Don’t Get Stung
Trying To
Pay For College
“Ignorance about how to get aid is the #1 reason students drop out of college.”
Looking for the best way to pay for college and still keep your shirt? Will you have to put off retirement for the average of 7 years until your student’s college bill isn’t eating away at your income? Do you have multiple children to educate and not enough money to go around?
Do you have some money saved but would rather keep it for retirement and not use it to pay for college? Is the family home equity going to keep you from getting any grants and scholarships or even a favorable student loan? Which assets that you own will disqualify your child for college financial aid? How can you bulletproof them form the formulas so you don’t have to foot the entire bill?
For example: Did your financial advisor or CPA tell you that a Roth IRA conversion could ruin your child’s chances for grants and scholarships…”When someone converts a regular IRA into a Roth IRA by transferring funds, the amount converted has to be reported as taxable income on the tax return. So the income reported on the FAFSA will be higher than without the Roth conversion, even though the family doesn’t actually have additional income or assets available”. FAFSA Application and Verification Guide 2008–09 AVG99
If you don’t have have the answers to these very important questions you’ve come to the right place.
I am a firm believer that paying for college is as much an art as it is a science. Sure you can borrow, what you need at consumer rates and/or spend down your life’s savings or use an inheritance that was left for you. But it doesn’t have to be that way.
Even if you don’t qualify for need based aid, don’t walk off the cliff like the rest of the sheep. THERE IS A SMART WAY TO PAY FOR COLLEGE AND A NOT SO SMART WAY . If you choose the “not-so-smart way,” it could cost you your retirement.
It’s not a secret that as the cost skyrockets it is becoming more and more difficult to pay for college. In my 20 years in the business, I can testify that almost each and every year the average cost for college goes up over 5.5%. That’s why I say that when a student graduates, the debt service either eats away at your income or it took a huge bite out of your savings – or both.
If you are not aware of the process you need help or you will pay!
Even when well meaning grandparents, for example, want to help out with college costs most times they are disqualifying their grandchild from receiving grants and scholarships. As money is transferred, gifted or even when it is held jointly in a child’s name, the college sees this as money to be used for education. You can eliminate these assets from the formulas and get your fair share of grants and scholarships if you take corrective action.
Below is a short list of assets that will hurt your child’s chances of receiving college scholarships and grants if held in either the student’s name or held jointly:
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Cash
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Money market funds
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CD’s
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Stocks, bonds, mutual funds or other securities or commodities
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IRA’s
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College savings plans
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Real Estate
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529 Plans
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Trusts
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Life Insurance Beneficiary
A gifting person might say, “Well, that’s what these assets are for- That’s why I gave the money to him/her- so she could pay her tuition”. That’s all well and good, however, that money can still be gifted to the student and NOT have it count against him/her for receiving those coveted grants and scholarships.
This is the free money you don’t have to pay back so that on graduation day the asset that the student received will still be in their accounts. That’s having your cake and eat it too! You just need to know the system AND know what you are doing.
The smart way to eliminate any savings from being used in the calculations- including gifts from friends and relatives or other assets you or your child might have- has entire chapter dedicated to it in my e-book, The Ultimate Guide To College Financial Aid.
Here, I explain step-by-step in layman’s terms what to do if you or your student has savings accounts, bonds, or other assets or perhaps has a grandparent or relative who is in a position and willing to help pay for college. You will learn that the people you trust most and who probably have good intentions, don’t really know the secrets of how to handle the situation. In fact, what happens most times is the asset ends up disqualifying the child for money he could have received for college.
What is at stake here is tens, and very possibly hundreds of thousands of dollars in some cases where there may be several children to send to college or where there is substantial savings accounts that you want to protect or well-to-do grandparents having good intentions. This shouldn’t be left to anything less than a knowledgeable, professional expert in the field of college financial aid and funding.
Let’s face it; anybody can fill out the FAFSA or other financial aid form and hope for the best. It’s knowing what to do beforehand that can save you tens of thousands of dollars. Imagine your college financial aid package increasing by $10,000 in grants and scholarships and you still get to keep your assets. Over a four year period, that’s $40,000 you would have spent- after taxes- not to mention you still have your savings in tact. That’s an $80,000 swing of events. What could be better?
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