College planning – it’s more than choosing a college

Have you heard the news?  It just got tougher to pay for graduate school.Before the recent agreement on managing the debt ceiling, students were able to defer interest on “government subsidized” loans until six months after graduation.  And if they made the first 12 monthly payments on time, they received a “credit” equal to the 1% loan origination fee they paid.  Now, students begin owing interest on their debt while they are still in school, and they have lost the “credit” that reimbursed loan origination fees.  Paying more for graduate school makes paying less for college even more important.  
Choosing a college to attend is an important decision. It is also a major consumer purchase, and should be approached with the appropriate care and caution. Ultimately, the cost of college is driven by the tuition cost of the institution, room and board, and books, less any financial aid or scholarships the student can access. What is crazy is that the student and parents typically don’t know the amount scholarships and aid packages awarded until after the student commits to attend and the parents pay a hefty deposit, often, as much as 25% of the first year’s total cost. That’s why it’s important to plan in advance, learning all you can about college costs and the scholarships or aid programs that may be available.
Surprisingly, when you combine college costs with the scholarships and student aid available, you may find that the ”state college with lower tuition costs” may actually end up costing more than an expensive private school with more aid and scholarships available.  Add to the equation that your student might be more likely to graduate in four years from the private college, rather than five years many students find is the case in a large state university, and the private school could be an even better value.
I am not trying to make an argument for private schools; I am promoting the concept that the right college planning can save thousands of dollars for both the parents and the student.
What can you expect from college planning?  For years, as a financial planner, I advised parents to save early and often while helping my clients chose the best vehicle, i.e. a 529 Plan or a custodial account.  Now I can do more, not only in guiding parents in their saving strategies, but also helping my client’s students qualify for more student aid with strategies that include:

  • maximizing the income and expenses to produce the largest aid package,
  • repositioning assets,
  • harvesting tax losses
  • leveraging gifts from grandparents
  • providing tips for filling out the dreaded FASA [Federal Student Aid Application]
  • calculating the “Expected Family Contribution.”
If you have a college-bound student in your family, whether he or she or they are ready to start sending out applications, or just starting to learn how to read, it’s time to give me a call. The result of working together could be a better college education for your student, at a lower cost. And remember — the money you save on college costs may be the money that funds your retirement.
Resource:  CNN Money, August 2, 20122 – “Student to feel pinch in debt deal”

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