How To Pay For College Without Going Broke
- Date: 2007-04-18 - Word Count: 1067
Share This!
To ensure their children's success in today's intensively competitive world, parents are faced with the absolute necessity of paying for a college education. As students approach the high school years, it is understandable why so many parents feel the stress to financially prepare for tuition and related costs as they have not only gone through the roof already (Boston Univ., $51,000+), but continue to increase as much as 15% ever year! With no relief in sight, how can a college or college-bound family survive?
Contrary to popular belief, much of the anticipated debt can be legally eliminated if the appropriate action is taken at the proper time and before it is too late. Help is on the way in the form of proven financial strategies that make virtually any college affordable.
For example, most families are unaware of the fact that students have no asset protection allowance in the financial aid formulas. For college year 2007-2008, students will lose 20% of every dollar they have in cash, savings UGMA & UTMA accounts, stocks, bonds, savings bonds, mutual funds, and the like.
Parent assets are subject to a different formula and school selection is a key factor in ultimately determining the amount of financial aid. There are two categories of schools:
Category 1 includes a few select state colleges plus approximately 225 elite private schools. In addition to the Free Application for Federal Student Aid, (commonly known as the FAFSA), they also require the CSS Financial Aid Profile (FAP).
Those who find the FAFSA difficult will undoubtedly regard the FAP as a nightmare, and pity the poor family who's divorced, separated, or owns a business or a farm. Such families are required to complete an additional form, The Business/Farm Supplement (you'll need your accountant), and/or The Noncustodial Parent's Statement (be nice to your ex). These colleges take into account all of the above plus home equity, Coverdell Education Savings Accounts (Education IRA's), the refund value of Prepaid Tuition Plans and 529 Savings Plans.
Category 2 schools (all the rest), only require the FAFSA and exclude the value of the primary residence or a farm, provided the family lives on it.
Parent assets are subject to a 5.6% annual assessment over their allowance, which increases with age. The asset protection allowance for a two parent family with an older parent of 48, is $45,000. A 45 year old single parent is only allowed $19,700.
While this is certainly cause for concern, it is not cause for alarm. The good news is that with proper asset repositioning, parents and their students can appear penniless in the blink of a financial aid officer's eye by legally repositioning their money into financial vehicles excluded from the calculations.
Once accomplished, repositioning makes it possible for families with students already in college to re-file their financial aid forms and qualify for additional aid for each of the ensuing years.
Note: Even more money can be saved when implementing income planning strategies. As the formula for parent income is much more complicated and not germane to this discussion, I have addressed it in one of my other articles.
The following illustrates exactly how student income affects financial aid:
1. In the financial aid formulas, students have a $3,000 income protection allowance, but for every additional dollar earned they lose 50 cents in financial aid:
Example: $5,000 earned - $3,000 exempt = $2,000 subject to the 50% assessment = $1,000 lost in financial aid.
Tax consequences: The $5,000 earned is subject to 7.65% in social security and Medicare resulting in an additional $383 lost!
1. If the student has larger earnings, it looks like this:
Example: $8,000 earned - $3,000 exempt = $5,000 subject to the 50% assessment = $2,500 lost in financial aid.
Tax consequences: Of the $8,000 earned, $5,000 is exempt leaving $3,000 subject to 10% federal and $8,000 subject to 7.65% social security and Medicare = 300 + 612 = $912 lost.
2. In the above example, let's assume the student banked $5,000 and listed it on the FAFSA. The student would lose an additional 20% or $1,000 just for having it! Of the $8,000 earned, the total amount of financial aid lost in taxes and assessments would equal $4,412, or 55%!
3. Even if the student has no earnings but will attend one of the elite private and/or state colleges that require the FAP, there will still be an automatic income assessment of $1,000! However, this can be avoided - if you know how.
In order to receive maximum financial aid without the slightest hesitation on the part of a financial aid officer, income planning and asset repositioning must be completed no later than Dec. 31st of the 11th grade, or no later than Dec. 31st of the 10th grade if the student is applying to an FAP school.
Other strategies which have literally saved families millions of dollars over the years include:
· The ambiguous noncustodial parent strategy, which has reduced the cost of college by as much as 90%;
· The winter clothing allowance, which has saved students from southern states attending northern schools as much as $2,600;
· The "no work" work-study award, which has been worth as much as $8,000 over 4 years;
· Strategically negotiating for the best possible financial aid package, much like wheeling and dealing for the best price on a new car, has produced incredible results; and
· Professional Judgment, which few families are aware of, comes into play when there has been a significant change in family income, assets, marital status or health.
In order to win the college funding game (which repeats itself every year), a family must have the most up to date information, precise timing, persistency - and/or professional counseling from an expert in income planning and asset repositioning to do battle in the arena the College Funding Process has become...
Reecy Aresty has been a financial advisor since 1977, and is founder and president of College Assistance, Inc., located in Boca Raton, Florida. He is the author of "How To Pay For College Without Going Broke," an invaluable, critically acclaimed, parent/student manual, (updated from its previous edition, "Getting Into College And Paying for It!"). Arguably the most revealing book ever written on college admissions and financial aid, it is also the only book of its kind available in Spanish. For the past 28 years, Reecy has helped thousands of families send their kids to the college of their choice for less than they ever dreamed possible. For more information on admissions & financial aid, and to checkout the best college book on the market today, please visit: Paylessforcollege.com
Contrary to popular belief, much of the anticipated debt can be legally eliminated if the appropriate action is taken at the proper time and before it is too late. Help is on the way in the form of proven financial strategies that make virtually any college affordable.
For example, most families are unaware of the fact that students have no asset protection allowance in the financial aid formulas. For college year 2007-2008, students will lose 20% of every dollar they have in cash, savings UGMA & UTMA accounts, stocks, bonds, savings bonds, mutual funds, and the like.
Parent assets are subject to a different formula and school selection is a key factor in ultimately determining the amount of financial aid. There are two categories of schools:
Category 1 includes a few select state colleges plus approximately 225 elite private schools. In addition to the Free Application for Federal Student Aid, (commonly known as the FAFSA), they also require the CSS Financial Aid Profile (FAP).
Those who find the FAFSA difficult will undoubtedly regard the FAP as a nightmare, and pity the poor family who's divorced, separated, or owns a business or a farm. Such families are required to complete an additional form, The Business/Farm Supplement (you'll need your accountant), and/or The Noncustodial Parent's Statement (be nice to your ex). These colleges take into account all of the above plus home equity, Coverdell Education Savings Accounts (Education IRA's), the refund value of Prepaid Tuition Plans and 529 Savings Plans.
Category 2 schools (all the rest), only require the FAFSA and exclude the value of the primary residence or a farm, provided the family lives on it.
Parent assets are subject to a 5.6% annual assessment over their allowance, which increases with age. The asset protection allowance for a two parent family with an older parent of 48, is $45,000. A 45 year old single parent is only allowed $19,700.
While this is certainly cause for concern, it is not cause for alarm. The good news is that with proper asset repositioning, parents and their students can appear penniless in the blink of a financial aid officer's eye by legally repositioning their money into financial vehicles excluded from the calculations.
Once accomplished, repositioning makes it possible for families with students already in college to re-file their financial aid forms and qualify for additional aid for each of the ensuing years.
Note: Even more money can be saved when implementing income planning strategies. As the formula for parent income is much more complicated and not germane to this discussion, I have addressed it in one of my other articles.
The following illustrates exactly how student income affects financial aid:
1. In the financial aid formulas, students have a $3,000 income protection allowance, but for every additional dollar earned they lose 50 cents in financial aid:
Example: $5,000 earned - $3,000 exempt = $2,000 subject to the 50% assessment = $1,000 lost in financial aid.
Tax consequences: The $5,000 earned is subject to 7.65% in social security and Medicare resulting in an additional $383 lost!
1. If the student has larger earnings, it looks like this:
Example: $8,000 earned - $3,000 exempt = $5,000 subject to the 50% assessment = $2,500 lost in financial aid.
Tax consequences: Of the $8,000 earned, $5,000 is exempt leaving $3,000 subject to 10% federal and $8,000 subject to 7.65% social security and Medicare = 300 + 612 = $912 lost.
2. In the above example, let's assume the student banked $5,000 and listed it on the FAFSA. The student would lose an additional 20% or $1,000 just for having it! Of the $8,000 earned, the total amount of financial aid lost in taxes and assessments would equal $4,412, or 55%!
3. Even if the student has no earnings but will attend one of the elite private and/or state colleges that require the FAP, there will still be an automatic income assessment of $1,000! However, this can be avoided - if you know how.
In order to receive maximum financial aid without the slightest hesitation on the part of a financial aid officer, income planning and asset repositioning must be completed no later than Dec. 31st of the 11th grade, or no later than Dec. 31st of the 10th grade if the student is applying to an FAP school.
Other strategies which have literally saved families millions of dollars over the years include:
· The ambiguous noncustodial parent strategy, which has reduced the cost of college by as much as 90%;
· The winter clothing allowance, which has saved students from southern states attending northern schools as much as $2,600;
· The "no work" work-study award, which has been worth as much as $8,000 over 4 years;
· Strategically negotiating for the best possible financial aid package, much like wheeling and dealing for the best price on a new car, has produced incredible results; and
· Professional Judgment, which few families are aware of, comes into play when there has been a significant change in family income, assets, marital status or health.
In order to win the college funding game (which repeats itself every year), a family must have the most up to date information, precise timing, persistency - and/or professional counseling from an expert in income planning and asset repositioning to do battle in the arena the College Funding Process has become...
Reecy Aresty has been a financial advisor since 1977, and is founder and president of College Assistance, Inc., located in Boca Raton, Florida. He is the author of "How To Pay For College Without Going Broke," an invaluable, critically acclaimed, parent/student manual, (updated from its previous edition, "Getting Into College And Paying for It!"). Arguably the most revealing book ever written on college admissions and financial aid, it is also the only book of its kind available in Spanish. For the past 28 years, Reecy has helped thousands of families send their kids to the college of their choice for less than they ever dreamed possible. For more information on admissions & financial aid, and to checkout the best college book on the market today, please visit: Paylessforcollege.com
Related Tags: student, education, parents, college, school, tax, high school, financial aid, fafsa, tuition, 529, ugma, utma, coverdell, eira
Your Article Search Directory : Find in Articles
Recent articles in this category:
- How Hypnotherapy Can be Used on Children
Today Hypnosis can be termed as a branch of medicine which is quite unique, whereas in the past this - Confidence Workshops For Children
Every parent wants their children to be confident, happy, highly motivated and enthusiastic in order - Inspiring Children Using NLP
Neuro-Linguistic Programming (NLP) is one of the most successful therapies in psychology today. Init - Writing Term Papers
Students often tend to put off a written assignment, considering it to be a chore too formidable to - Naming In Term Paper
Give a descriptive name to each of your concept in the paper. Adhere using terms like "our approach" - Introduction Section of a Research Paper
Your introductions should not exceed more than two pages (typed, double spaced). See again the examp - Getting a Feedback of Your Term Paper is Important!
Get the feedback of your work! Finish your paper, having written it well in advance, so that you hav - The 1950's - Was Life Better?
Iconic TV shows like I Love Lucy, Dennis the Menace and My Three Sons seem to indicate that the 1950 - Online Classroom Systems Makes Home Schooling Even More Attractive
In the past it went without saying that you would send your kids to public schools. With public scho - 8 Helpful Tips For Surviving Military Basic Training
Getting through military basic training takes a lot perseverance. During this training it is best to
Most viewed articles in this category:
- Culinary Cooking Schools and What They Teach
Culinary cooking schools prepare you for a job in the culinary industry by providing you with the kn - How To Learn Spanish Quickly Without Moving To Spain
Learning Spanish is a popular pastime, as well as a serious goal for many individuals. Whether it's - How To Improve Your Life With An Accredited Online College Degree
With the information super highway raring full steam ahead, quality accredited online college degree - Online Bachelor Degree Programs Go Mainstream
The Internet has seen an explosion in online bachelor degree programs in the last five to ten years - Online Degree Program Just A Click Away
You want to go shopping, but your car is low on gas. You want to know your account balance, but do n - Online Paralegal Degree Will Open Doors
An online paralegal degree may offer the possibility of improving your chances in the legal professi - What West Point Military School Looks For In A Candidate
West Point is looking for well rounded young men and women who are good students, good athletes, and - The Importance of Effective Accounting Programs
In the past, small businesses like mom and pop stores were not required to maintain any sort of acco - California Schools Educators Retirement System And Lionstone Group Create Investment Fund
The California State Teachers' Retirement System (CSTRS) is the second largest public pension fund i - A Taste of China - Seattle Schools New Guest Teacher Shares Language and Culture of Her Native Hom
The Seattle schools have a new "guest" teacher. Zhu Dan arrived in the Seattle schools in January