How To Pay For College Without Going Broke

To ensure their children's success in today'sit in one of my other articles.
intensively competitive world, parents are faced withThe following illustrates exactly how student income
the absolute necessity of paying for a collegeaffects financial aid:
education. As students approach the high school1. In the financial aid formulas, students have a
years, it is understandable why so many parents feel$3,000 income protection allowance, but for every
the stress to financially prepare for tuition and relatedadditional dollar earned they lose 50 cents in financial
costs as they have not only gone through the roofaid:
already (Boston Univ., $51,000+), but continue toExample: $5,000 earned - $3,000 exempt = $2,000
increase as much as 15% ever year! With no relief insubject to the 50% assessment = $1,000 lost in
sight, how can a college or college-bound familyfinancial aid.
survive?Tax consequences: The $5,000 earned is subject to
Contrary to popular belief, much of the anticipated7.65% in social security and Medicare resulting in an
debt can be legally eliminated if the appropriate actionadditional $383 lost!
is taken at the proper time and before it is too late.1. If the student has larger earnings, it looks like this:
Help is on the way in the form of proven financialExample: $8,000 earned - $3,000 exempt = $5,000
strategies that make virtually any college affordable.subject to the 50% assessment = $2,500 lost in
For example, most families are unaware of the factfinancial aid.
that students have no asset protection allowance inTax consequences: Of the $8,000 earned, $5,000 is
the financial aid formulas. For college year 2007-2008,exempt leaving $3,000 subject to 10% federal and
students will lose 20% of every dollar they have in$8,000 subject to 7.65% social security and Medicare
cash, savings UGMA & UTMA accounts, stocks,= 300 + 612 = $912 lost.
bonds, savings bonds, mutual funds, and the like.2. In the above example, let's assume the student
Parent assets are subject to a different formula andbanked $5,000 and listed it on the FAFSA. The
school selection is a key factor in ultimatelystudent would lose an additional 20% or $1,000 just
determining the amount of financial aid. There arefor having it! Of the $8,000 earned, the total amount
two categories of schools:of financial aid lost in taxes and assessments would
Category 1 includes a few select state colleges plusequal $4,412, or 55%!
approximately 225 elite private schools. In addition to3. Even if the student has no earnings but will attend
the Free Application for Federal Student Aid,one of the elite private and/or state colleges that
(commonly known as the FAFSA), they also requirerequire the FAP, there will still be an automatic
the CSS Financial Aid Profile (FAP).income assessment of $1,000! However, this can be
Those who find the FAFSA difficult will undoubtedlyavoided - if you know how.
regard the FAP as a nightmare, and pity the poorIn order to receive maximum financial aid without the
family who's divorced, separated, or owns a businessslightest hesitation on the part of a financial aid
or a farm. Such families are required to complete anofficer, income planning and asset repositioning must
additional form, The Business/Farm Supplement (you'llbe completed no later than Dec. 31st of the 11th
need your accountant), and/or The Noncustodialgrade, or no later than Dec. 31st of the 10th grade if
Parent's Statement (be nice to your ex). Thesethe student is applying to an FAP school.
colleges take into account all of the above plus homeOther strategies which have literally saved families
equity, Coverdell Education Savings Accountsmillions of dollars over the years include:
(Education IRA's), the refund value of Prepaid Tuition· The ambiguous noncustodial parent
Plans and 529 Savings Plans.strategy, which has reduced the cost of college by
Category 2 schools (all the rest), only require theas much as 90%;
FAFSA and exclude the value of the primary· The winter clothing allowance, which has
residence or a farm, provided the family lives on it.saved students from southern states attending
Parent assets are subject to a 5.6% annualnorthern schools as much as $2,600;
assessment over their allowance, which increases· The "no work" work-study award, which
with age. The asset protection allowance for a twohas been worth as much as $8,000 over 4 years;
parent family with an older parent of 48, is $45,000.· Strategically negotiating for the best
A 45 year old single parent is only allowed $19,700.possible financial aid package, much like wheeling and
While this is certainly cause for concern, it is notdealing for the best price on a new car, has produced
cause for alarm. The good news is that with properincredible results; and
asset repositioning, parents and their students can· Professional Judgment, which few families
appear penniless in the blink of a financial aid officer'sare aware of, comes into play when there has been
eye by legally repositioning their money into financiala significant change in family income, assets, marital
vehicles excluded from the calculations.status or health.
Once accomplished, repositioning makes it possible forIn order to win the college funding game (which
families with students already in college to re-file theirrepeats itself every year), a family must have the
financial aid forms and qualify for additional aid formost up to date information, precise timing,
each of the ensuing years.persistency - and/or professional counseling from an
Note: Even more money can be saved whenexpert in income planning and asset repositioning to
implementing income planning strategies. As thedo battle in the arena the College Funding Process
formula for parent income is much more complicatedhas become...
and not germane to this discussion, I have addressed