The Burgeoning Financial Aid Gap

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Parents, students, families suffered economically during the Covid-19 worldwide freak-out.  Not only did they suffer from the downturn, so did colleges and universities.

Financial aid gaps that existed before the Pandemic of 2020 will be even greater now and for the foreseeable future.

Schools with small endowments, schools that offer lesser amounts of free money (scholarships, awards, and grants), schools overly dependent on foreign students who may not return, and schools heavily reliant on tuition to cover expenses, will find themselves in highly precarious financial situations.

Accordingly, the aid offered by these schools will be lower.  Lower aid offers result in even higher need on the part of families and students.

The traditional options to cover the gap will be the same as they were before the pandemic.  And those options typically will result in an even higher student debt load.

Let’s face facts – the traditional, conventional ways to pay for an education don’t serve the needs of the family and they haven’t for quite some time.  Traditional and conventional just doesn’t work any longer.

The financial coaches at Vivensure deal in the non-traditional and unconventional.  A college planning campaign designed and implemented with a Vivensure coach:

 ·         helps the family find the best school at the lowest possible out-of-pocket expense;

 ·         shows the family where to shelter their college savings so that it has no impact on financial aid;

 ·         establishes the process for repaying student debt in the shortest possible time; and,

 ·         much, much more…

We await your call…

A Vivensure Preferred Partner
Unleash a Better Life!!
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The Parent Portion of the College Education Expense

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The expense of a college education rivals, and often surpasses, that of a residential mortgage, especially if the cost involves more than one child.  Yes, costs are steep, and with 43% or more of the cost covered by the family (according to Sallie Mae), parents tend to be the principal source of college funds.

According to a February 11, 2019, article in Credible, the average annual: in-state cost-of-attendance on campus at a public university was $25,980; on campus at an out-of-state public university was $41,950; and, on campus at a private non-profit college was $52,500.  Thus, the average 4-year cost-of-attendance for one child, assuming no increases (yeah, right!), ranged from $103,920 to $210,000.

Conventional thinking suggests parents have several options available to them.  Technically, they do.  But, none of the options actually benefit the family.  Four conventional means of savings include the following:

1.       Start a savings account early. 

While it’s never too late to start a savings account, the earlier the better.  Suggested accounts include those at a bank or credit union, as they are insured and safe.  However, the return on your money is negligible.  Even were you to begin an account at conception, the likelihood of having the money needed to cover your portion of the expense is low.

Another suggested option is the 529 College “Savings” Plan.  The drawback that most parents and grandparents overlook is that these are investment accounts, not savings accounts.  Even though there may be some tax benefits, the money can be lost, it’s outside your control, and subject to access and use restrictions.  And, if used for non-qualified expenses, taxes and penalties are imposed.

2.       Complete the Free Application for Federal Student Aid (FAFSA). 

A critical step with respect to federal student aid, it provides access to “free” money (i.e., grants, scholarships, and awards) and qualifies the student for federal student loans.  Be sure to submit the FAFSA, as it may make available aid of which you were unaware.

3.       Take Out a Parent Loan.

Both Parent PLUS loans and private student loans typically are available to parents.  Parent PLUS loans come with one of the highest rates for federal loans, as well as an origination fee exceeding 4%.  Repayment begins within 60 days following distribution of the loan and, as you must apply for a new loan each academic year, you may have four or more loan payments for the better part of a decade.

4.       Take Out a Private Student Loan. 

Private student loans for parents are in the student’s name, but cosigned by a parent.  Typically, they have lower interest rates than the Parent PLUS loans and multiple repayment plans.  And, they can assist in establishing good credit for your child.

Do not withdraw retirement funds from your retirement savings account(s).  Likewise, do not take out a Home Equity Line of Credit or refinance your residence for the cash.  Doing either can have a variety of negative impacts, not only on your retirement plans, but on the amount of financial aid for which your child may qualify.

While many of our clients do utilize one or more of the above options, not one of those options address the financial vehicle we recommend for college savings purposes.  The vehicle we recommend: leaves you with access to and control of your money; is protected from market downturns; has a guaranteed return, compounded annually; and, will not have a negative impact of eligibility for financial aid.

If you’re interested in learning more about the vehicle we recommend, please contact us to schedule your no-obligation evaluation.  We are here to help!

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The Parent Portion of the College Education Expense

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The expense of a college education rivals, and often surpasses, that of a residential mortgage, especially if the cost involves more than one child.  Yes, costs are steep, and with 43% or more of the cost covered by the family (according to Sallie Mae), parents tend to be the principal source of college funds.

According to a February 11, 2019, article in Credible, the average annual: in-state cost-of-attendance on campus at a public university was $25,980; on campus at an out-of-state public university was $41,950; and, on campus at a private non-profit college was $52,500.  Thus, the average 4-year cost-of-attendance for one child, assuming no increases (yeah, right!), ranged from $103,920 to $210,000.

Conventional thinking suggests parents have several options available to them.  Technically, they do.  But, none of the options actually benefit the family.  Four conventional means of savings include the following:

Start a savings account early. 

While it’s never too late to start a savings account, the earlier the better.  Suggested accounts include those at a bank or credit union, as they are insured and safe.  However, the return on your money is negligible.  Even were you to begin an account at conception, the likelihood of having the money needed to cover your portion of the expense is low.

Another suggested option is the 529 College “Savings” Plan.  The drawback that most parents and grandparents overlook is that these are investment accounts, not savings accounts.  Even though there may be some tax benefits, the money can be lost, it’s outside your control, and subject to access and use restrictions.  And, if used for non-qualified expenses, taxes and penalties are imposed.

Complete the Free Application for Federal Student Aid (FAFSA).

A critical step with respect to federal student aid, it provides access to “free” money (i.e., grants, scholarships, and awards) and qualifies the student for federal student loans.  Be sure to submit the FAFSA, as it may make available aid of which you were unaware.

Take Out a Parent Loan.

Both Parent PLUS loans and private student loans typically are available to parents.  Parent PLUS loans come with one of the highest rates for federal loans, as well as an origination fee exceeding 4%.  Repayment begins within 60 days following distribution of the loan and, as you must apply for a new loan each academic year, you may have four or more loan payment for the better part of a decade.

Take Out a Private Student Loan.

Private student loans for parents are in the student’s name, but cosigned by a parent.  Typically, they have lower interest rates than the Parent PLUS loans and multiple repayment plans.  And, they can assist in establishing good credit for your child.

Do not withdraw retirement funds from your retirement savings account(s).  Likewise, do not take out a Home Equity Line of Credit or refinance your residence for the cash.  Doing either can have a variety of negative impacts, not only on your retirement plans, but on the amount of financial aid for which your child may qualify.

While many of our clients do utilize one or more of the above options, not one of those options address the financial vehicle we recommend for college savings purposes.  The vehicle we recommend: leaves you with access to and control of your money; is protected from market downturns; has a guaranteed return, compounded annually; and, will not have a negative impact of eligibility for financial aid.

If you’re interested in learning more about the vehicle we recommend, please contact us to schedule your no-obligation evaluation.  We are here to help!

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How Many Colleges and Universities Will Close in the Next Decade?

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“Now that’s an interesting question,” you’ll say, “coming from a professional college planner.”

It most definitely is an interesting question, but it is one that parents and students should factor into their college planning campaigns.

At one point in the not-too-distant-past, a Harvard Business School Professor, Clayton Christensen, predicted that 50% of colleges and universities would go bankrupt in the next 10-15 years.  In 2013, he and Michael Horn, a writer focusing on education, suggested that, “a host of struggling colleges and universities—the bottom 25 percent of every tier, we predict—will disappear or merge in the next 10 to 15 years.”

In short, an underlying premise supporting the argument – the business model of traditional colleges and universities was broken.

How so?

Annual revenue falls short of covering costs. 

According to the National Association of College and University Business Officers, the average tuition discount rate for first-time, full-time freshmen was 49.9%.  Students were paying roughly one-half of the projected annual cost of an education.

Continuity of business numbers suggest that, for schools dependent upon tuition to cover expenses, a discount rate in excess of 35% places a school in jeopardy.  Multitudes of institutions exceed that percentage.

As of Mr. Horn’s 2018 article, “at least 25% of private colleges are now running deficits” and at public institutions, “even in a good economy, expenses have outpaced revenue the past three years.” (2015-2017)

Demographics have been changing.

The pool of potential students began its decline a few years ago.  The number of college-age students reached its zenith and began trending downward not too long ago. 

Awesome right?  More money for fewer students!  Not so…it’s a disaster in the making…

First, in the competition to attract students, colleges and universities will continue their “arms race.”  For many, that means more faculty, more extravagant facilities, more administrative positions—added expense.  This intensifies their current struggle for revenue (i.e., tuition, government funds, market returns on endowments, and donations).

Second, for those that lose the race and those that experience enrollment declines, their large fixed costs (tenured faculty, debt payments associated with financing their many buildings, and associated building-maintenance costs) are but dead weight pulling them under at rapidly increasing rates.

Disruptive innovation.

Online learning is predicted to wreak further havoc on the traditional business model.

Even before the mass hysteria occasioned by the Covid-19 pandemic, schools had begun utilizing online learning technology.  With the resulting nationwide shutdown of colleges and universities, such learning has become the new norm.

How many colleges and universities will close and over what period of time will this occur?  Will there be outright closures?  Mergers and acquisitions?  Bankruptcies?  Perhaps all three?

There is an old Chinese curse (yes, quite fitting for the time) – May You Live in Interesting Times.  We most certainly do.

Considering the above, it’s likely the 200 most selective schools in the nation are likely to be unaffected.  Many institutions will find clever means of innovation in an effort to ensure their continued existence.

Do you have any idea how your college planning campaign may be affected?  Will the schools in which you’re most interested be able to provide the financial aid for which you qualify?  Will your child be in the best position for purposes of application and admissions?  How will you know if you’ve addressed every facet that could affect your campaign?

We are here to help.  We look forward to hearing from you.

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Don’t Base Your College Search on Sticker Price…

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We have found that both parents and students immediately will eliminate a possible school based solely on “sticker price” – the cost of attendance published by the particular institution. 

And, while the 4-year cost of an education, ranging from $92,000 – $300,000 or more (depending on the institution), represents perhaps the largest lifetime investment parents and students will make (usually parents), larger than even the household mortgage, parents and students can’t afford to dismiss a school outright based on perceived cost.

Unfortunately, the vast majority of high school seniors and their parents, waiting now on acceptance letters and soon to be apprehensively awaiting financial aid award letters, have done just that.  And, by doing so, may have cost themselves thousands, even tens of thousands in financial aid.

Families – welcome to the most expensive time of your lives!!

How much time have you spent on your family’s college planning campaign?  Compare the time spent diving into the college-planning details with the time usually spent planning a family vacation.  What is the cost of a family vacation compared to the cost of a 4-year education? 

Have you saved that kind of money?  Most haven’t. 

Now it’s late into your child’s high school career and you’re sitting there lost, confused, overwhelmed.  A school is chosen based on sticker price.  But, what if a change in majors occurs?  What if it’s not the right fit and a transfer occurs? 

This is much too expensive a proposition for your child to use these 4 years to find themselves.  Proper planning is necessary and should begin as early as middle school, perhaps earlier, but really not later than sophomore year in high school.

Based on published expense, why not dismiss school’s based on sticker price?  Because each school calculates financial aid according to their own formula and the higher-priced schools have much larger financial aid budgets.  Thus, while sticker price may be higher, the higher-priced schools typically have more money to give often making the annual cost of attendance equal to or lower than the lower-priced state school.

Final questions to parents – Have you implemented a college planning campaign designed to find the right school at the lowest price based on academics, geographic location, size of institution, and family budget?  Do you even know what your actual budget might be?  Most family’s just guess.

These questions and more are why we exist.  We help families design and implement the proper college planning campaign based on the individual family’s particular circumstances, thereby providing peace of mind. 

Reach out for a no-obligation consultation.  We are waiting to hear from you!

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Should You Engage the Services of a Professional College Planner?

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Students and their families have a huge decision to make when it comes to their college planning campaign.

Most college-bound students, while highly qualified, aren’t number one in their class, aren’t top athletes, and aren’t considered financially needy. In short, they’re from the average family.

The average family faces an increasingly complex undergraduate admissions process, often increasingly confusing technological issues, and swiftly rising costs-of-attendance. Moreover, they have less and less time to devote to their college planning campaign.

According to Mary Chao in her December 29, 2017 article, professional college planners “… help streamline the process of college admissions, acting as a coach through the process while helping with interviews, essays and seeking out colleges with the right fit that will offer financial incentives, or aiding a student in getting into a highly selective college.”

More and more families find engaging the services of a professional college planner a worthwhile investment of both time and resources, helping families save money in the long run while directing students toward “right fit” schools.

Without doubt, investment in a college education is one of the largest expenses a family will face. If there are two or more children, the investment likely will exceed the expense of a mortgage.

Professional college planners offer impartial advice regarding the admissions process, while helping find the right schools for the student. However, they will not offer written or verbal guarantees of admission, financial aid, or scholarships.

Nevertheless, engaging the services of a professional college planner may be the best decision a family can make regarding their college planning campaign.

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Capturing Brilliance…with Your Application Essay

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What is your essay about?

It’s not about grades, scores, achievements…it’s about

YOU!!!

Schools search for curious, articulate people who can think and write both coherently and intelligently.

More than 60% of schools don’t require an essay; at others, a well-written essay is a must!

Regardless of the essay topic, the real topic is you.

Your readers want a glimpse into your life, your personality, your thought process, your humor. They want to know if you can learn from your experiences.

So, here are a few basic guidelines to follow in developing a strong essay…

Analyze the essay question, carefully noting any and all requirements, especially word counts. Follow instructions verbatim.

Don’t delay; procrastination usually worsens the experience. Talk through your topic, recording your thoughts.

Demonstrate thoughtfulness. You might consider writing about not-so-successful situations where you learned about yourself.

Treat your essay like you were writing a story. Develop a strong story line through outlining your essay.

Bring to life the person revealed by your grades, scores, recommendations, and extracurriculars.

Ask trusted people to review your essay; but, don’t let them change your style or what you’re conveying. Be sure it’s coherent and grammatically correct.

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To Which School Should You Apply?

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You’ve done your research…

You’ve gathered all the information you believe you’ll need…

You’re ready, willing, and able to make an informed, reasonable, and heartfelt decision, picking the right school for you…

Hold your horses, youngster!

Are you truly ready? Have you reviewed the list of potential schools from the following angles?

Will it be an informed decision?

Do you have ALL of the facts? Are you missing any information? Fill in your gaps, finding the needed information online, from publications, or from a phone conversation with a representative of the school.

Will it be a reasonable decision?

Have you actually considered your chances of acceptance at the schools in which you are most interested? While you may be confident about being admitted, do you know if you meet the admission criteria? More importantly, do you know if you’ll be able to afford those schools?

Will it be a heartfelt decision?

Are you basing your choice strictly on measurable data? Or, are you following your intuition and instincts, as well? Follow your gut! Be sure you feel good about the campus and the people there. Be sure the school is challenging and fits your personality.

Will it be the right decision?

Are you sure you’ll be happy attending any school that made your final cut? Be sure to pick 2-3 “dream” schools, provided you have a real chance of being admitted. Pick 2-3 schools that aren’t as selective as the “dream” schools, but meet much of your selection criteria. And, pick 2-3 “safe” schools, schools you know you’ll like and that will admit you.

If you carefully consider each school that made your list of final possibilities, be assured that, regardless how things transpire, you will be attending the right school for you.

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Family Friendly Schools – Where are They?

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Would you be interested in finding affordable schools?

Do you have any idea how to identify “financially friendly” institutions?

Don’t focus on schools that provide the largest aid packages.

Look for schools offering the greatest reduction in the cost-of-attendance – those that meet the largest percentage of financial need, those whose graduating seniors bear the lowest amounts of student debt, and those that award the largest amounts of merit aid.

When researching schools, be sure to answer as many of these questions as possible:

  1. What percentage of students have their need fully met?
  2. What percentage of students receive gift aid, both need-based and merit-based? How much?
  3. What percentage of students received loans and work-study awards? What was the average amount of that aid?
  4. What is the average indebtedness of recent graduates?
  5. What are the number and types of non-need awards?
  6. What is the percentage of students graduating within four years?
  7. Does the school reduce gift aid after freshman year?

The closer your GPA and test scores are to the top GPAs and test scores of the most recent freshman class, the more likely you are to receive a generous aid award.  Just don’t get your heart set on any particular school.

Instead, be sure to have a number of schools to which you’d be comfortable attending. Finally, look for other factors that may impact your financial aid award. Those include:

  1. How do they handle private scholarships and grants? Will they reduce unmet need and loans, will they reduce gift aid, or will it be a combination?
  2. How large are their endowment funds? The stronger the endowment, the greater the likelihood of a generous award package.
  3. Does the school limit or eliminate student loans. Some schools do so.

In any event, if you haven’t started your family’s college planning campaign, there’s no better time than now.

Contact our Professional College Planners to schedule the first meeting of your family’s campaign!

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College Rankings: What Matters Most?

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How important are college rankings?

Is the “best” school really the best one for your child?

Adding one or more of the higher ranked schools to the list of possible schools may seem an obvious move, but ranking should support determinations, not supplant them.

It takes quite a bit of effort to identify schools that will fit and the annual national school rankings provides an “easy way out.”

But, shouldn’t you wonder what led to the rankings, what qualities are valued and how they are measured?

Doesn’t a ranking assume certain qualities are more important than others (e.g., academic strength, student life)?

Don’t some rankings rely on subjective input (e.g., opinions of students, professors, and/or others) while others rely on objective data (e.g., graduation rates, size of endowments)?

Rankings can be helpful if they address what you look for in a school or if they introduce you to qualities you may not have considered.

So…

What ranking matters most?

The most meaningful ranking is the one based on qualities you deem most important, the qualities that make a school the best fit for you!

For assistance with your family’s college planning campaign, contact our Professional College Planners to schedule one of the most important meetings you may ever have.

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