financial checklist to start preparing in H.S. sophomore yr?

Paying for College
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<p>My understanding is that we should really have our financial ducks in a row by the junior year of high school since that is the year most looked at for FAFSA, etc.</p>

<p>I'd like to find, or create a to-do list with this in mind.</p>

<p>Should we be trying to move more money to a retirement account (which we should be doing more of anyway, but also want to save for college)...</p>

<p>I know car shopping will be in our future. Should our daughter use what money she has toward that purchase? Will the car count 'against' her as an asset if it's in her name?</p>

<p>If you know of a good financial checklist, or have suggestions, I'd appreciate them!</p>

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<p>I found this helpful:</p>

<p>[FinAid</a> | Financial Aid Applications | Maximizing Your Aid Eligibility](<a href=“Your Guide for College Financial Aid - Finaid”>Maximizing Your Aid Eligibility - Finaid)</p>

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<p>About your specific questions.</p>

<p>While it is good to put money into retirement accounts, be aware that the year that they were invested, pretax dollars put into retirement vehicles are added back to income for FA purposes.</p>

<p>There are some Profile schools that ask about the vehicle(s) of the parents, but I’ve never seen it asked for as a student asset. It generally is a good idea to first spend down student savings on a necessary car, laptop, etc., as their assets are assessed at a higher rate than parents.</p>

4

<p>Be aware that INCOME largely drives EFC, so financial gymnastics may not do any good at all.</p>

<p>First determine if your INCOME is high enough that you won’t get much aid.</p>

<p>If your AGI income is above $100k, estimate that your EFC could be about 33%…(that’s with no assets).</p>

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<p>Ok, so it is ADJUSTED gross income? I have seen a few posts about those general ranges, that if you make something like 50k-100k your EFC would be about 25% and 33% if your income is higher, but I wasn’t sure if it was gross or AGI. So, what that would mean, if I understand correctly, is that if a family’s AGI was 100K, they’d be expected to pay 25K a year toward college?</p>

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<p>What you will be “expected to pay for college” will very much depend on the colleges you kiddo applies to. MOST colleges do not meet the full need of their accepted students. You should run an online financial aid calculator using your income and assets. The amount you get from this would be a rough guesstimate MINIMUM of the amount your family would be paying…a MINIMUM amount.</p>

<p>I’m not sure where you got the info that a family with $100k in income would be expected to pay $25k per year. That might be close for some schools but for others it could be well in excess of that amount.</p>

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<p>* if I understand correctly, is that if a family’s AGI was 100K, they’d be expected to pay 25K a year toward college?*</p>

<p>No…for a few reasons…</p>

<p>If a family’s AGI is $100k then 33% would be an EFC of $33,000…not $25,000 (which in any case is just a rough guideline to get a feel for what EFC might be.). And, EFC is per year.</p>

<p>Secondly, MOST schools do not meet need…so most families have to pay MORE than EFC. Schools do NOT have to respect EFC at all. All they have to do with EFC is see if you qualify for any federal aid (fed grants are for LOW income students). Obviously, those with 6 figure incomes don’t qualify for federal Pell Grants. </p>

<p>Thirdly, the term EFC is a misnomer. It’s not what you have to pay. You could have an EFC of $20,000 and your child gets accepted to UMich which has an OOS cost of about $50,000. All you might get is a $5,500 loan…and a really huge GAP of about $25,000 that you’d have to pay in addition to your EFC. Imagine, your EFC is $20k, but you’d be paying $45k for your child to attend that school (and your child would have a loan for $5500) for that year. As you can see, EFC doesn’t mean what many think it means. :frowning: But, as you can imagine, the federal gov’t has devised the determining of EFC and it doesn’t have the power to say that schools must meet need. Most schools don’t have the money. </p>

<p>Lastly, the schools that give the best aid usually require CSS Profile. Those schools consider assets that FAFSA doesn’t. Many CSS schools consider home equity and what’s in retirement accts. Many CSS schools are not to favorable to those who are self-employed.</p>

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<p>To find out what your FAFSA EFC would be this year, google EFC formula 2013. That will get you the link to the PDF of the formula. Print it out and work through it on paper so that you can see how much the various factors affect your results.</p>

<p>You should sit down with your child’s other parent(s) and anyone else who will be helping pay for college, and sort out what you actually will pay, whether or not you are willing to take on any debt (and how much), how much you expect the child to contribute from savings and esrnings, and how much debt you think is OK for your child to take on. That way you will be able to present a plan to your child, and hold the line if it becomes necessary to. The students here whose parents have been clear about finances, are not the ones who are brokenhearted when college A turns out to be unaffordable.</p>

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<p>^^^</p>

<p>Yes…with your spouse, determine how much you’ll contribute each year and tell your child. Many parents refuse to borrow, or let their kids borrow more than Stafford loans and that’s fine. If that would be your rule, let your child know ASAP.</p>

<p>When kids know what the limits are, and they know that they will have to come up with the rest thru summer job money, fed student loans, need-based grants, and merit scholarships, they know what the limits are.</p>

<p>Be sure that your child understands that most schools don’t meet need and most schools will ALREADY include full student loans in their FA pkgs so those aren’t available to also cover “family contribution” or gaps.</p>

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<p>Thank you for clarifying that info for me. It can get pretty confusing. Our AGI is solidly 5 figure, so I guess we’d be looking at that general 25%. I know we’ll need to work the calculations to get more specific, but it sounds like that might be a good ‘guess’. So anything over that 25%estimate is what the schools might aim to fill thru scholarships and loans, but many schools may not have enough to offer to be able to fill that gap. I guess that may be where being a highly desireable student can help? Schools may steer more of their resources toward your child if they really want them to attend…and that could be the funding to fill that gap (or even more if they reeeeally want them), right?</p>

<p>My daughter has talked about MIT for a long time, and they do, at least currently, meet full need (could be in loans though…and I assume they would be one that would want the CSS). If the MIT dream doesn’t work out, she will probably be looking at an in-state school, but who knows. </p>

<p>We’ve done the state (Florida) prepaid tuition plan for her, and that is something I have not seen noted in discussions of calculating cost and family contribution.</p>

<p>Ok, so, for state/public schools, it sounds like it may be best to have money in retirement accts and in equity, (also 529??) but for the schools that want the CSS maybe mostly private schools?), it may not matter where the money is.</p>

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<p>Thank you…we will definitely do some more calculating soon. That heartbreak issue is one of the things we’ve talked about. She hopes for MIT and will likely be interested in a some other expensive (non-state) schools. We don’t want to discourage her, and keep hearing about the possibility of some of those schools offering enough in grants/package to make them affordable. I guess we are trying to be realistic dreamers, if that’s possible. ;-)</p>

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<p>Momtocollege…I am not sure what you mean when you say "most schools don’t meet need and most schools will ALREADY include full student loans in their FA pkgs so those aren’t available to also cover “family contribution” or gaps. "</p>

<p>Can you tell me more about that?</p>

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<p>Financial aid packages are built from the loans up. Meaning the first thing they put in a package are loans. Then federal aid if eligible: pell Grant, SEOG, work study, subsidized and unsubsidized loans. And then institutional grants and loans. </p>

<p>Schools that don’t meet full need gap any amount they wish. That is why the term admit/deny applies to schools that admit but are actually denying because the gap is so large it would be impossible to attend. And gaps can be large, really large. If the gap uses up most of the money one would get in a private loan there is no loan money left for the EFC or it is used up in the first part of the financial aid package in the “loan” portion.</p>

<p>Kat</p>

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<p>*Momtocollege…I am not sure what you mean when you say "most schools don’t meet need and most schools will ALREADY include full student loans in their FA pkgs so those aren’t available to also cover “family contribution” or gaps. "</p>

<p>Can you tell me more about that?*</p>

<p>Here’s an example…</p>

<p>COA = $40,000 (for instance, an out of state public)</p>

<h2>EFC = $25,000 </h2>

<p>need = $15,000</p>

<p>An FA pkg to go towards that need might be:</p>

<p>$5500 in student loans
$2500 in work study
$3000 in a merit scholarship</p>

<p>So, that FA pkg would provide $11,000 towards that $15,000 need (leaving a $3k gap).</p>

<p>Well, let’s say that you can’t afford to pay your $25k per year EFC (plus the $3k gap), and you wanted your child to take a student loan to help out. Your D wouldn’t be able to do that because her loans would already be in the FA pkg for need.</p>

<p>* So anything over that 25%estimate is what the schools might aim to fill thru scholarships and loans, but many schools may not have enough to offer to be able to fill that gap. I guess that may be where being a highly desireable student can help? Schools may steer more of their resources toward your child if they really want them to attend…and that could be the funding to fill that gap (or even more if they reeeeally want them),*</p>

<p>Some schools don’t give merit (like MIT or the Ivies). And, all their students are exceptional, so they only really care about getting more ethnic diversity and maybe regional diversity. Even then getting a more desirable pkg can be iffy. I helped an African American Valedictorian with very high SATs try to get a better pkg out of MIT. MIT was willing to fly him out to get him to commit, but not increase his FA pkg. He ended up at Columbia which was also great. </p>

<p>Since MIT and other elites are super hard to get into, your D will have to include other choices. Are you still instate for Florida? If so, she’ll have Bright Futures and her pre-paid. :)</p>

<p>If she were to include schools like Purdue and UMich, getting aid may not happen. Neither can be depended on for merit scholarships (at least large ones), so being expected to pay nearly all costs could happen. </p>

<p>OOS publics (except for UVA and UNC) charge high OOS rates for a reason…they expect you to pay those costs. UVA and UNC do give need based aid and meet need…but they’re the exception.</p>

<p>There are some OOS publics that will give large merit scholarship for high stats or being a NMF. If your D does have high stats, apply to a couple of these as back-ups.</p>

<p>Do you think she’ll have the test scores to be competitive for MIT…and GPA?</p>

<p>Schools that don’t meet full need gap any amount they wish. That is why the term admit/deny applies to schools that admit but are actually denying because the gap is so large it would be impossible to attend</p>

<p>Yes…schools admit students without knowing whether they can attend. Most schools are “need blind”. They don’t first look to see if the money is there. So, when the FA office puts together the FA pkg, there can be some huge gaps. The school really has no idea if there’s a grandparent that will pay or a non-custodial parent that will pay (if that income isn’t included), so they just send the FA pkg out (gap and all) and the family decides what they can do…or not do.</p>

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<p>If you reside in Florida, and your child is an MIT competitive applicant, it would seem that she would be eligible for the top Bright Futures awards used at Florida public universities. This is excellent.</p>

<p>Is she interested in engineering? Again…depending on her SAT/ACT scores and GPA, she could garner a full ride at U’Bama. They have a fine program…and free is good.</p>

<p>If she is looking at grad school or professional school after undergrad, you want to keep your undergrad debt to a bare minimum.</p>

<p>The loans MIT uses are the Stafford loans…not private loans. These are loans in the student name only.</p>

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<p>Another great resource is Kalman Chaney’s book “How to Pay for College…” published by Princeton Review…</p>

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<p>Thank you so much for the information. It is really helping me to get a better understanding of the system. I’ve read quite a bit about it, but I think I can only absorb so much at a time. :-)</p>

<p>You said:</p>

<p>…There are some OOS publics that will give large merit scholarship for high stats or being a NMF. If your D does have high stats, apply to a couple of these as back-ups.</p>

<p>Do you think she’ll have the test scores to be competitive for MIT…and GPA?..</p>

<p>um…what is an NMF? To answer your question; She seems on track to have a good GPA and test scores. She is in the I.B. program (Well, pre-IB right now) right now with all A’s so far…time will tell. I think I had always thought of schools like MIT as unattainable for us ‘regular’ people, but I don’t want to discourage her if it might actually be attainable, and don’t want her to have false hopes if we just won’t be able to afford it. :/</p>

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<p>*…There are some OOS publics that will give large merit scholarship for high stats or being a NMF. If your D does have high stats, apply to a couple of these as back-ups.</p>

<p>Do you think she’ll have the test scores to be competitive for MIT…and GPA?..</p>

<p>==============</p>

<p>um…what is an NMF? To answer your question; She seems on track to have a good GPA and test scores. She is in the I.B. program (Well, pre-IB right now) right now with all A’s so far…time will tell. I think I had always thought of schools like MIT as unattainable for us ‘regular’ people, but I don’t want to discourage her if it might actually be attainable, and don’t want her to have false hopes if we just won’t be able to afford it. :/*</p>

<p>NMF = National Merit Finalist. This will be depend on how she does on her junior year PSAT…taken in Oct. Make sure that her school signs her up for that. I’d have her take the June SAT as a practice and then work on weaknesses.</p>

<p>Affording MIT will depend on what the school expects as a contribution. I don’t know what the acceptance rate at MIT is these days…5%? more or less???</p>

<p>Figure out how much you can afford to pay each year, and tell your D that that is your limit…and that anything else will have to come from merit scholarships, grants, and maybe small federal loans.</p>