Parents

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3 Well-intentioned mistakes paying for college

We all want to avoid mistakes, especially expensive ones. Sometimes all it takes is a little planning and thinking ahead. Here are three common mistakes that parents make when it comes to paying for college.

Selling investments at the wrong time

You might have some investments that you’ve socked away to pay for college. Great! If they are in a regular investment account (not a 529), when you sell them you will incur capital gains.  Capital gains will increase your income which will increase your Expected Family Contribution on the FAFSA.  As a result, you will not qualify for need-based aid that you might qualify for otherwise.

So what do you do? You can still sell, but you have to sell earlier than you think. Let’s say your daughter is a risking junior in high school. You will file your first FAFSA in January of her senior year.  The FAFSA will ask about your income during the calendar year that she is part junior (spring) and part senior (summer and fall).  This means that if you want to sell some investments, you should do so before December 31 of your daughter’s junior year.

(Note: the CSS Profile form that some colleges use will still pick up this income.)

Taking a retirement plan distribution

The FAFSA considers retirement plan distributions to be income in the year received. The increased income will hurt your chances for need-based aid. You won’t have to pay a penalty if the money is used for college, but you will have to pay taxes on the earnings and your EFC will go up.  Even a return of Roth contributions is picked up on the FAFSA as untaxed income.

So what do you do? It is possible in for the financial aid office to adjust your EFC if the retirement plan distribution was made for certain specific circumstances. (Just needing the money to pay for college is not going to be one of them.) If your distribution was one-time and you have a documented hardship, it might be worth pursuing an adjustment. We can help you with that. In general, though, if you have not taken the distribution, don’t!

Grandparents paying the college bill

This happens far too often – grandparents who want to help but aren’t sure how, and they learn that there are estate tax benefits to paying tuition directly, so they do. They’ve done a very nice thing, but it will likely hurt your financial aid.

So what do you do? If you are lucky enough to be in this situation, you want to be very careful in how you structure your funding plan. Don’t do anything until you’ve considered all the options and how they will impact your family. This is a great example of how ‘what works for one family doesn’t necessarily work for another’ holds true.  Understand the implications on your aid and your EFC and you’ll make wiser decisions.

 

VTAG deadline approaching

Don’t miss the deadline for the VTAG scholarship!

If you are a Virginia resident and plan on attending a private, non-profit college this year, you most likely qualify for the Virginia Tuition Assistant Grant. The amount of the award can change annually based on what the General Assembly does, and the maximum amount for 2014-15 is $3,100 for undergraduate and $1,550 for graduate students.

The deadline for applying for the grant is July 31! 

How do you apply?  The application can be found on the SCHEV website here.  If you are not familiar with VTAG, the best place to start is to call your private college’s financial aid office and make sure you are going about the process in the right way.

This is low-hanging fruit when it comes to paying for college and most schools do an excellent job of communicating with families about VTAG.  However, with summer schedules and vacations, deadlines can creep up on you. Don’t miss this one! 

SCHEV also provides a detailed brochure about VTAG if you’d like more information. 

A full list of participating schools is below: 

Appalachian College of Pharmacy

Averett University

Bridgewater College

Christendom College

Eastern Mennonite University

Edward Via Virginia College ofOsteopathic Medicine

Emory & Henry College

Ferrum College

George Washington University (VA campus only)

Hampden-Sydney College

Hampton University

Hollins University

Liberty University

Lynchburg College

Mary Baldwin College

Marymount University

Randolph College

Randolph-Macon College

Regent University

Roanoke College

Shenandoah University

Southern Virginia University

Sweet Briar College

University of Richmond

Virginia Intermont College

Virginia Union University

Virginia Tech Carilion School of Medicine

Virginia Wesleyan College

Washington & Lee University

 

 

CFG in the news

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Richmond Times-Dispatch

Primer on Student Debt

Richmond Times-Dispatch

That college may not be out of your range

 

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Norfolk Virginian-Pilot

College degree = job = high salary? It depends.

 

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Fairfax Times

“Cost of college a multi-layered proposition”

Fairfax Times

“Deciphering financial aid terms often tougher than college itself”

 

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Charlottesville Daily Progress

New data improve college cost, earning comparions

Charlottesville Daily Progress

Know how to decipher award letters

 

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WWBT NBC12

Website launched for local scholarships

 

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Roanoke Times

“Graduates earnings inform expectations”

 

CFG in the Times-Dispatch

The Richmond Times-Dispatch ran a good story about paying for college – another excellent article by reporter Karin Kapsidelis! Here are a few excerpts with a link to the full article:

A primer on student debt — Know your options

High school seniors weighing financial aid packages may be excused if they feel they already need a college degree to understand what they’re getting themselves into.

Financial aid, a mix of loans that must be repaid and grants that do not, is designed to lower the sticker price if not the eventual shock.

Here’s advice from a higher-education administrator, a financial adviser and a student on how to avoid pitfalls that pile on the debt:

Also contributing to the debt problem is the way in which students receive what’s left of the loan to cover their expenses after colleges deduct tuition and fees, said Jonathan West, director of College Funding Group in Richmond.

This money is part of a student’s loan, but it is oddly called “a refund.”

“It’s misnomer,” West said. “You always know around campus when the refunds are in because it’s like payday for 18-year-olds.”

The refund is meant to last a semester, but at some schools it goes on a debit card and even the student ID, “and all they need to do is swipe it,” he said.

“It’s convenient, but it’s really too convenient,” West said, especially with no one looking over a freshman’s shoulder to see whether it’s spent on pizza or a textbook.

“There’s nobody intervening,” he said, to tell the student “you’re going to be paying this back for 10 years. That Domino’s pizza is really expensive.”

Graduate in 4 years or less

It’s the ultimate strategy to lower the cost of attendance. For a 120-credit bachelor’s degree, that means taking 15 credit hours per semester, but they have to be the right courses.

So be deliberate about your course selection: Don’t sign up for classes just because they sound fun, [Luke] Schultheis said.

Apply for scholarships

Students too often think a scholarship for a few hundred dollars isn’t worth their effort, but win a few here and there and they add up.

That’s been the strategy of [Lorraine] SantaLucia, who said all her awards will allow her to graduate without debt.

SantaLucia, whose scholarships have ranged from $250 to $5,000, founded the group Scholarship Sharing to spread her philosophy. She hopes to turn the idea into a nonprofit when she graduates.

Her advice: Shop local for scholarship opportunities. The offering from a local organization may be smaller, but you’re not competing against thousands of other students to win it.

Students who do that often earn more credits than they need but not necessarily the ones required to graduate on time.

Some schools, including VCU, have software programs to help students stay on track with the courses necessary to complete their degree program.

Fill out the FAFSA

FAFSA — the Free Application for Federal Student Aid — is the starting point for receiving all types of aid, including need-based grants, federal student loans and the Plus loans for parents.

Some colleges also require the PROFILE, administered by the College Scholarship Service, to determine how they will award institutional financial aid.

PROFILE takes a deeper look at a family’s finances. While FAFSA doesn’t include a family’s retirement accounts or home value, PROFILE does.

West recommends listing a realistic value for your home — what you would expect to get in a quick 30-day sale.

And because a student’s assets will factor into aid awards, it makes sense to use those funds to buy a computer and other college necessities before filing either the FAFSA or

PROFILE forms, he said.

Start planning early

Part of the problem is that “colleges let you in and then tell you how much it’s going to cost,” West said.

The worst time to decide how much to borrow is after the acceptance letter is received, but that’s what many families do, he said.

“They don’t figure out how much they can afford to borrow. They just borrow what they need to borrow,” he said, with long-term repercussions for the family’s finances.

“Money shouldn’t be the sole determinant, but the truth is, for many families it is a very important factor,” he said.

West recommends beginning to narrow the “college universe” based on affordability in the 10th or 11th grade with the help of the U.S. Department of Education’s FAFSA4caster, which gives an early estimate of eligibility for aid, and with the net-price calculators that schools must post on their websites.

The best of these calculators incorporate the college’s resources, philosophy about aid, government grants, and possible merit scholarships all into one summary, West said.

But be aware: The calculators are also marketing tools, because higher education is a business, too, he said. “It’s not all warm fuzzies and ivy-covered walls.”

Parents often think their bright teen will coast through with merit aid, but that’s unlikely. West describes merit aid as a pot of money that colleges use as an inducement to enroll the most desirable students.

“They want to give you just what it takes to get you to attend, but not more than that,” he said.

 

Full article:  Primer on Student Debt

 

FAQ – Frequently Asked Questions

What is a college funding plan?

A college funding plan is your road map to paying for college.  It answers the two big questions:  “How much does college cost?” and “How do we pay for it?”

Why do we need a plan?

You only need a plan if it is important to you to keep a lid on college costs so they don’t spill over and hurt your other financial goals and objectives.  If that’s not a big deal to you, you can wing it.

Doesn’t our financial plan cover paying for college?

If you mean a comprehensive financial plan (only about 1/3rd of people even have one, and fewer than that actually follow them), then it probably does have a section on education.  However, a good college funding plan covers far more than just saving for education.  When your plan was put together, did you know exactly where your teenager would be going to college and what that college would cost?

Don’t we just have to pay what the college says we owe?

Yes, when you get the invoice you have to pay it. However, “what the college says we owe” is a moving target.  Your invoice will be different than that of other students, in the same way your airfare is different than other passengers. 

A good college funding plan addresses ways to reduce what the college will say you owe, well before the invoice arrives.

What goes into our plan?

The first part of your plan will focus on what college will cost your family – that’s different than what college costs.  In-state schools, out-of-state schools, selective private schools, community colleges all have different prices and different financial aid resources.  What you pay may be significantly different than another family of a student in the same class.  Your plan addresses ways to both figure out and reduce what college will cost.

The second part of your plan is to identify all available sources of money.  It is perfectly possible to borrow 100% of the cost of college (including spending money) from the federal government through student loans and parent loans, but is that wise for your financial situation?

Our checklist starts with your family’s cash flow and savings to see what can be reallocated to college costs.  What education tax credits will you qualify for? Do you have the generosity of a grandparent or other relative to count on? Do you have a 529 plan or prepaid plan? Can you count on income from a part-time job for your teenager? Can a tuition payment plan help?

These are just some of the items we examine. The important thing is that your plan includes all the items that are relevant to your family.

Loans can be part of a college funding plan, they just should not be the first thing you turn to.  Loans have to be repaid at some point, so you are going to need to come up with the money eventually.  If a careful analysis shows you have confidence in your ability to do that, loans are an option.

What about all the “other” costs of college, like books and spending money?

The extra costs are significant and can add up to thousands of dollars per year.  40% of families report having some major expense they did not expect.  Your plan should identify these costs and address ways to proactively lower them. 

Here’s a huge cost that is often a surprise:  the fifth year.  It is increasingly common, especially at state schools, for students to need an extra semester or two to graduate.  Nothing will blow your budget like an extra year.  Your plan should help keep you on track to a four year graduation.

Why don’t colleges tell us about all this?

Colleges can be wonderful institutions, but it’s not their job to tell you how to pay them less money.  That’s your job.  Fortunately, your college funding plan will do just that.

When should we get started with our plan?

Today!  What you can do will vary depending on the age of your child, but it’s never too early for information and it’s never too late to make changes.  Ideally, parents of sophomores and juniors have more flexibility than parents of seniors or current undergrads.

Our son or daughter has graduated with student loans.  Can you help?

Yes.  Student loan repayment is incredibly complicated and college graduates are not prepared to make the important choices that are required of them.  We go over the different repayment programs, cover the immediate and long-term implications, and help your son or daughter create a loan repayment plan.  As situations change, the repayment plan will also change.

Can’t I make a plan myself?

Yes, absolutely. A college funding plan is not incredibly complicated.  If you’ve been through the college process lately, understand how financial aid works and how to lower your net price, can tell when a financial aid award should be appealed, can compare the various and misleading aid award letters, are able to get a grasp on the 15+ education tax provisions and 10 loan options, know how to complete the FAFSA properly, and can manage your costs while in school, you do not need help.

Or, if you’d like help, or are just too busy for all that, we can get your plan started in about an hour.

 

 

 

Scholarship newsletter launches

We’ve just launched a new email newsletter focused on finding, winning, and using local private scholarships! If you’d like to subscribe so you don’t miss an issue, please click here.  You’ll get in-depth tips and advice as well as important input from area counselors.  Scholarship season is heating up, you won’t want to miss an issue!

Local scholarships are just part of the tremendous generosity in Richmond – thank you scholarship sponsors.

 

Priority financial aid deadlines for Virginia colleges

Make sure to check with your own school’s financial aid office to verify deadlines. The following dates are reported by college websites as of January 2014:

College Deadline
Christopher Newport March 1
George Mason March 1
James Madison March 1
Longwood March 1
Mary Washington March 1
Norfolk State March 15
Old Dominion February 15
Radford February 15
UVA March 1
VCU March 1
Virginia State March 31
Virginia Tech March 1
VMI March 1
William & Mary March 1
   
Emory & Henry March 1
Hampden-Sydney March 1
Hampton February 15
Hollins February 1
Lynchburg March 1
Mary Baldwin March 1
Randolph April 1
Randolph-Macon March 1
Richmond February 15
Roanoke March 1
Shenandoah March 15
Sweet Briar February 15
Washington & Lee February 15

 

How your FAFSA can be used against you

From our October newsletter

It’s understandable if parents are a bit jaded these days about college.  It seems like the schools hold all the cards – they don’t even tell you what it will cost you until after you are in, and then you only have a few weeks to accept. 

Talk about no transparency!  Admissions are a black box – incredibly qualified students are passed over in favor of others.  Why?  We figure there are reasons but it’s all so secretive.

Now there’s a shocking revelation about the FAFSAAccording to a story in Inside Higher Ed, colleges are using the FAFSA in a way it was never intended both for admissions and awarding aid.

Remember, the goal of a college in awarding financial aid is to give you enough money to say yes, but not one dollar more.  They have consultants, they have enrollment management programs, it’s all quite sophisticated.  They know you better than you know yourself it seems.

So back to the FAFSA.  When you submit the FAFSA, you need to list the schools you will send the information to.  You can list up to 10.  But how do you list them, in what order, and could that possibly be important?

We’ve been telling parents for some time that the order might matter, and we offer suggestions and strategies on how you might consider listing your schools, just in case.  Here’s why it matters.

To read the entire article, click here to subscribe – it’s free!

 

UVA – differential tuition by any other name

UVA has coined one of the best euphemisms of all time.  But what else would expect from our leading state university?  Instead of calling a planned tuition increase a tuition increase, UVA is calling it an “academic excellence fee.”  This makes you wonder if you can just choose the “average” education and avoid the fee.

The plan is not yet set in stone and has only been reported in the newspapers.  The fee for this academic excellence for juniors and seniors would start at $500 this fall and increase to $2,000 by 2016.  The business  program already has a differential tuition plan in place which we wrote about here.  Engineering students will be asked to pay $2,000 extra as well as a $750 lab fee that exists now.

This fee is in addition to a discussed tuition increase of 2.9%.  This has not yet been approved.

UVAs chief operating officer noted that the planned fees were less than what the market would bear.  That statements holds the answer to the question, “why does college cost so much?” Because they can get away with charging it.

An academic excellence fee.  Really?

 

Free review of award letters

April is the month for acceptance and award letters. It can be incredibly frustrating to try to decipher the language and format of different award letters from different colleges.  Our April newsletter gives you some tips on how to do that, and we have a special offer for new subscribers too. 

If you sign up for our newsletter during April, and would like help understanding and comparing financial aid award letters, we will do a side by side comparison of up to 5 letters for free. 

To take advantage of this offer and sign up for our newsletter, please click here.