Don Croghan, CPA

Many families approach college with the goal of having their child accepted by a college, and they typically have a particular type of college in mind well before the process begins. Instead, the goal should be to get accepted at the college that “fits” the student and at the best possible price. Since most students don’t truthfully know if the college really “fits” them until they are on campus and face a personal challenge; this process usually doesn’t see its completion until the end of the freshman year.

So how does the family make sure they get the best possible financial aid package? The family and student need to start the process of being “acceptable” to a college at least by the freshman year in high school. Because colleges today are looking for students that can be an asset to their student body, they rarely look just a grades and classes taken in high school.

Position your student by taking the right course work and being involved in community, school or church activities. Being active in community organizations, doing some volunteer work and taking leadership roles in these activities shows the college admission department the individual is well-rounded and is likely to have interests beyond the classroom. These characteristics are desirable as a college student and as alumni!

The calculation of the EXPECTED FAMILY CONTRIBUTION (EFC) is another vital part of the planning process. The EFC is the starting point for what the family is expected to pay, from its own resources, toward the cost of the college education. If a family doesn’t know what the cost exposure is, proper planning cannot be accomplished. Several internet websites have basic EFC calculators.

A knowledgeable college planner can assist the family in making sure the family and student handle the entire college application process in an efficient and rewarding manner. With the cost of a four-year education ranging from $60,000 to $120,000, many families are finding college planners to be a real bargain.

Today we’ll talk about the FAFSA form and how it is used to help determine how much your child will papy for college.

FAFSA stands for Free Application for Federal Student Aid. It is the primary means for transmitting your families financial information to colleges and universities so they can determine what kind of financial aid package. The FAFSA is due ASAP as you can get it filed, but not before January 1st, of the year your student will start his/her next year of college. (YOU heard me right, you will need to file one each year of college life).

On the FAFSA, you will report the parents and students assets and the parents and students income. The income is what is reported on the tax return for the previous year. For example, if your child is going to college for the first time in August, 2008, your FAFSA is due next month. The income figures will come from your 2007 tax return (estimates are OK), with some additional information requested to give the colleges a better insight into your actual “income cash flow” for the year of 2007.

You will also report your and the students assets on the form. The assets are valued as of the date the FAFSA is signed.

But be careful !

I’ve seen scores of FAFSA’s filled out showing all kinds of assets that are not reportable–things like IRA accounts, annuities, cash value of life ins. policies. The colleges need to get some idea of what kind of income and assets are available for education costs. IRA’s, annuities, etc. are not readily available, without some serious tax consequences, for these costs, so they are not reportable. This is by no means an exhaustive list!!

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Talk about a startling intro! I saw a report on a local TV station that said the average cost of a private college education has hit $30,000 a year. The reporter went on to project the cost of a year of college (in 15 years) if costs continued to increase at a 6% inflation rate. (You don’t want to know). He finished the report by saying families should start saving right away. While that is good advice, there is a good way to save and a bad way to save. And while you’re saving, why not take some other pro-active steps to prepare your child for college?

Then I open the Wall Street Journal to an article entitled: “As tuition soars, federal aid to college students fall” (WSJ, 10/25/06, Marketplace Section). The gist of the article was that changes made in the federal calculation of families need made it look as though the need was not a great, so families that qualified for federal grants in the past no longer qualify, or qualify for a smaller amount. A Pennsylvania State Univ. professor observed, “They are getting killed on the aid side, and they are getting killed on the tuition side.”

With everything seemingly going against todays college students and their families, it no wonder that a college planner is becoming more of an option. My service takes a pro-active approach to preparing for college, with the desired result of less emotional strain on the family and a better financial aid package. Like so many things today, it’s an investment in your student that (hopefully) pays dividends in the long run. If you’re investing $30k or more in your child’s education, why not do it right?

Just yesterday, it seems you were dealing with preparing your child for kindergarten. Suddenly, you turn around and high school graduation is just around the corner! Where did the time go?

Are you worried about your retirement plans and how you will help your child with college? Our unique approach to funding retirement and college will put you on track to achieving security and peace of mind. See our College Planning page for more information.