How do you maximize college financial aid?

[HeatherC]

The other college thread got me thinking about this. We have 3 kids, oldest is in 8th grade so we are five years away. We put money away for college each month, but it is still peanuts to what we will need.

So I started wondering if there are things they look for in awarding aid? Are families better off with a bigger mortgage and no other debt? We have excellent credit with very large credit lines...that are not used. We didn't ask for them, the credit card companies have just given us huge lines of credit. Should we reduce them now?

I'm a substitute teacher part time. Should I stay part time or go full time as far as aid is concerned? (Not talking about all the other reasons to go full time in regards to this topic.)

Things like this I'm curious about. All those things that we should do or know about now to avoid the "we should haves" in a few years.


Any advice would be great!

Appreciate any input from all you seasoned pros.

Thanks!

 

[Christine]

Receiving grants (Pell grants) is pretty rare. You must be fairly low income to get any "free" money.

Based on what you've described, you will be offered a combination of loans--some that will be made available to your child in their name and then some that will be in your name.

Basically all you will get is loans. Determinations are made on your household income, mortgage amount, and number of other kids in college also factors in.

 

[powellrj]

Receiving grants (Pell grants) is pretty rare. You must be fairly low income to get any "free" money.

Based on what you've described, you will be offered a combination of loans--some that will be made available to your child in their name and then some that will be in your name.

Basically all you will get is loans. Determinations are made on your household income, mortgage amount, and number of other kids in college also factors in.

Thats what we have found too. A couple of DS friends have gotten huge scholarships, but its very unusual for kids in our state going to a state school. I know one of DS teachers kids got a nice scholarship to a private school and found that even with the scholarship, it was still cheaper for them to pay for the state school.

 

[msmayor]

Receiving grants (Pell grants) is pretty rare. You must be fairly low income to get any "free" money.

Based on what you've described, you will be offered a combination of loans--some that will be made available to your child in their name and then some that will be in your name.

Basically all you will get is loans. Determinations are made on your household income, mortgage amount, and number of other kids in college also factors in.

Actually, this may not matter one bit. The equity in a home (value less outstanding mortgage) is only a factor for schools that use the CSS Profile.

FAFSA only schools...schools that only need the FAFSA to determine your estimated family contribution...do not take mortgage into consideration at all.

For that matter, any consumer debt is pretty much ignored for FA purposes.

 

[golfgal]

The best way to maximize financial aid is to make sure your kids are good students with good GPA's 3.5 or better on a 4.0 scale when they graduate from college. This opens up many scholarship opportunities for them.

The financial aid process looks at your income, what the EQUITY is in your home-now how much your mortgage is and what you have in liquid savings-savings accounts, mutual funds, etc. (not your retirement accounts 401k's, etc.). Your credit card balance or limits are not considered at all.

Don't rule out ANY school because of cost until your get your aid statements-often they end up being LESS expensive in the long run.

As far as working, stay part-time because if you go full-time, you will make more money and qualify for less.

 

[HeatherC]

Thanks guys! This is what I was thinking anyway. But I don't want to find out in a few years that we should have done something different a couple years earlier. I'm thinking like...are people better off taking out a home equity loan a year or two before college? Does that work for or against you? Or make no difference at all?

I think I will stay part time anyway for a number of reasons.....college only being one of them.

The whole thing is so confusing that it can only be a good thing to start planning and investigating ahead of time.

Keep the advice coming!

Thanks!

 

[golfgal]

Thanks guys! This is what I was thinking anyway. But I don't want to find out in a few years that we should have done something different a couple years earlier. I'm thinking like...are people better off taking out a home equity loan a year or two before college? Does that work for or against you? Or make no difference at all?

I think I will stay part time anyway for a number of reasons.....college only being one of them.

The whole thing is so confusing that it can only be a good thing to start planning and investigating ahead of time.

Keep the advice coming!

Thanks!

DO NOT use your home to finance college-EVER. If you take a home equity loan they WILL consider that "income" and reduce how much aid you will get.

Our high school has several financial aid seminars offered during the year, usually on the same nights as parent/teacher conferences. Call your high school and see if they have something similar and attend one for background information.

Put it this way-the more liquid cash you have, the less money you will get from the government.

 

[msmayor]

DO NOT use your home to finance college-EVER. If you take a home equity loan they WILL consider that "income" and reduce how much aid you will get.

Our high school has several financial aid seminars offered during the year, usually on the same nights as parent/teacher conferences. Call your high school and see if they have something similar and attend one for background information.

Put it this way-the more liquid cash you have, the less money you will get from the government.

But by the same token, if you have very little 'liquid' cash that DOESN'T mean you'll get free government money.

INCOME is essentially what drives the estimated family contribution bus. You can have little in savings and living paycheck to paycheck as a middle-class family yet still qualify for little or no government grant money.

 

[allison443]

DO NOT use your home to finance college-EVER. If you take a home equity loan they WILL consider that "income" and reduce how much aid you will get.

Our high school has several financial aid seminars offered during the year, usually on the same nights as parent/teacher conferences. Call your high school and see if they have something similar and attend one for background information.

Put it this way-the more liquid cash you have, the less money you will get from the government.

"The government" is not the only source of financial aid. Institutional aid, from the college itself, usually is a component of financial aid packages.

OP you can run an online EFC calculator which will give you a rough estimate of what your estimated contribution will be.

Two things to keep in mind are that not all schools provide a package which fully meets a student's financial need, and that loans and work-study are considered financial aid.

Good luck with the process!

 

[golfgal]

"The government" is not the only source of financial aid. Institutional aid, from the college itself, usually is a component of financial aid packages.

OP you can run an online EFC calculator which will give you a rough estimate of what your estimated contribution will be.

Two things to keep in mind are that not all schools provide a package which fully meets a student's financial need, and that loans and work-study are considered financial aid.

Good luck with the process!

I realize this and if you read my first post that is exactly what I said--scholarships are the best way. The reply was directed toward her question about a home equity loan.

 

[allison443]

I realize this and if you read my first post that is exactly what I said--scholarships are the best way. The reply was directed toward her question about a home equity loan.

The colleges also give need based financial aid, not just merit scholarships. So the home equity loan would affect eligibility for institutional aid as well as aid from the government, that's all I was saying.

 

[mill4023]

There's a whole bunch of good information on the government's student aid site.
http://studentaid.ed.gov/PORTALSWebApp/students/english/funding.jsp

They even have a link to a tool that is supposed to help estimate what kind of aid you will be eligible for.

 

[badcramps]

There are so many variables involved. Do you and your spouse make $35,000 a year? 50,000 a year? 65,000? 85,000? 100,000? 200,000+? This is the biggest factor right there. The more income you make, the less financial aid you will get.

And how much will the school your child attends cost? $50,000 a year? Or $15,000 a year? Is it Harvard or Yale, an other very well-endowed competitive private school, a well-endowed public school, or a financially strapped public school?

You probably don't know a lot of these things since your child is so young at this point. Have you tried filling out a practice fafsa? That should help you get some idea--assuming your income and assets stayed the same--what your expected family contribution (EFC) would be at least at state schools. It won't tell you, though, if your EFC is only, say, 1/3 the cost of a school how the rest of that will be made up for. It really depends on the particular school and your particular financial situation. Someone earlier on the thread said they got all loans. In my packages I got upwards of $20,000 per school in need-based grant aid (not counting merit aid).

I believe one "tip" we heard when I was in high school (~12 years ago) was that the fafsa (or maybe the profile used by private schools?) will take 1/2 of any savings in the student's name each year and add it to the expected student contribution. Not sure if they still do it that way. But that's a big disincentive for student's to work and save in high school if so much of it will be expected by the college (and if the money didn't exist the college *wouldn't* expect it given how the formulas work). I believe we heard about a trick--to put the child's money in the parent's name. And it had to be done a certain amount of time before the college applications. That way the college wouldn't see the $ as the kid's and would treat it as parental savings which they certainly don't expect 50% of.

Something similar goes for income I believe--if you begin making more income then your EFC will go up. It's possible that a significant portion of the extra income you would make by working full-time would then be expected by the college. (But you have to consider if you're not working full-time, what sort of aid will they give you for the amount you can't afford? Will it be grants? Or will it be loans?)

Probably the best thing to do is to do the practice fafsa with different possible scenarios and see how it comes out.

 

[golfgal]

There are so many variables involved. Do you and your spouse make $35,000 a year? 50,000 a year? 65,000? 85,000? 100,000? 200,000+? This is the biggest factor right there. The more income you make, the less financial aid you will get.

And how much will the school your child attends cost? $50,000 a year? Or $15,000 a year? Is it Harvard or Yale, an other very well-endowed competitive private school, a well-endowed public school, or a financially strapped public school?

You probably don't know a lot of these things since your child is so young at this point. Have you tried filling out a practice fafsa? That should help you get some idea--assuming your income and assets stayed the same--what your expected family contribution (EFC) would be at least at state schools. It won't tell you, though, if your EFC is only, say, 1/3 the cost of a school how the rest of that will be made up for. It really depends on the particular school and your particular financial situation. Someone earlier on the thread said they got all loans. In my packages I got upwards of $20,000 per school in need-based grant aid (not counting merit aid).

I believe one "tip" we heard when I was in high school (~12 years ago) was that the fafsa (or maybe the profile used by private schools?) will take 1/2 of any savings in the student's name each year and add it to the expected student contribution. Not sure if they still do it that way. But that's a big disincentive for student's to work and save in high school if so much of it will be expected by the college (and if the money didn't exist the college *wouldn't* expect it given how the formulas work). I believe we heard about a trick--to put the child's money in the parent's name. And it had to be done a certain amount of time before the college applications. That way the college wouldn't see the $ as the kid's and would treat it as parental savings which they certainly don't expect 50% of.

Something similar goes for income I believe--if you begin making more income then your EFC will go up. It's possible that a significant portion of the extra income you would make by working full-time would then be expected by the college. (But you have to consider if you're not working full-time, what sort of aid will they give you for the amount you can't afford? Will it be grants? Or will it be loans?)

Probably the best thing to do is to do the practice fafsa with different possible scenarios and see how it comes out.

They take into consideration 100% of the student's money.

 

[mill4023]

There are so many variables involved. Do you and your spouse make $35,000 a year? 50,000 a year? 65,000? 85,000? 100,000? 200,000+? This is the biggest factor right there. The more income you make, the less financial aid you will get.

The more you make, the less need-based aid you will get. You always have the option of taking unsubsidized stafford loans to cover the cost, regardless of what your income is. Obviously unsubsidized loans are the least attractive option, but it is an option if you can't afford to chip in as much as the government thinks you should be chipping in.

 

[ajk912]

I could be wrong, and google-check this if you would like, but while they are under the age of dependency they EXPECT to know the parent's income and for the parents to contribute. If the parents may not able to able to contribute, and if they are unsure of what they want to be when they grow up anyway, it may be best to wait till a kid is considered independent..then the world opens up and your financial aid package would be a lot different. Once you are independent, the parent's income doesn't matter, only yours, and it's easier to get grants then. But that's not the best choice for all, I know.

 

[msmayor]

I could be wrong, and google-check this if you would like, but while they are under the age of dependency they EXPECT to know the parent's income and for the parents to contribute. If the parents may not able to able to contribute, and if they are unsure of what they want to be when they grow up anyway, it may be best to wait till a kid is considered independent..then the world opens up and your financial aid package would be a lot different. Once you are independent, the parent's income doesn't matter, only yours, and it's easier to get grants then. But that's not the best choice for all, I know.

That's about age 24 for FAFSA purposes. I don't know too many that are willing to put their college careers on hold for almost 6 years just to get financial aid.

 

[allison443]

They take into consideration 100% of the student's money.

Student assets are assessed at 20%, that is, 20% of assets in the student's name are considered to be available for college costs for that year.

 

[golfgal]

Student assets are assessed at 20%, that is, 20% of assets in the student's name are considered to be available for college costs for that year.

Are you sure about that? When we went through this just this year 100% of our DS's savings was considered "available" for college.

 

[erincon23]

Are you sure about that? When we went through this just this year 100% of our DS's savings was considered "available" for college.

Ours too -- we have a small 529 and he had a very nice savings bond from Grandma and Grandpa -- both were considered in his expected contribution.