How
To Pay For College Without Going Broke
By Reecy Aresty
College Admissions/Financial Aid Expert and
Author
To ensure their children’s success in
today’s intensively competitive world, parents are faced with the absolute
necessity of paying for a college education. As students approach the high
school years, it is understandable why so many families feel the stress to
financially prepare for tuition and related costs which have not only
gone through the roof already (Boston Univ., $51,000+), but continue to
increase as much as 15% every year! With no relief in sight, how can a
college or college-bound family survive?
Contrary
to popular belief, much of the anticipated debt can be legally
eliminated if the appropriate action is taken at the proper time and
before it is too late. Help is on the way in the form of proven
financial strategies that make virtually any college affordable.
For
example, most families are unaware of the fact that in the financial aid
formulas, students have no
asset protection allowance. For college
year 2008-2009, students will lose 20% of every dollar they have in
cash, savings UGMA & UTMA accounts, stocks, bonds, savings bonds, mutual
funds, and the like.
Parent assets
are subject to a different formula and school selection is a key factor in
ultimately determining the amount of financial aid. It is therefore a
financial necessity to identify your school of choice as follows:
Category 1
includes a few select state colleges plus approximately 225 elite private
schools. In addition to the Free Application for Federal Student Aid,
(commonly known as the FAFSA), they also require the CSS Financial Aid
Profile (CSS).
Those who find the FAFSA difficult
will undoubtedly regard the CSS as a nightmare, and pity the poor family
who’s divorced, separated, owns a business or a farm. Such families are
required to complete an additional form, The Business/Farm Supplement
(you’ll need your accountant), and/or The Noncustodial Parent’s Statement
(be nice to your ex). These colleges take into account all of the above
plus home equity, Coverdell Education Savings Accounts (Formerly Education IRA’s),
the refund value of Prepaid Tuition Plans and the account value of 529 Savings Plans.
Category 2
schools (all the rest), only require the FAFSA and exclude the value of
the primary residence or a farm, provided the family lives on it.
Parent assets are subject to a 5.64%
annual assessment over their allowance, which increases with age. The
asset protection allowance for a two parent family with an older parent of
48 is $45,000. A 45 year old single parent is only allowed $19,700.
While
this is certainly cause for concern, it is not cause for alarm. The good
news is that with proper asset repositioning, parents and their students
can appear penniless in the blink of a financial aid officer’s eye
by legally repositioning their money into financial vehicles
excluded from the calculations.
Once accomplished, repositioning makes
it possible for families with students already in college to re-file their
financial aid forms and qualify for additional aid for each of the ensuing
years.
Note:
Even more money can be
saved when
implementing
income
planning strategies. As the formula for parent income is much more
complicated and not germane to this discussion, I have addressed it in one
of my other articles.
The following illustrates exactly how
student income affects financial aid:
1. In
the financial aid formulas, students have a $3,000 income protection
allowance, but for every additional dollar earned they lose 50 cents in
financial aid:
Example:
$5,000 earned - $3,000 exempt, $2,000 subject to the 50% assessment =
$1,000 lost in financial aid.
Tax consequences:
The $5,000 earned is subject to 7.65% in social security and Medicare
resulting in an additional $383 lost.
2.
If the student has larger earnings, it looks like this:
Example:
$8,000 earned - $3,000 exempt, $5,000 subject to the 50% assessment =
$2,500
lost in financial aid.
Tax
consequences:
Of the $8,000 earned, $5,150 is exempt leaving $2,850 subject to 10%
federal and $8,000 subject to 7.65% social security and Medicare = 285 +
612 = an additional $897 lost.
3. In the above example, let’s assume
the student banked $5,000 and listed it on the FAFSA. The student would
lose an additional 20% or $1,000 just for having it! Of the
$8,000 earned, the total amount of financial aid lost in taxes and
assessments would equal
$4,397,
or 55%!
4. Even
if the student has no earnings but will attend one of the elite
private and/or state colleges that require the CSS, there will still be an
automatic income assessment of $1,000! However, this can be
avoided – if you know how.
In order
to receive maximum financial aid without the slightest hesitation on the
part of a financial aid officer, income planning and asset repositioning
must be completed no later than Dec. 31st of the 11th grade, or no
later than Dec. 31st of the 10th grade if the student is applying
to an CSS school.
Other legal strategies I have used
that literally
saved families millions of dollars over the years include:
-
Professional Judgment,
which few families are aware of, comes into play when there has been a
significant change in family income, assets, marital status or health.
In order
to win the college funding game (which repeats itself every year
the student is in school),
a family must have the most up-to-date information, precise timing,
persistency and/or professional counseling from an expert in income
planning and asset repositioning. This is no longer an optional path on
the way to college, but rather a necessity for families determined to
survive the battle the admissions and financial aid process has become...
About The Author:
Reecy Aresty has been a financial advisor since 1977, and
is founder and president of College Assistance, Inc., located in Boca
Raton, Florida. He is the author of the critically-acclaimed, How To Pay For College
Without Going Broke, an invaluable, parent/student
manual. Arguably the most revealing book ever
written on college admissions and financial aid, it is the only book of its
kind also available in Spanish.
Reecy has been
interviewed by financial experts on radio and television, and by many of
the nation's most respected publications including Money Magazine, US
News & World Report, Bloomberg News, Scripps Howard, The Washington Post,
financial icon Terry Savage for the Chicago Sun-Times,
Consumers Digest, The Education Times and AOL. An Internet search for
Reecy Aresty will result in thousands of links to sites all over
the world that feature his articles, advice and methods. Recently, he
created the College Information Network™,
which includes The High School Blog, The College Blog, PayLess For
College and The Way To College.
For almost three
decades, Reecy has helped thousands of families send their kids to the
college of their choice for less than they ever dreamed possible.
The critics agree. The way to college is Reecy Aresty's,
How To Pay For College Without Going Broke. It reveals the trade secrets and insider
information our colleges, universities and the federal government don't want you to know. For
further information on the best college funding book on the market today,
click here. For more information on admissions and
financial aid - Ask Reecy!
