Two easy fin aid traps for parents

Parents Forum
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<p>BIG Financial Aid trap for old middle class folks - just pay off your mortgage and save money in your childs name ( did this before 529 plan was hot). Now when the childs money is spent we may have a decent EFC, but then the kid will be on to grad school ( I hope). I should have read up on this when D was in middle school not HS. </p>

<p>In all seriousness, my D who has good stats but not top notch received some nice merit offers from 2 state honors programs and 1 top 50 LAC. Part of the offer from the LAC may have been because it is located in our State. She was also in the top 10% or better of their stats.<br>
She received an entrance ticket but no merit from a top twenty university and has not heard from two others. She has so far 3 good choices but of course our quirky D has narrowed it down to the cheapest and the costliest ( never has been a child in the middle!) sigh</p>

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<p>From Suze, post #52:
[quote]
How happy can you be if you're following your passion but not able to provide what you'd like to give yor kids?

[/quote]
Report from the world of the median-income, self-employed, passion-followers (2 parents, separated/divorced about midway through the journey of raising 2 kids)</p>

<p>We gave our kids a loving and supportive home, in which there was always plenty to eat. There wasn't money for private schooling, but there was enough for dance lessons, swimming, gymnastics. There was even enough to allow the kids the opportunity for international travel. Some things were purchased on layaway, and the kids learned early on that "no" means "no", and "we can't afford it" also means "no". </p>

<p>A little bit of research led the kids to alternative/magnet public schools that they thrived in. Income was somewhat reduced for many years because of my decision to work part/time & flex time after the birth of my son -- so I also gave my children something else very important: my time. </p>

<p>We gave our kids the most important gift we could imagine: a set of values that we lived by and they grew to share. One of those values was a work ethic -- the understanding of the intimate connection between work and earnings. Another was understanding the value of work and career based on self-respect, self-determination, intellect & creativity - and of a sense of fulfillment - and of the great importance of doing "good works" or contributing something of value toward others. Our kids learned, as we learned from our own parents, that middle-class life is comfortable enough, and that life is what you make of it, not something dependent on a particular school or employer to provide. </p>

<p>Can we afford to pay the full cost of private college? No way. We can't afford to buy our kids designer clothes, or flashy cars either. Would I <em>like</em> to be able to provide these things? Not nearly as much as I wanted to provide my kids with the example that we set for them. I mean -- if the alternative would have been to spend years working long hours at jobs we detested, leaving our kids tied to an expectation of an expensive lifestyle and the obligation that they, themselves, would need to work long hours at jobs they detest in order to acquire the trappings of wealth and the material goods, and the ability to provide the same for their own kids...... what's the point? </p>

<p>I too am frustrated by the vagaries of the financial aid system, though in part the frustration comes from the fact that it is simply unpredictable. My son went to a college that I told him we would never be able to afford; that turned out to be the college with the most generous financial aid offer. With a more certain, predictable system, I would be able to map things out and tell my daughter exactly which schools she could apply to. If needs-based aid were not available, I could simply tell my daughter that no private college was affordable, and she would have to limit her aspirations to the state university system - which was good enough for her dad and me. But because of the particular, uncertain system that we have, my kids simply have to accept an added layer of uncertainty if they aspire to attend a private college.</p>

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<p>Calmon, so true. When we started this process, I was willing to do what I needed to do to make college work for my son. But I knew it was all uncertain. That's why my son applied to 8 schools. Most of the private schools were generous to a fault. I cried my eyes out one night when my son was accepted to all and had great financial aid to over half. The best aid came from the reaches as well. The state schools were not as good since we have iffy residency that I didn't want to really approach. Thankfully, my son had put his heart very quietly with a perfect match private school and when the financial aid came through, that was it. That doesn't mean he won't have loans and work study. They are manageable.</p>

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<p>calmom,
We are your "twin" family (except that our son's private school choice didn't come through for him financially); I couldn't have said it any better!</p>

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<p>momnipotent:

[quote]
Hey- how about relocating to locale of S or Ds choice school and seeking employment at the institution in order to get the employee discount for our offspring? I mean- how easy would that be?!

[/quote]
</p>

<p>This is how we can afford college for our kids. H is on staff at a small private LAC. His salary will probably never quite reach the lower limit of the economic middle class, but our children can attend there for free. In recent years, the college has restricted the full remission benefits to higher level employees with at least 2 years seniority, but when H began, the benefit was immediate. </p>

<p>Shortly after H came on staff, the college joined the Tuition Exchange organization, and H's remission benefit is now potentially transferable to several hundred other schools. </p>

<p>Although there are no guarantees that the student's chosen school will award him/her the TE grant once the student is admitted, it is similar to applying for a scholarship worth up to $22K/yr. with a relatively small applicant pool. D spent her last 2 years of college at a private LAC in New Mexico, thanks to a TE grant.</p>

<p>We pretty much restricted S's search to schools where he had a chance for the TE grant. He was accepted at four schools, and received the TE award at two of them. Although he received several merit scholarships as well, the two schools that awarded him TE stacked his merit awards "inside" the TE. IOW, they used the TE grant to cover the amount of tuition left over after the merit award. We were told by almost every school that TE recipients could not have more than full tuition in scholarships and grants, except for certain dept'al awards. One school would apply a music award to the cost of required private lessons, another would apply a music scholarship towards the cost of room and board. </p>

<p>When D started college I had some money left from an inheritance, and we used it to pay our EFC and other costs for D and older S [who went to a technical school that was not in the TE program]. We now have very little savings left, so our low salary and no assets makes our current EFC very low. </p>

<p>We are hoping to set aside part of the remainder of our savings in a renewable CD each year in the amount of the loans that S has as part of his FA package. Barring any emergencies, when he graduates, we hope to cash in the CDs to help him pay off the loans. Is this another pitfall that we should avoid?</p>

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<p>


Yes. I am so glad you posted . Most savvy financial planners that I have spoken to would recommend that y'all pay off my D's loans instead. ;)</p>

<p>O.K. I didn't think that would work. I can see no negative at first glance to your plan. Gives you and your son some flexibility now, and possibly removes the repayment obligation from him when the terror has somewhat subsided.</p>

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<p>Ack. This stuff makes me sick to my stomach.</p>

68

<p>curmudgeon, my H says he thinks you need to find a different financial planner. ;-)</p>

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<p>About this whole discussion: I hope the people who have access to great state supported universities (Michigan, Virginia, California) know how lucky they are. Most states don't.</p>

<p>Secondly, this is why Canadian universities offer a good alternative.</p>

70

<p>Having cash, quick cash, gives more options than no cash-and no debt. IMH. </p>

<p>As for Financial Planners-Advisors, they can give more insight but they are not always correct. I am currently very upset with my longtime physician and the referred physician about a diagnoses that was wrong. Could have been a simple test by asking the correct questions but they didn't and now I can never get it the original diagnoses off the records- which now greatly impacts my insurance.
I should have gotten the best of 2 of 3 opinions. </p>

<p>Did anyone see the NOW, with David Broncocio (?) this week? Concerning the squeeze of the middle economic class in this administration? Veeerry telling, and recomfirms CC threads.</p>

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<p>Just my humble opinion here...the FAFSA calculations for EFC only part of the problem. The cost of attendance is also an issue. Even instate publics can have a COA (instate) in excess of $15000. For some that is simply not possible. Add to that the fact that most public universities do not have sufficient school monies to meet the needs of all their admitted students and you have the recipe for GAP. Private schools are more costly...some have more aid and some don't. For the lottery schools, finaid is a secondary consideration...you must get accepted first. IF (and I mean IF) the school meets 100% of need, your family is still expected to take out at least the equivalent of the Stafford loans, and usually work study is part of the award. In addition, even if your EFC is 0, your student is expected to contribute a certain amount from their earnings and that amount increases each year the student is in college. There are very very few "totally free rides" whereby the student has no loans, and no expectations to pay anything. The finaid process now is for those who are truly unable to afford a college education without monies. It is not for families with even middle of the road assets because it is presumed that those folks can pay the bill. Our family is QUITE middle class....not rich by any measure or means, but not poor either. Our EFC is about $40,000 per year. The reality is that we aren't thrilled about paying those bills each month, but we have been able to do so for the past two years. Next year will be fine too. It's when both kiddos are in college in 2006 that we are going to do some serious worrying. Applying to those "need blind...meet 100% of need" schools is not an option as neither of these kiddos is interested in those schools PLUS the admissions criteria are very lofty. PLUS when your EFC is as high as ours, there really isn't much need! The finaid system in this country has not kept pace with the rising costs of higher education (in my opinion). Our kid's college costs are increasing by almost 5% next year. Cost of living is going up by 2.7% or so. The miniscule tax break for college tuition payments is welcome but it is a small drop in the bucket. We are willing to scrimp so that our kids can attend college. But I suspect that future generations will have a more difficult time than even we are having meeting these costs.</p>

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<p>Curmudgeon,
Starting this thread sure makes me wish I was a little poorer or a lot richer! I am faithful that this will all work out in the end for all CC posters. It all may not make sense to us now-kind of like Albom's "Five People You Meet in Heaven." The reasons will present themselves later possibly. Keep on posting though. I am learning so much. thanks,
momnipotent</p>

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<p>i have a S who is a junior, we are looking at colgate. they don't have merit aid, only need based. their latest info says of all who needed aid, 100% of the need was met(after your EFC). am i to assume that this really isn't true? say it ain't so!! we can come up with ourrough estimate of EFC (approx. 10,000) but i was really hoping that the rest of the need will be met- no gaps. colgate also had one of the lowest indeptedness upon grad. of the schools we are looking at</p>

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<p>If it says it will meet all need, then it probably will. However, that need may be met with a combination of grants, loans, and work study. Each college works it out in a little different way.</p>

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<p>Repeating WS17's wisdom above - guys, if you have a sophomore or a junior, the answer to your problem is very simple:</p>

<p>CANADA!</p>

<p>Get busy and start researching. Much better prices, 1.2 exchange rate, wonderful people!</p>

<p>For those with seniors selecting among acceptances, we have to fish in the cove where the storm blew the boat.</p>

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<p>I don't get it - how do schools calculate EFCs that are completely out of line with what a family can afford? I always assumed that the EFC was the amount a family could reasonably be expected to pay based on their current income and spending patterns. How is it therefore possible that people end up having to take loans to cover half of their EFC, * before * loans that are part of the 'aid' package?</p>

77

<p>There are nine-and-sixty ways,
Or figuring Financial Aid,
And every one of them is screwed.</p>

<p>--R. Kipling</p>

<p>Our EFC is somewhere around $25K but the initial offers that D received varied by about $4K. Used the best one as a lever to pry a slightly better than matching offer out of her first school.</p>

<p>That doesn't address covering the EFC thing in the first place.</p>

<p>One thing is priorities: we've always been cheap on buying cars...I've never bought a new car in my life...even though earning my living requires a newish car, I buy two years old and keep for five years and then TheMom drives it for another five. In contrast, we're borrowing an amount as part of our contribution that would raise some eyebrows; for us, current income can be wildly variable but the longterm we should be able to pay it off. D works, D borrows, we pay, we borrow, the college gives grants...it comes together. Not easily, not without some pain.</p>

<p>But a footnote: it's easier to do this in a high-cost, high-income area. A gallon of gas or a book from Borders or a pair of jeans costs the same here as most places but the cost as a percentage of household income is smaller. Thus, the "necessities" and more of life cost a smaller percentage of income than they do elsewhere. Fortunately, the FinAid department we've dealt with seems to understand about a cost of housing that would make us "rich" in most parts of the country but not even close here.</p>

<p>A somewhat brain-dead ramble after a longish day....</p>

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<p>itstoomuch:</p>

<p>
[quote]
Having cash, quick cash, gives more options than no cash-and no debt. IMH.

[/quote]
</p>

<p>I think we're in agreement here, if I understand what you mean. </p>

<p>We could pay the amount of his loans now; but if he takes the loans his interest will be deferred until after he graduates, and we're reluctant to pay down our savings (although it would not deplete it entirely). We will still have some readily available savings ITMT, while the amount equivalent to his Stafford and Perkins will earn a slightly higher rate of interest. If there are no medical emergencies or such, we should be able to help him pay off at least part of his loans when he graduates. I hate the idea of debt, but we don't want to risk being left short.</p>

<p>Theoretically, we should also be able to sell our house then because we will both be over 55 [it's an older house in what used to be a fairly rural area, but it's paid for], but I'm not expecting housing prices to hold up for that long. Prices in our area have risen so much in the past few years that we could not afford to buy the house we now live in. When we are ready for a smaller place, it would be nice to be able to realize some cash from the sale, but we're not counting on much. I think it's too likely the housing bubble will burst before we are in a position to sell. [S's school doesn't use the Profile, thank goodness! I'd never realized that some schools expect home equity to be used to pay the bills.]</p>

79

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<br>

<p>The EFC is calculated on your assets and income. Your spending patterns do not come into play AT ALL (unless the spending is for a catastrophic illness or something like that). Spending patterns are considered a matter of choice especially when college costs are looming. If your income is high enough, than the finaid calculators figure you should be planning to spend between 1/4 and 1/3 of your gross income on college costs....typically that is what the EFC calculation yields.</p>

80

<p>It would be helpful to those of us who haven't started the process if everyone would post the names of generous schools.</p>