discussion on the College board re: paying for college

[wapiti]

While many young parents may be tempted to stick their fingers in their ears and say to themselves "la la la I can't hear you," knowledge is power.

 

It is interesting to read the many ways parents and students have worked out a financial path for college, some of which may have involved starting saving early, others seeking scholarships and careful school selection and based in part on the student's interests, ability and academic record, and still others a combination of those.  While uncertainty will remain until the time comes, it may be important to look ahead and get some idea of the lay of the land.

 

How are YOU managing to pay for college?

[Hilltopmom]

Yes! Go read it now & start saving today.seriously.

 

Eta- I probably should've said "start planning" today. Since not all of our plans can involve saving, but if our kids are young or older, we should think about planning:). I wish we had thought about this more when our oldest was younger.

Edited February 7, 2016 by Hilltopmom

[Hunter]

If you are very low-income, saving anything at all can hurt you, and disqualify you from some grants.

 

Even though my older son was just 16 and putting himself through college, some of the money he had saved was deducted from what was offered to him as financial aid.

 

My younger son didn't have any savings at all, but because his dad now did, he was actually offered less than his brother was offered, even though his dad was refusing to contribute anything to his education.

 

I'm only talking about very low-income situations.

[ScoutTN]

Yes! Go read it now & start saving today.seriously.

 

Saving for college is just not possible for everyone. Lower income families like ours are doing great to have a modest emergency fund, cars that run, regular expenses like housing, food and insurance covered. And school, of course. We tithe and save some (not enough and got a late start) for retirement. As the thread mentioned demonstrates, there are many ways to pay for college. But there are no scholarships for retirement and we have to eat, drive and learn now in order to get to the college years.

 

Replacing a car (getting a 6 year old one instead of a 17 year old one) is very, very hard for us. We cannot afford a car loan and do not borrow money for things which depreciate rapidly. We live very simply. We budget carefully. 

 

We will plan and work and help our kids as best we can, but our income just doesn't go far enough to save for college.

 

I am sure we are not the only family here in similar circumstances...

Edited February 7, 2016 by ScoutTN

[Carol in Cal.]

Savings should not be in the child's name, if possible, because that will count against him in the FAFSA.

I don't believe savings in retirement accounts count on FAFSA or anywhere else, but am not positive about grants.

So a kid who is working should consider stashing as much as possible of his savings into a Roth IRA.  The limit on that is $5500/year, and the principal can be withdrawn for college if needed.

[Lori D.]

Just wanted to echo wapiti's suggest to read through that thread -- lots of different ideas (not just college savings funds). It's a really good idea to glean ideas so you can be starting to look around and see what options are open to you locally, since every area is different, and every family's financials are different.

 

You might also like to look at this past thread on creative ideas for funding college: "s/o: Cautionary Tale: High College Costs: a brainstorm $$ ideas thread!"

 

This thread is linked, with many other great threads on Financial Aid and Scholarships, in POST #5 of the big pinned thread at the top of the High School Board: "Transcripts, Credits… Scholarships/Financial Aid… past threads linked here!"

 

BEST of luck to all as you start thinking ahead to high school and college! :) Warmest regards, Lori D.

 

[Hilltopmom]

Saving for college is just not possible for everyone. Lower income families like ours are doing great to have a modest emergency fund, cars that run, regular expenses like housing, food and insurance covered. And school, of course. We tithe and save some (not enough and got a late start) for retirement. As the thread mentioned demonstrates, there are many ways to pay for college. But there are no scholarships for retirement and we have to eat, drive and learn now in order to get to the college years.

 

Replacing a car (getting a 6 year old one instead of a 17 year old one) is very, very hard for us. We cannot afford a car loan and do not borrow money for things which depreciate rapidly. We live very simply. We budget carefully.

 

We will plan and work and help our kids as best we can, but our income just doesn't go far enough to save for college.

 

I am sure we are not the only family here in similar circumstances...

I completely understand. We ourselves have not saved at all for college for the reasons you mention. But if people possibly can & just aren't because it seems so far away, I recommend they try or start looking at other creative options.

 

We've realized now that our oldest who is looking at colleges and is likely NOT getting merit aide, that living at home & going to CC or hopefully our local state

U is what he's going to have to do while still taking out loans.

 

I had NO idea how expensive college has gotten.

That's why I mentioned it here in the younger kids board.

Edited February 7, 2016 by Hilltopmom

[Hobbes]

Saving for college is just not possible for everyone.

 

...

 

We will plan and work and help our kids as best we can, but our income just doesn't go far enough to save for college.

 

I am sure we are not the only family here in similar circumstances...

Agreed. Saving for education is great, but not of top priority, in my opinion, and I have heard financial advisors say the same (ex: Dave Ramsey puts retirement savings before education savings). My parents had a moderate income and it was all they could handle to provide for their current family needs while homeschooling. I don't question that the investment they made in our educations while homeschooling was deeply valuable.

 

Every one of their five children has completed or is on the education path they desire and none of us carry great debt for having to pay our way. This is not because things were different then... many of our friends still carry huge university debt, due to different choices.

 

My husband was the same - neither of us had help paying for school. It wasn't a major problem for us or my siblings. We chose our programs carefully, did not choose the most expensive universities, worked through school, some earned merit scholarships while in school, and lived at home (the way my parents were able to support us - I know not possible for everyone due to location). My parents also do not have generous retirement savings, so it isn't that they just went for that instead.

 

I am completely behind my kids getting degrees, if that's their desire and gifting. I don't think it's 100% necessary and I don't plan to pay their way. I do plan to teach them and prepare them to work and save and approach education thoughtfully.

 

Just some encouragement for those who are not in a financial position to save large amounts for their children's educations. It's nice, but not necessary and does not guarantee an educational outcome either way.

[monk17]

Thank you all for some great information!  I especially like the tip about a child putting money into a ROTH IRA. I was wondering if anybody had confirmed that retirement accounts didn't count against your net assets under FAFSA? I had heard that the student is expected to contribute up to 25% per year of their savings yearly toward college and parents were expected to contribute 5% of their savings per year. Is that correct?  Also, it appears that you can't start to fill out FAFSA for the 2017-2018 academic year yet. When do they typically open up the FAFSA application for the following year?  Any help or comments would be greatly appreciated. Thank you!

 

[J&JMom]

We started a prepaid tuition plan when our oldest was just a few months old on an annual payment, 10-year plan which equals 4 years (128 credit hours) at any TX state university or the average value of said state tuition payable to any private or public university in the nation. Our youngest got a later start when the plan was revampe opened and we purchased a middling university equivalent of 4 years (the plan price adjusts to the cost of the state school).  We struggled to make these payments every year, but when my mother died 6 years, we took the proceeds of the sale of the home and paid off the contracts.  So my kids each have 4 years tuition in the bank regardless of the economy.  Room, board, textbooks will need to be paid on an 'as you go' basis as we have minimal other school savings atm.  However, we will have our house paid off right about the time they start so that should free up funds to apply to those costs. Loans, scholarships, and old fashion work will make up the rest. I know we are blessed to have these resources so we can concentrate of building up retirement..

Edited June 26, 2016 by J&JMom

[Lori D.]

… a child putting money into a ROTH IRA. I was wondering if anybody had confirmed that retirement accounts didn't count against your net assets under FAFSA? ...

 

Always best to check directly with FAFSA (helpline and email contact), and with a financial expert who specializes in college planning. :)

 

But yes, from this brief article from IRA Kids, a Roth IRA in either the parent's name OR the student's name is not looked at by FAFSA (unless a withdrawal is made, which is then counted as income). However, do be aware that if the college your student wants to attend requires the student to fill out the much more in-depth financial form of College Board's CSS Profile, some funds that are NOT considered by the FAFSA, ARE considered by the CSS.

 

Here are two more detailed articles about IRAs (held in the parent or grandparent's name) that may be useful:

FinAid article: "Saving for College: Account Ownership: In Whose Name to Save?"

FinAid article on a parent withdrawing money from the a Roth IRA to pay for college

 

 

...I had heard that the student is expected to contribute up to 25% per year of their savings yearly toward college and parents were expected to contribute 5% of their savings per year...

 

From the FAFSA formula for calculating EFC (Estimated Family Contribution), expected contribution percentages look like this:

- 20% of a student's assets (money, investments, business interests, and real estate)

- 50% of a student's income (after certain allowances)

- 2.6% to 5.6% of a parent's assets (money, investments, certain business interests, and real estate, based on a sliding income scale and after certain allowances)

- 22% to 47% of a parent's income (based on a sliding income scale and after certain allowances)

 

Here is the detailed US Student Aid Worksheets for Calculating EFC (Estimated Family Contribution) number. The EFC is what the FAFSA is all about -- it is the number used by the Federal Government to determine eligibility for federal grants and work study monies, and which colleges use to help them determine student "need" for putting together a financial aid package to offer to each student.

 

For more about how the EFC plays into financial aid, see this Federal Student Aid website article.

 

 

... Also, it appears that you can't start to fill out FAFSA for the 2017-2018 academic year yet. When do they typically open up the FAFSA application for the following year? 

 

A heads-up: FAFSA is in the process of being streamlined/revamped -- so a family's income and tax information from 2015 will be used for TWO years in a row -- both for the 2016-17 school year AND for the 2017-18 school year. A family's income and tax information from 2016 will be used for the 2018-19 school year. See this helpful article from Federal Student Aid on FAFSA changes.

 

The 2017-18 FAFSA is slated to be available on Oct. 1, 2016 (3 months earlier than the "old" FAFSA, which became available on Jan. 1st of each year). The closing deadline will continue to be June 30th.

 

So, the new FAFSA will be open for 9 months of the year (Oct. 1-June 30), rather than just the 6 months (Jan. 1-June 30) of the old FAFSA.

 

If you need to submit a FAFSA now, you'll need to use the old one, and you'll need to hurry -- the deadline to use the "old" 2015-16 FAFSA is in 4 days -- June 30, 2016. FAFSA will then close for 3 months.

 

 

Note: above you expressed concern about student assets. If the student has substantial assets, and you want to transfer them into another family member's name to avoid being counted against the student, for the old FAFSA that needed to happen TWO years in advance of submitting the FAFSA for that student so that it will not appear on the tax forms as an asset. As you can see with the new FAFSA, that would have to happen THREE years in advance of submitting the FAFSA, as the new FAFSA will be using family income and tax information that is 2.5-3 years old.

Edited June 26, 2016 by Lori D.

[monk17]

Wow!  Thank you for putting this together  I will share this with my homeschool group.