A Parent's Guide to Paying for College

By Richard Preston

A Parent’s Guide to Paying for College will unlock the secrets to receiving the maximum financial aid awards that you never need to pay back. These tactics can save the average family up to $100,000 for a four year education.

As an outsider, the financial aid process may seem complex and cloudy, but fear not; this book will be your guide. It will give you a clear understanding of the entire financial aid process, all of the possible forms you will need to fill out, and inside knowledge on how financial aid algorithms work. Best of all, it’s written in layman's terms you’ll have no trouble understanding and applying to your own situation.

The Author, Richard Preston, is a College Financial Aid Expert, and a father who has gone through this process with his own children. Contained in this book is everything he knows about the financial aid process, and insights from consulting directly with hundreds of families. He has translated the complexities of paying for college into this easy to understand guide.

Included in this book are:
- Step by step guides
- When and how to start planning for the best financial aid outcome
- Instructions on how to organize your financials
- Information on how financial aid is calculated and awarded
- Descriptions and instructions for the possible forms you’ll encounter
- Information about Expected Family Contribution (EFC)
- A calendar that tells you month-by-month what to do

• Language: English
• Publisher: Richard Preston
• Release date: Dec 18, 2014
• ISBN: 9781310152818

Book preview

Table of Contents

INTRODUCTION

CHAPTER 1—An Introduction to the Process

Myths and facts, where college costs are going, and biggest mistakes

CHAPTER 2—Misconceptions, Questions, and Answers

Can I qualify? How important is timing? What forms do I need to complete?

CHAPTER 3—Forms.

Description of each form, when to use, and samples of each form used

CHAPTER 4—Government Grant and Loan Programs.

Stafford Loans, Pell Grants, work study, service programs, and private loans,

CHAPTER 5—Understanding Need

How to calculate your need, selecting a college, and how many you should apply to

CHAPTER 6—Calculating Your Expected Family Contribution

Knowing what to expect from and Federal and Institutional Methodology

CHAPTER 7—Your Students Action Calendar

Your timeline for your student’s junior and senior years

CHAPTER 8—Dealing With the Financial Aid Office

What to do after the application is made, sample award and appeals letters and tables to break down the award letters to show a fair comparison

CHAPTER 9—Let’s Not Forget the Student

How the colleges market themselves, what they are looking for in a student, How to handle the interview and what to look for in a campus visit

CHAPTER 10—Strategies and Solutions

Traditional approaches blown away, investments that can hurt you and those that will put you in a better position for aid, how to develop your budget, alternative programs, and prepayment plans

CHAPTER 11—Case Studies

Actual case studies of families this process has been able to help, and ideas for those that believe they cannot qualify

CHAPTER 12—Typical College Tuition.

Cost of colleges from all over the country

CHAPTER 13—State and Federal Educational Agencies

Phone numbers and addresses for your state’s Department of Education and current phone numbers and addresses of federal agencies in your state

CHAPTER 14—Definitions and Help Telephone Numbers

Knowing the terms and speaking the lingo, federal help phone numbers, and phone numbers to get you into the processing departments

CHAPTER 15—Must-Read Books

Books on scholarships, how to write an essay, and books for the learning disabled

CHAPTER 16—Final Words

Where aid will be going in the future and what you can do to help

INTRODUCTION

First things first: this book was not written by someone who has immersed himself in the halls of academia. It was written by a father who went through the process and made many errors, but by doing so gained a vast knowledge as to how the system works. I carried that knowledge with me and shared it with virtually hundreds of clients to help them through the college planning maze. For years upon years the financial planning wizards have given us all bad information regarding the arrangement of our personal assets and investments in order to fund education.

I will dispel all of the myths about how to gain tuition assistance. I will clearly demonstrate that sacrificing your retirement comfort or mortgaging every asset you own through the use of student loans is not the only method of financing a quality education.

Not only will I identify sources of funds, but in a great many cases free money through grants and bequests. The few dollars you spent on this book will come back to you thousands of times over as your student receives a quality education and increases his or her earning power seventy-five to one hundred percent over those who only finish high school. I will share with you the colleges and universities throughout the country that are rich in endowment funds and actively seeking students.

You will learn the systematic process of how to accurately and most advantageously complete the myriad of forms for college financial aid. I will help you identify the time tables in order to assist you in being first in line for potential financial aid. I will assist you with recommendations as to how to position all of the assets that you have in such a way as to maximize the amount of aid you will receive.

I will further dispel the rumor that financial aid is for individuals who are destitute. Actually, this aid is available to all good students who are simply seeking an opportunity to receive a quality education from some of America’s finest colleges and universities.

We will systematically burst the bubble of saving money in uniform gifts to minor’s accounts, zero-coupon bonds, and other such financial instruments that only enrich those who provide the products and services associated with these old-fashioned, ineffective strategies.

You have taken the first step toward securing financial independence for your children. You will unlock the secrets of gaining a quality education at a minimal price. The amount of money and time you will invest in this endeavor will be repaid to you many, many times over, as your child enjoys one success after another in his or her chosen career or profession.

In order to effect change, some action is required. You have taken the first step toward that action, and that step was the purchase of this book. Now, the next step is to properly utilize the information here, so please do not delay and do not let your investment age. Immediately begin reading the information contained in this book.

Good luck! Remember, you have already taken the first major step, now please complete the process and secure that wonderful financial future for your child.

CHAPTER 1

An Introduction to the Process

Congratulations—you have a son or daughter who’s going off to college. As a parent, I’m sure you are very proud of their achievements and are probably patting yourself on the back for lending a little guidance and encouragement to them over the years, as well you should. Enjoy these moments of pride, fulfillment, and joy, for they are fleeting.

You are about to trade these emotions for terror, confusion, and frustration. It’s real world time. How are you going to pay for this experience over the next four to five (or more) years? You are now looking ahead at one of the biggest expenses of your lifetime. If you are like most people, you’ve been putting a little money away on a regular, semi-regular, or when-you-can basis so when Johnny or Mary is ready for college, you’ll have a pretty good start. After all, college is a long way off, and it’s been hard enough to make a living and keep up with all the decisions that have to be made on a daily basis. Well, wake up and turn around. They’re ready. Are you?

Through these next chapters, we will be offering some guidance and preparing you for what to expect, hopefully allowing you some time to develop a game plan. Although the previous paragraph may sound a little scary, I want you to understand that this book was put together by someone who has gone through the process personally and is still going through the process by guiding clients. I want you to benefit from all the mistakes that I have made and to understand just how important timing is. In order to have a time line to work with, a systematic approach to the process, and, most importantly, no surprises, we will go through this together step by step. I assure you, you will be referring back to this book many times before completing the financial aid process.

By taking charge now, you will have an advantage over those who will enter the process (as most do) uninformed and unprepared. This knowledge will put you in a position to receive not only greater financial assistance, but also more favorable awards. As you will learn, scholarships and grants do not have to be paid back; however, student and parental loans must be repaid. I am here to explain to you what your Expected Family Contribution is and how it affects your family. New phrase, huh? Get used to it. You are going to learn a lot of new phrases and terms before completing this book. Knowing this amount in advance will protect you from sticker shock and allow you time to prepare a financial strategy.

The purpose of this book is to offer you guidance and provide information about the financial aid process. Without these, it becomes impossible to make informed decisions. Let’s start by taking away some of the more common myths surrounding financial aid.

Myth: I make too much money.

Fact: Wrong. I have had clients making well over $100,000 who have gotten financial aid.

Myth: I have a business, so I won’t qualify.

Fact: Wrong. You are in the driver’s seat. You can control your own income and who owns what assets.

Myth: My son or daughter, with help from our high school’s guidance department, will take care of these forms.

Fact: Really wrong, unless you are prepared to turn over all your tax records and a list of all your assets and liabilities to your local guidance counselor.

Myth: My son or daughter is receiving a big scholarship. That, with what financial aid we receive, will cover the cost of college.

Fact: Wrong. We will cover the effects of scholarships or awards in later chapters.

Myth: We have plenty of time.

Fact: Wrong, wrong, wrong. I don’t care how old your student is, you must start preparing now!

Myth: State schools are cheaper than private schools.

Fact: Wrong. With the ability of some private colleges to offer substantial financial aid awards and the lack of funding for some state colleges, it may be cheaper to go to the private school.

Myth: As parents, if we don’t have enough cash, our son or daughter can just take out more loans. I’m not going to use my home equity or use moneys set aside for my retirement.

Fact: Wrong. First of all, Uncle Sam limits the amount a first-year student can borrow on their name alone. The first year is a maximum of $3,500 in a Stafford Loan. Beyond this, there is the Perkins Loan, but this is reserved for the neediest of the needy. I know of no bank that will lend money to a student who has no means of income to demonstrate. So parents, you’re next in line.

Myth: They won’t expect me to tap into my life savings, home equity, or retirement.

Fact: Wrong, there are only three ways that I know of to pay for college without financial aid or borrowing: 1) savings, 2) current cash flow, or 3) equity, be it in the home or retirement funds. If you know of any others, please let me know. I was always looking for other means to cover my sons’ college bills.

Myth: I am an alumnus, so it’s not going to be a problem. The college will accept my son or daughter and provide me with the help I may need.

Fact: Wrong, although the student may have somewhat of an advantage in the application process, let’s not forget that the cost of college has far outpaced inflation, and, as much as they may want to help you out, that college that cost you $5,000 to $8,000 is now $30,000 to $40,000 per year.

Myth: We will just have them file on their own. After all, they are eighteen and have had a job for years. We will just divorce them.

Fact: Wrong. Nice try, though. There are many qualifications required in order to file as an independent student. It is not that easy. But we will cover this in later chapters.

Now let’s consider some truths about financial aid:

1. If you don’t apply, you will not receive any aid.

2. The cost of a college education is by far outpacing inflation and wage increases.

3. With few exceptions, everybody can qualify for some aid.

4. The rules are constantly changing.

5. Some schools have the ability to offer more in aid than others, based on the same application.

6. Aid does not necessarily go to the neediest. More often than not, it goes to those who are well-informed about how to work the system.

7. No matter how great the need, if you start too late in the process, the college will have already run out of money.

8. The process is hard work and must be endured every year.

So how do parents pay for college? There are several options that face you as the parent.

Save for it.

You can borrow the money either through equity lines on your home or college loans.

You can just suck it up and pay the bills as they come due and reduce your asset base.

You can pre-fund the expense through state programs.

Have someone else pay for it; there is an exemption to the gift tax laws—any person can pay for the cost of higher education for another without gift tax consequences. You may want to bring this up to Grandma and Grandpa at Christmas dinner.

We will discuss each of the options in more detail in later chapters.

According to The College Board, the average cost for a public college for the 2013/2014 school year will be approximately $9,498 for a resident student. The average surcharge for non-residents is $22,203, compared to $30,094 for a private college. This doesn’t include room and board. If that isn’t scary enough, tuitions are increasing at a rate of between five and eight percent. In five years, the costs will be $12,122 and $28,337, respectively, and this is for the average school. What will the tuition be in five years for the school that’s now $30,000? And who will be able to afford it without substantial debt?

I think back to a visit to my dentist not too long ago. He was aware, at that point in time, that I had two sons in college and, as usual, extended his deepest sympathy. He expressed that he had some time before his sons entered college, for they were both in elementary school. He half-chuckled to himself when he said, By the time they are ready, I should have all my student loans paid off. He stopped chuckling when I asked him, What do you think the cost of college will be when they reach their freshman year? Scary thought, huh, doc?

When beginning the process, be prepared to not only bare your soul to the financial aid department, but also to expose yourself as you never have before. Nothing will be spared—not incomes, assets, trusts, real estate holdings, stock, bonds, or the equity in your home. They will want to know of everything you have ever owned, currently own, or ever foresee owning. Well, maybe not to that extent. But they will certainly know more about you than does anybody that you have developed a trust and a relationship with, such as your accountant, your lawyer, or your banker. The difference is that you selected these individuals, and you have provided information to each of them as they have needed it to help you accomplish your goals. They have always been working toward your best interest.

Now steps in the financial aid department, who are perfect strangers. They ask for all this information now—on their terms, on their forms, and on their time table—and you must provide it or be left aside. They are certainly not going to take the time to get to know you as your other advisors have. And, like it or not, you will probably be dealing with three or four different people within the department. Everything is available to all within the department. Based on their impersonal formulas, they’re going to tell you what you’re going to pay for college. Remember, these forms are meant to disqualify you for aid. Decisions will be made around you—decisions that you will take no part in making—by people who may be thousands of miles away. Your only communication with them will be the forms you submit and any written documentation they may request. A phone call, at best, is a wild card.

If you have ever talked with a parent who has tried to call a financial aid office, you will understand why the telephone company invented automatic re-dial. During the busier times of the year, you will need an abundance of two things in order to reach a real person: time and patience. And then you will probably reach a work-study student who is there only to help out in the office for a few days a week.

Is all of this worth it? Without a doubt, yes! Even with the ever-climbing expense of college and the mountains of paperwork involved, college education is a good investment. Experts agree that by the year 2015, a college degree will be a necessity to compete in the world economy. College grads have much lower rates of unemployment than their counterparts who have only a high school education.

And what do the U.S. Census Bureau statistics show? The Current Population Survey 2009 Annual Social and Economic Supplement states that a male college graduate will earn over