The Financial Aid Process

By: K.W. Abbott

The financial aid process is comprised of the following four steps:

(1) After applying to college, the student must file the appropriate financial aid applications. The two basic types of financial aid applications are the FAFSA (Free Application for Federal Student Aid) and the PROFILE (the Financial Aid Profile Form).

FAFSA

There are 3 ways to file a FAFSA: (1) by manually completing the form and mailing it to the FAFSA processor; (2) by filing electronically through the college (not all colleges have this capability); and (3) by filing on the internet by contacting:

http://www.fafsa.ed.gov

To receive aid from the federal student aid programs the student must:

* Show financial need

* Have a high school diploma

* Be enrolled in college

* Be a U.S. citizen or eligible noncitizen

* Have a valid social security number

* Make satisfactory academic progress

* Certify the aid will be used for educational purposes

* Not be in default of a federal loan

* Be registered with selective service

* Not be convicted of possessing or selling drugs

PROFILE Form

The Financial Aid Profile form is used by some private colleges to calculate the Institutional Methodology EFC (Estimated Family Contribution). The PROFILE may require the applicant to answer questions in addition to the basic application questions. These questions are known as "Section Q Questions" and unfortunately, there are no instructions on how to accurately answer these questions.

(2) Receive and review the Student Aid Report (SAR). In 4 - 6 weeks (1 - 2 weeks when electronically filed) after filing the FAFSA form, a student should receive the SAR form. The SAR form indicates the student’s EFC on the upper right corner of the first page. Errors or estimated tax information must be immediately corrected or updated on this form and the form re-filed.

(3) Verification of the applicant's information s required of at least 30% of the financial aid applications filed. If a student is picked for verification, there will be an asterisk accompanying the Expected Family Contribution (EFC) amount on the SAR. Verification can vary from merely providing a tax return to sending in detailed family financial information (at some private colleges). Using estimated numbers on the FAFSA or inconsistency of data submitted on the application may lead to an increased chance of being verified.

(4) Receive and review the colleges' Award letters. The Award Letter states the amount of the financial aid and types of financial aid offered to the student. A student may accept, deny, or appeal, any part of award letter.

                                                                                                             National Institute of Certified College Planners

The College Admission Process

By: K.W. Abbott

Students must apply to be accepted at a college. That is pretty obvious, right?? You would be surprised what is overlooked during the college admission process! There are several ways in which a student can be informed early of their admission status:

Early Action - The student can apply to a college by an early deadline (set by a particular college) to guarantee admission without obligating the student to attend that college. The student then usually files for financial at the college under the same deadlines as a regular student applicant.

Early Decision - The student can apply to a college by an early deadline to guarantee admission, but is obligated to attend that college under a binding contract. Early decision applicants file for financial aid early and are offered a financial aid award at an early date. Some colleges make "early decision" binding only if the financial aid offer is mutually agreeable.

Early Notification - The college notifies the student of their admission status as the admission office makes its admission decision. The student applies for financial aid in the same manner as would a regular financial aid applicant.

Early Read - The college computes the student's Estimated Family Contribution (EFC) early and estimates the student's financial aid award. Since this computation usually takes place early in the fall of the year, the student must submit estimated financial information to the college.

                                                                                       National Institute of Certified College Planners

Federal VS. Institutional Methodology EFC Formula

By: K.W. Abbott

There are two formulas by which the Expected Family Contribution (EFC) of a family can be computed: The Federal Methodology and the Institutional Methodology.

All colleges use the Federal Methodology (FM). It is used as the basis for distributing federal financial aid funds. The Institutional Methodology (IM) is used by some private colleges. It is used as the basis for distributing the individual college’s private funds. Federal financial aid funds are distributed on the basis of the FM, even though the college uses the IM to distribute its own private funds.

The Institutional EFC is usually higher than the EFC calculated using the FM formula. The IM takes into consideration items such as the personal residence and family farm assets. The financial aid office also has the discretion to add back certain income items such as depreciation or business losses. The financial aid office can also add back asset items that have been disposed of prior to the filing of the financial aid application, but were in the family’s possession during the year.

The IM formula gives several options to the financial aid office at the university. The family’s EFC should be calculated using both the FM and IM formulas. This is to prevent an unpleasant surprise for the family that calculates its EFC using the FM formula and has a student who attends a college that uses the IM formula to calculate a higher EFC.


                                                                           National Institute of Certified College Planners

College Loans - Federal Unsubsidized Stafford Loans

By: K.W. Abbott

Unsubsidized Stafford Loans are not need-based loans.  If there is no financial need, the student can still receive an Unsubsidized Stafford Loan (subject to the Subsidized Stafford Loan limits).  A student must file a financial aid appication to receive this loan.  The interest ratre and repayment terms are the same as the Federal Subsidized Loan.  However, the interest is not subsidized by the federal government duing the time the student is in college.  Therefore, these loans cannot be considered financial aid when comparing financial aid award letters from various colleges.  However, repayment of these loans will not start until six months after the student leaves college.

In a situation where a student does not qualify for need-based financial aid because the Estimated Family Contribution (EFC) is greater than the Cost of Attendance (COA), it may be more beneficial for the student to borrow using an Unsubsidized Stafford Loan rather than for the parents to borrow using a PLUS Loan. There may be a greater probabiity that the student will be able to deduct the interest as student loan interest from the Unsubsidized Stafford Loan than the parents will be able to deduct the interest on a PLUS Loan.

When the student leaves college and claims himself/herself on the student's tax retune, the income wil probably be lower than the income phase-out limits for deducting the student loan interest,  The student can then deduct the interest paid on the Unsubsidized Stafford Loan.

Since the interest accrues during college years and repayment to is deferred until after college years for an Unsubsidized Stafford Loan, the student will be be eligible for a substantial student loan interest deduction.  The parents' income level may be greater than the interest deduction phase-out limit ($150,000 for married) and therefore, they will be unable to deduct any of the interest for the PLUS loan on their tax return.

                                                               National Institute of Certified College Planners, LLC 

College Loans - Federal PLUS Loans

(Parents' Loans for Undergraduate Students)

By: K.W. Abbott

Federal PLUS Loans are not need-based.  The borrower pays the interest and repayment begins six months after the student leaves college.  However, if the parent is enrolled in college on at least a half-time basis, the repayment may be deferred while the parent is in college.

The interest rate on Federal PLUS Loans is fixed with an upper limit of 7.9%.  If a parent is not ceredit worthy and cannot obtain a PLUS Loan, the student can borow an additional $4,000 per year in Unsubsidized Stafford Loans for the first year of college and $5,000 for the second, third, fourth and fifth years of college (the limit for an indepemdent student).  The amount of a PLUS Loan that a parent can borrow is limited to the Cost of Attendance minus the financial aid award offered to the student.  The amount of financial aid offered to the student does not include Federal Perkins Loan or college work-study funds that the college determines the student has declined.  In other words, the amount of declined Perkins Loan or work-study does not count as part of the student's finanical aid offer when determing eligibility for the PLUS Loan.

These are signature loans in the parent's name.  If the signatory parent (only one parent must sign for the loan) dies or becomes disabled before the loan is repaid, the remaining loan principle balance is forgiven.  PLUS Loans may be consolidated into one loan and repaid over a period of up to 30 years. 

                                                          National Institute of Certified College Planners, LLC

College Loans - Federal Perkins Loans

Federal Perkins Loans are low interest need-based loans (the rate is fixed at 5%) ranging up to $5,500.00 per year.  The interest is subsidized by the federal government until six months after the student leaves college.  The college determines which students will receive this loan and the amount of the loan. These loans are in the student's name and the student will be entitled to the student loan interest tax deduction.


                                                                National Institute of Certified College Planners, LLC

College Loans  - Federal Subsidized Stafford Loans

By: K.W. Abbott

Federal Subsidized Stafford Loans are fixed rate, need-based loans.  A student can borrow $3,500.00 for their freshman year, $4,500.00 for their sophomore year and $5,500.00 for their junior, year, senior and higher years. The interest is paid (subsidized) by the federal government until 6 months after the student leaves college.  Stafford loans carry both life and disability insurance on the student.  If the student dies or becomes disabled the loan balance is forgiven.  These loans are in the student's name and the student will be entitled to the student loan interest tax deduction.  If the loan is eligible to be bought by Sallie Mae and the student makes the first 48 payments on time, the interest rate will drop 2%.



                                                              National Institute of Certified College Planners, LLC

College Selection & Visitation Strategies

College Selection & Visitation Strategies

 College Selection & Visitation Strategies

(College Planning Series)

By: Krystal W. Abbott

The whole picking a college thing is so overwhelming!  Too many choices!  Too many career and major options!  Too close to home . . .  too far away from home . . . too big . . . too small . . . too cold . . . too hot . . . too many strangers . . . too many friends . . . a great athletic program . . . an average or lousy athletic program . . .  too many people from my culture, race or ethnic background . . . not enough!  Let’s start with the below bullet points to get started.

●  List career path(s) or area(s) of interest.

● Begin with 25 colleges

● Rank according to major factors and what characteristics of a college that are important to you

● Analyze & select 4 - 8 schools

● Visit each of the 4 - 8 schools

● Schedule your visits on a weekday

● Ask about admissions, career placement, faculty, students, financial aid, work-study, etc.

● Rank the colleges based on the evaluation

● Determine which college best fits 

You will need to stop, be still and take some time to think about this whole college choice thing!  You don’t want to find yourself in the 25% of incoming freshman who transfer to another university, only to  find themselves taking 5, 6 and 7 years to graduate because of lost credits and additional adjustment time. You also don’t want to find yourself among the 60% of incoming freshman who have no career goal, no plan and no thought of what they want to major in come the fall of their freshman year.  Because of starting college lost, undecided, and confused, 25% of incoming freshman ultimately just drop out all together at some point in their college career. DON’T BE IN THESE STATISTICS!  Just take some time from the high school homework, activities and socializing to stop, be still, and think about your college future.  College is an exciting four year stop in your  journey of success.  Don’t make being a college student a never ending career of confusion!  Just take the time now to stop, be still and think about all the future holds for you!

FAFSA Facts

FAFSA Facts

 7 FAFSA Facts

 (College Planning Series)

By:  Krystal W. Abbott

1. FAFSA stands for Free Application for Federal Student Aid.  Any high school student applying to college must complete a FAFSA form  during the winter of his or her senior year (i.e., roughly between January and March) if he or she wants to be eligible for government aid.

2. A student’s  eligibility depends upon the student’s financial need. The FAFSA application is evaluated by a federal processor. The information on the form will assist in determining the student’s expected family contribution or the EFC.

3. FAFSA form data includes the parent and the student’s income and  asset information, as well as and other family information.

4. The FAFSA is used by most universities to determine the award of grants, loans, or the enrollment in a work study program.   

5. FAFSA funds are awarded on a first come first serve basis so the earlier the completed form is submitted, the better the student’s opportunities are for receiving a financial aid award.  Check with the universities the student is applying to and adhere to their deadlines. Missing the FAFSA deadline will destroy the student’s chances of receiving financial aid.

6. There is over $170 billion in government  aid which is available to help students with the cost of attending (COA) college.

7. Consult with a college planner or surf the college planning websites to assist the student and his or her family with completing the FAFSA form. The objective for the college student in completing a FAFSA form is to demonstrate a low EFC, which would support  receiving a larger government aid award.  A college planner  can legitimately make that happen with their in depth knowledge about credits, deductions and other EFC lowering strategies.  Enlisting the guidance of a college planner will increase the student’s opportunity for receiving a larger financial aid award and potentially save the student and his or her family money. However, a college planner can be costly.  If you have the time and patience to research how to complete the FAFSA form properly, you can achieve the same results for FREE!  College planning websites and blogs like this one are invaluable resources to parents like you and I of high school students who are trying to finance their children's college education without going broke!    

Invest in Your Kids' Future

Invest in Your Kids' Future

 It's Never too Early to Invest in Your Kids' College Future  .  .  . How Cliche' is That!!

By: Krystal W. Abbott

Yes, when we think about investing in our children's post-secondary education we think of saving money in a 529 or a trust or even in an IRA. Believe it or not it is more important to invest in your child than to invest in your mutual funds and savings accounts! What talent does your child possess? How do you figure it out? Enroll them in everything under the sun?? NOT!! Who the heck can afford that! Sometimes its easy to figure out and sometimes its not.

One of my daughters as a small child was cross-eyed, pigeon toed, uncoordinated, had no rhythm, and would trip over a blade of grass. Who would have thought she would end up on the college athletic scholarship track playing volleyball or softball at a D1 university!! Although my daughter did not start out with any coordination, her passion for sports and being a part of a team was more powerful than her physical deficits.

Observe what your children love to do when you don't have them registered or enrolled in some program. Do they sing all the time? Are they drama queens or kings? Do they thump the floor or a piece of furniture to the beat? Will they hit a volleyball against the side of your  house for hours? Do they read a lot? Do they run fast? Do they dribble the ball and shoot hoops outside by themselves?  Do they have an interest in computers and video games beyond just being a user? Do they dance all over the house? Are they doing flips and cartwheels all of the time? Do they have creative ideas? Do they like to draw or paint or create other aesthetically pleasing works? Do they like to knit, sew or crochet? Do they like to write?  Do they like helping others and performing community service? Is your child always advocating their position about something?

What do your kids talk to you about regarding what THEY like to do? Sometimes your kids may think they want to do something and then when you pay your money and enroll them in it, they find that they don't like it. Don't get angry about it and force them to do it because you paid money. Just have them finish out whatever the session term is and move on. As soon as you make them participate in an activity, they will hate it even more. If it is an open ended activity like piano or karate lessons where you can pay every week or every month into perpetuity, I would suggest  encouraging your child to stick it out for at least a year unless it is just really an emotional grind every time it is time to go to the lesson or the session. You don't want to force your kids into participating in extra- curricular activities but you also don't want them being too quick to quit everything either. It is a fine line to walk.  Unfortunately, our rug rats don't come with training manuals so we have to figure out when to let them quit and when to encourage them to continue on with a trial and error analysis.

So often as parents we think we are doing a service for our kids by packing their schedules with a bunch of activities. We are actually doing them a disservice when we do that. Not only are we driving ourselves to the poor house paying for all of these activities and programs, but we are stressing our kids out with too much stuff to do! Not to mention all of the time we as parents are working as taxi drivers running everyone around!  Yes, our kids should be busy doing activities that enrich their minds and their bodies, but we have to be smart about the way we go about accomplishing that goal.   Throwing money at that objective is the WRONG way to go.

By the time they are in middle school, you will have a pretty good idea about your child's interests. Once they are in high school you should have a real handle on what they like to do outside of school. Then the question becomes "can you parlay your child's talent into a means of receiving government or private aid for college?" ABSOLUTELY!!  Whatever your child's talent, there is scholarship money out there just waiting for you! You don't have to be a star athlete or a straight 'A' student  to be eligible for scholarship money. The key is that once you identify your child's talent and passion for it, you MUST support it. NOW is the REAL INVESTMENT part!! The investment comes in the form of money and time. It is going to hurt! It will be painful! It will require sacrifice!! But just think of the big scholarship pot at the end of the rainbow!!

Your kid has worked hard to do well at whatever their talent is. NOW you have to help them kick it up a notch so that their chances of receiving scholarship money increases.With my surprisingly athletic daughter, the investment has been in club volleyball ($3,000.00) and travel softball ($1,000.00) . . . OUCH!! How do you pay for that? . . .  fund raise and sacrifice!  Its just that plain and just that simple. It is the best INVESTMENT in your child's college future!!

Five tips on investing in your child college future:

1. Observe what they like to do at a very young age.

2.  Talk to your child about what they would like to try.

3. Find convenient and affordable (or better yet FREE)programs for your child. College universities and non-profit organizations often offer affordable or FREE educational programs.  Surf the web for such opportunities.

4. Pay attention to the difference between what your kids love to do and what they don't mind doing . . . Look for the passion in what they are doing. If you have to drag them to practice or rehearsals or class, there is no passion there!

5. Once you have discovered the talent and passion for it, support it fully with your time and your money and your creative methods of coming up with the money you don't have!