less than $10,000 Saved for a College Education

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Even a 529 Plan, an account that allegedly helps parents save for the cost of a college education, may not be enough.

Frankly, it likely won’t be.

Figuring out how to cover the cost can be, and often is, a daunting task. So daunting that many find it absolutely overwhelming.

Most families have saved $10,000 or less, an amount barely satisfying one year’s tuition and fees, let alone a family’s portion of the annual cost-of-attendance (e.g., tuition, fees, room, board, books, transportation, personal expenses, etc.).

A Student Loan Hero survey of 1,035 families saving for college, conducted January 23-24, 2018, found that:

57% have saved $0-10,000
22% have saved $10,001-20,000
9% have saved $20,001-30,000
5% have saved $30,001-40,000
3% have saved $40,001-50,000
4% have saved $50,001 or more

According to Andrew Pentis of Student Loan Hero, “The price tag of tuition is rising… That makes it all the more important for parents to choose the right vehicle to grow their college savings. If they wait for the teenager to navigate the college financial aid process, they’re late to the game.” In fact, if their child has entered junior or senior year of high school, they are well past “Crisis Planning Mode.”

While a 529 Plan may be the right vehicle for a specific family, a 529 Plan is not a savings vehicle. Rather, it is an investment vehicle, tied to market fluctuations, meaning a family could end up with much less than expected or needed when the bill comes due. Moreover, the balance of the 529 Plan negatively impacts financial aid eligibility.

Contact us for more information regarding the proper savings vehicle, a vehicle that protects the amount contributed and the earnings thereon with no impact on financial aid eligibility.

5 Reasons a Federal Parent PLUS Loan may be a Mistake

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Today’s parents are borrowing more, and more often, than parents of years’ past to help pay for their children’s educations. As a result, managing a federal Parent PLUS Loan, or other student debt, often competes with other important family priorities.

With so much on the line, making the best borrowing decisions is crucial!

Here are a few reasons a federal Parent PLUS Loan just doesn’t make sense…

The Student hasn’t Hit Their Borrowing Limit.

Before taking any parent loan, and especially a Parent PLUS Loan, be sure your child has maxed out all student loans available for the academic year. Interest and fees on student loans are significantly lower, meaning the student loans will cost less over time.

Private Student Loans could be Less Expensive.

Interest rates on these loans often are lower than the rate charged on Parent PLUS Loans. Many lenders don’t charge origination fees; but, if they do, such fees often are lower than that levied on Parent PLUS Loans.

The catch: the rates paid on the private student loan will depend on the parent’s credit score and other qualifications.

.Shop around to see if a private student loan would cost less than a federal Parent PLUS Loan.

You want Your Student to Share Responsibility.

The unfortunate reality inherent in almost every family’s college planning campaign is that parents need to help cover the cost of attendance. For families who want the child to share responsibility, cosigning a private student loan may be the option. However, this option is available only on private student loans.

Bear in mind, however, even though a parent helps the child cover the cost, if the child fails to pay for any reason, the parent is responsible for repayment of the loan.

You’re Helping Your Child Pay for Grad School.

In this case, private student loans will be the only option. However, delay this option until all student options have been exhausted.

Like undergrad students, grad students might have access to federal aid and student loans that are a better deal. Evaluate all options to identify the least expensive means of financing the degree.

You Can’t Afford the Payments.

If considering a federal Parent PLUS Loan, be careful. Borrow only what you can afford to repay.

While the limit on Parent PLUS Loans focuses more on what the education costs than ability to repay, private lenders consider debt-to-income ratio when evaluating applications. Parent PLUS Loans have no income requirements.

Parents can borrow the amount needed to cover their child’s educational expenses. But, just because it’s available doesn’t mean you can afford it.

Be sure payments can be managed when added to the current debt scenario, as it’s likely you’ll be paying on that debt for the next 10-14 years.

Contact our Professional College Planners for information about the debt elimination program we build into the college planning campaigns we help families design and implement.   We provide parents peace of mind, knowing they have a plan that won’t negatively impact their future for the benefit of their children.

 

Things to Know About the ACT

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While it’s just a single factor in determining chances of admission, ACT scores help admissions counselors identify how well you’ve mastered high school content compared to other high school students.

What’s Covered?

The exam includes four multiple-choice tests – English, Reading, Math, and Science. Spanning almost three hours, unless the optional 40 minute writing portion is needed for admission, the ACT measures academic knowledge and skills that should have been acquired through the high school curriculum.

English: This section measures mastery of effective writing. It requires evaluation of several essays and responses to multiple questions about each one. Focus will be on conventions of standard English (punctuation, usage, sentence structure), production of writing (organization, cohesion), and knowledge of language (word choice, style, tone).

Reading: After reading several prose passages that represent the level and kind of reading required in first-year courses, questions will test your understanding of information both stated and implied. It requires evaluation of the author’s reasoning, central ideas/themes, and supplied evidence.

Math: This sections measures skills typically acquired by the beginning of 12th grade. You’ll solve a wide-range of problems covering functions, geometry, statistics and probability, algebra, and modeling. Problems may require more than one math skill, such as averages, medians, and percentages.

Science: This section gauges interpretation, analysis, evaluation, reasoning, and problem-solving skills. Following review of several sets of scientific information, you’ll analyze experimental designs and scientific results, compare alternative viewpoints and hypotheses, and interpret data.

Writing: This section measures writing skill emphasized in entry-level composition courses. Following your reading three points of view on an issue, you’ll evaluate each perspective, present your position on the issue, and explain how it relates to/differs from the other positions presented.

Scoring

The score is based on the number of questions answered correctly; no deductions occur for incorrect responses or questions left blank. The composite score is the average of the four sections, rounded to the nearest whole number.

If the writing portion is taken, that score will be included in a separate English Language Arts score, which is the average of the scores on the essay and the required English and Reading tests.

When Should the ACT be Taken?

The ACT (and SAT, in order to see which exam better suits the student) should be taken no later than Spring of junior year in high school. This will leave time for 1-2 more exams following a study course. Once the stronger exam has been identified, focus on the study course and upcoming exam dates for that exam. Be sure to identify the last possible date a score will be accepted by each of your schools of interest.

Sending Scores to Schools

Upon registration, you can choose up to four schools at no cost to receive your scores, adding additional schools for a fee per school. There is an additional fee per school for any scores sent after testing occurs. If taking the test more than once, which should be part of your college planning campaign, you can choose the test date the schools will see (unfortunately, you can’t choose scores from different dates). Fee waivers based on income are available.