How to Select the Right College For Your Child, and Your Finances!
It's an exciting time of year. Springtime is on its way, and most graduating seniors are receiving admissions letters from the schools to which they've applied! At this point, you have probably reviewed that list of colleges and universities where your child could be pursuing their dreams of higher education... and you are also aware that the upcoming decisions for your family are of the utmost importance! Making the choice of where to attend college is not an easy task, under the best of circumstances. This can be a weighty decision for the student, who considers such matters as academics, geographic location, future professional goals, and (of course) social situations... and it is every bit as demanding for the family, especially with the enormous effect it can have on your finances. This is one of those life situations where, working together, you and your child really need to make the right choice. There is a lot riding on this decision. Obviously, the money factor cannot be ignored in choosing a school. The anticipated cost of attendance can move a school up (or down) your list of possible schools faster than just about any other consideration! However, "cost" can be a tricky matter, as some schools which give parents an initial tuition sticker-shock may not turn out to be overwhelmingly expensive in the long run. Remember to look beyond the dollars and cents to see what each institution is actually offering to your child... both in the way of financial aid, the actual expenses for the school, and any assistance available to your child from the school. In order to assist you in analyzing these options, I am pleased to provide some specific points to consider as you review the college offers available to your child. As you focus in on each school, please be sure to go over the award letter information with a fine-toothed comb. Here are four specific areas to hone in on: For better or for worse, you're probably now on a first-name basis with your Expected Family Contribution (EFC). As you are likely aware, this is the amount that the Federal Government has dictated for you to pay the school. Bear in mind that there are two sides to this figure - your side, and the schools' side! Most people are convinced that their EFC is too high to be manageable, while most colleges (especially spendy private schools) will look at the same figure and deem it too low. This could mean that your award letters may ask for even more money than your EFC indicated! Pay very close attention to how the college has listed your EFC, and whether or not it is correct. Note that each school making an offer to your child will provide an estimate of Total Annual Expenses. These are generally quite accurate, as the school usually goes to great lengths to update these numbers annually. However, while tuition and fees are the same across the board for all students, the actual living costs can vary wildly, depending on how and where your child plans to reside during the school year! Lifestyle will be the determining factor, here. Students who plan to dine out at restaurants and live on their own (not to mention feed any shopping habits), will have considerably higher expenses than a student who choose to live and eat at home. In fact, if your child can stay at home during school, you can remove rent and food from the Total Annual Expenses. When you determine these details, calculating this figure shouldn't be a challenge. With the EFC and TAE in mind, you now need to determine how large of a financial gap you're facing - figure the difference between your EFC (Point #1) and the TAE (Point #2), and you will have arrived at your individualized financial need for that school. Note that this will probably be different for each institution! The school will probably have calculated the financial need amount for you, because they utilize this number to arrive at any financial aid package they will provide for your child. It's nice to know where the school is coming from in determining their amount of assistance. While all of the above are important figures, probably the most vital information you will find in these offer letters will be the scholarships, grants and loans available to your child! These should be spelled out in the award letter from each school, and in addition to scholarships may include special loans, grant programs, or even work/study aid. Of course, some of these are "free money," and others require repayment, so the offers are not all the same. This next bit of advice may seem like overkill, but I cannot emphasize it enough - regardless of whether or not your child has decided to attend any school, you should absolutely accept every single financial aid offer your child has received! There is a very real difference between accepting and actually committing to receive these offers, and you don't want to block your child from the possibility of any aid available down the road. You see, significant financial changes can occur between the time that your child accepts an offer and the actual start of school. Until you have to make a final decision, all sorts of things could happen: additional money could become available through family, private scholarships, or other sources... a parent might land a new job, or even discover how to arrange financial assets in a specialized manner to free up the money for a school. With even the possibility of changes like these, your best bet is to accept all financial aid offers EARLY, and then you and your child can begin focusing in on the final choices. FINALLY, IT'S TIME TO CHOOSE! "Education costs money... but then, so does ignorance." Baron Claus Moser The old adage that "money isn't everything" is especially pertinent when it comes to selecting a school. When making a college selection, money should never be the first and only thing on your mind. The inherent value in a solid education comes over the many years of your child's professional life, and can result in hundreds of thousands of dollars of earnings. I always like to urge parents to take a long-term view at the immediate investment in their child's future. Just like any other investment, however, you can only actually invest resources that you can access! Reality dictates that money will play a role in where your child attends school. With that reality in mind, grants are a terrific way to pay for school! If your child is offered grant money in an award letter, that is definitely worth highlighting, because grants do not have to be paid back. In addition, grants do not require any additional time or effort from your student, like funds available from work/study programs... and they do not require future payback, like funds available through low interest loans. Focus on the breakdown of each school's offer - the more "free money" they can provide in their offer, the more attractive that offer may soon become! For example, consider that College ABC makes an offer of $20,000 in award money, while College XYZ offers only $15,000. That's a no-brainer, right? Well, maybe not. If College XYZ is offering most of that money in grants and work-study funds, it could be a better net choice in the long run, especially if College ABC's offer consists mostly of low-interest private loans! Calculate out the length and payoff costs of any loans in a financial aid package before you decide that one offer is more generous than the rest. The logistics of college attendance are also something that must be reviewed. If your student is attending college in another part of the country, there will likely be plenty of airline tickets for summers and vacation plans. If the school is in a high-cost city, such as New York, Boston, or Los Angeles, the realities of expensive rent and other considerations will soon add to the cost of attendance. Breaking down the cost of living in each geographic area will give you a better idea of the real-world costs for your child to attend school there. You're now in the home stretch of deciding on a college with your child! We know that it can be both an exciting and a stressful time, but if you are making these decisions with solid information, it can help to smooth things out considerably. So, during this period of uncertainty, we would like to offer our expertise in the area of college funding and financial planning to assist you in clearing up any confusion regarding financial aid awards, and narrowing down your final college choice. We are experts in helping families to arrange financial assets in such as way that can provide that all-important money for college... and do so on a tax-favored basis. Of course, this plan is not designed for every family sending child to college, but under the right circumstances it could be capable of providing your child with the resources to attend a truly outstanding school that you might have thought your family could never afford! YOU'RE EITHER ALMOST THERE...OR YOUR JOURNEY IS JUST BEGINNING! If you are the parent of a graduating senior, you are probably now experiencing the excitement (and relief!) of knowing that this incredible journey of college selection is about to end. You have taken every step you can to maximize the financial aid package for your child. If your child is a junior, however, you can start right now to make the choices that will lower your EFC and help to get the cost of college for your student down to something that may be more manageable for you. In fact, you may be surprised to learn that in the eyes of colleges and universities, this is your "base year." Yes, the income your family reports this year will affect what the colleges expect you to pay towards your child's education. Your Adjusted Gross Income, plus your assets, will be used in these determinations. Usually, the lower the value of your assets when applying for financial aid, the lower your EFC turns out to be. However, some schools will use an Institutional Methodology, which includes assets such as your home, to calculate your EFC. Living in an expensive house, for example, can boost your EFC higher, even though that money is not available because it is tied up in your house! You may find that this happens a lot with private schools, especially, and they may even count any pre-paid tuition plans against your EFC. This doesn't mean that you need to avoid private schools, however - you may find that their findings can be negotiated, and they may have private aid to offer, as well. In addition, as we mentioned above, your home and other assets can sometimes be arranged to help the college funding and improve your tax situation.
