www.CollegePlusRetirement.com

Frequently Asked Questions

Q: What are the negative repercussions for lying on the financial aid
forms?

A: From www.finaid.org: "If you get Federal student aid based on incorrect
information, you will have to pay it back; you may also have to pay fines and
fees. If you purposely give false or misleading information on your application,
you may be fined $20,000, sent to prison, or both."


Q: Will saving hurt my chances for financial aid.

A: First of all, we need to clarify that it may only affect need-based financial aid
(not merit or private scholarships).  Although need-based financial aid is
primarily driven off of household income, assets are taken into account.  
However, every family will qualify for an asset protection allowance that typically
ranges between $30K and $70K as to the amount of assets they can have on
hand before they are counted.

Above and beyond the asset protection allowance, parent savings will only be
assessed at (approximately) 5.6%.  Therefore, if you have $150K in
investments, you might safely assume that $50K (guess) will not be counted
because of the asset protection allowance, and the remaining $100K will
increase that family's expected contribution for college by $5,600 (or $5,600 less
need-based financial aid).

Retirement accounts are not considered at all.

My take: Families with savings will have less of a need to rely on borrowing.  
Save for college, but save in the right places.



Q: Will I qualify for more financial aid if I have a big mortgage on my
house?

A: Again, it doesn't matter how much equity you have in your home when it
comes to merit or private scholarships.  It is only with need-based financial aid
where your home equity may be taken into account.  Of the 2,719 four-year
colleges in the U.S., only (approximately) 300 colleges that use the CSS Profile
financial aid application will ask about home equity.  Of those 300, a portion will
count 100% of the equity you have in your home, a portion will ask but will not
count any (0%) equity, and the final group of schools will cap the amount they
assess based on your level of income.  For example, if you own a $400K house
free and clear, your household income was $100K last year, and the college
your child is applying to caps home equity at 1.2X income = Therefore, they will
only assess $120,000 of your equity.

Keep in mind that #1: Need based financial aid is primarily driven off of income,
so depending on your current situation need-based financial aid may not be an
opportunity for you no matter how large or small your assets are.  #2: Some
colleges award a lot of loans in their financial aid packages.  Does it make
sense to take out loans (borrow against the house) to only qualify for more
loans?

My take: The bottom line with all financial aid questions = Everyone's situation is
very unique.  You are better off not making broad brush generalizations about
your situation without first crunching some numbers.


Q: I make $400,000, is there any point to me completing the financial aid
forms
?

A: Yes.  Many households with "high" income get awarded scholarships from
colleges.  You never know unless you ask.  Many colleges look to attract
students from high income families as it is assumed that they will have less
trouble funding all four years of college.  Schools want to publish high
graduation rates and high income families are less of a risk, therefore, they may
offer a scholarship to help encourage that student to attend.  Moreover, some of
the best loans for college can only be obtained after having completed the
financial aid forms.



Q: Should I wait until my taxes are filed before completing the financial aid
forms?

A: No, you may be sacrificing precious time as financial aid budgets are
depleted.  The forms assume you are making estimates, which can be verified
by your completed tax return at a later date.


Q: Are 529 college savings plans the best place to save for college?

A: They are an excellent option to consider, but may not be the only place you
will want to save.  There are merits to complimenting your 529 savings with Roth
IRAs, regular brokerage accounts, and even paying down your home.  For the
best tailored recommendations you should consider pursuing a holistic financial
plan.


Q: Should I save for retirement or college?

A: Run a retirement analysis and determine if you are on track for your goals.  If
your retirement is underfunded, then saving for retirement probably should take
priority.


Q: Is attending the most selective school always what is in the best
interest of the student?

A: Studies have shown little correlation with selectiveness of the college and
"success" in life.  I recommend you choose a college that is the right Fit
(provides the programs of study that the student wishes to pursue), Feel (the
school provides an environment in which the student will excel, be happy, and
graduate in four years), and Financial (most importantly is affordable to the
family).

Q: How much should a student borrow?

A: A good rule of thumb (that I like) is for the student to avoid borrowing more
than their estimated starting salary after graduation.  This encourages career
planning on behalf of the student.  The major (which leads to a career) a student
chooses to pursue is the best indicator as to post-graduation income.


Q: What is the best college planning strategy, if you had to pick one?

A: SAT/ACT preparation.  This is the one variable, through practice, that can
dramatically increase a student's chances of admission and financial aid at all
schools they are considering.  There are many affordable options like
eprep.com and prepme.com that produce excellent results.  A local professional
in my area shows an average increase of 180 points through practice and
preparation = that can make a big difference!


Q: Do colleges want well-rounded students?

A: Being well-rounded will never hurt a student's chances of admission.  
However, colleges have shifted their focus from students who have participated
in many activities for short periods of time to those that have "passions" and
have exhibited dedication to one or two activities.  Admissions seeks to compile
a well-rounded class composed of students who have exceptional talent or
commitment in one or two areas.


Q: Will early decision help or hurt my admission and financial aid
chances?

A: Research indicates that your odds of admission may actually increase slightly
by applying early.  In addition, your odds of financial aid may decrease slightly.  
If your student is considering early decision they should: 1) be absolutely sure
that the college is the best fit, 2) not need senior year grades to elevate their
academic resume, 3) have time to submit a strong application (essay,
recommendations, etc), 4) not need to compare and evaluate multiple financial
aid offers.


Q: Will writing a controversial essay be an effective admission strategy?

A: Be careful.  It may be best to avoid controversial political and social issues.  
You never know who may read the essay (with their own opinions) and this
strategy may backfire.  Colleges want to read a lively and interesting essay that
gives them insight into how you (the student) thinks and "who you are" (beyond
statistics).  Don't forget to proofread!


Q: Will it reflect poorly on the student to use the Common Application?

A: No.  The colleges that accept it pay a fee for the privilege to use it.


Q: Is a college interview necessary?

A: In my view, it is!  Colleges track your level of interest in the school.  
Interviewing may tip the odds of admission in your favor over applicants with
similar profiles.


Q: What actions should a student take if they are considering playing a
sport in college?

A: I recommend contacting college coaches with a short athletic and academic
resume.  All coaches have to continuously fill open positions on their teams.  By
proactively approaching them, you are doing them a favor.

If you plan on playing Division I or II, consider registering with the NCAA
Clearing House (www.ncaa.org) by the end of your Junior year.

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Interesting Note: "The U.S. government projects to make more money off
student loans this fiscal year than ExxonMobil, Apple, J.P. Morgan Chase or
Fannie Mae made on their respective businesses last year, a new analysis
shows."
                                                                                   - USAToday 6.16.13