5 Reasons NOT Saving for College Is a Good Idea

Okay. You caught me. Indeed most of the time not saving for college is a bad idea. Now and then I’ll run into a parent who tells me they are not saving for college in order to increase the chances their child will get financial aid. The thought is that having money makes colleges and the government figure you can afford to pay for college and therefore no aid is needed. This, to a limited extent, is true. If you have millions in the bank I’d rather not have my tax dollars taken and used to pay for your kid’s college so that you can spend the money on first class tickets to Vail.

However, assuming that saving for college will mess up financial aid is short-sighted and makes many assumptions. The first one being that there will be financial aid available for your child. We don’t know what the government will have in the way of aid in 5, 10, or 15 years. You should also realize that the majority of financial “aid” is in the form of loans. You very well could be creating a situation that burdens your kids with onerous loans they will have difficulty paying back in exchange for a little better lifestyle now. I wouldn’t call that sound financial planning.

Another reason that saving won’t hurt much when it comes to aid is that the government knows that you have more to save for than just college. If you save in your name rather than your child’s (including the 529 College Savings Plans and Coverdell ESAs) less than 6% of the savings in those account types will be counted against financial aid. Yes it does count against you a bit, but not much as assets held in the child’s name at 20%.

There is a good reason for not saving for college: You have more important needs for that money. Note I don’t say “if you can’t afford it.” That’s because determining affordability is often simplified to seeing if there’s money left at the end of the month. Most of us find ways to spend any money that is available. What we spend it on might be a true life-giving need, but it also might be a dubious want.

So what may take priority over college savings? Being a retirement planner, I like to see money put away for the time when you can no longer work. Of course, food, clothing, and shelter also seem like needs. But let’s be clear: you can spend $20, $40, or well over $100 on blue jeans. I’m thinking the $100 pair doesn’t count as a need.

In the end though, some folks just won’t be able to afford to save for college without leaving themselves short in other vital areas. That’s not selfish, that just is. But for the rest of us, it’s an area that deserves our attention.

Paying for College: A Gift That Keeps On Giving – Helpful Strategies for Grandparents to Lend a Hand

Adding in the cost of college tuition, fees and housing and this number can easily double. But paying for college shouldn’t require winning the lottery. Careful coordinated planning by parents and grandparents with the help of a trusted financial adviser can help to reduce the burden on families and their kids.

Before Grandma or Grandpa Writes a Check

Having the help of a relative certainly will take off some of the pressure. But before anyone writes a check, you should have a serious discussion about how best to help.

Providing help in the wrong way can be harmful to the student’s chances for getting financial aid.

Consider these strategies that will help the student in a financial-aid friendly way.

Consider Paying for Student Loans After Graduation

Financial aid is based on various formulas to calculate the Expected Family Contribution (EFC). Most of this is based on the information provided on a student financial aid form about parental and child assets and income.

The financial aid forms do not ask about financial assets of other relatives.

If you or a relative are in the fortunate position of having extra cash, you may be inclined to help. But providing a gift of cash directly to the parents or the student will result in an increase of reportable assets which will reduce the calculated need, increase the EFC and, in turn, reduce the amount of possible financial aid.

And if a helpful relative steps up and indicates that they will help, then the financial aid office will also reconsider the financial need of the student. Money paid to the school on behalf of the student could be considered to be like any other outside resource such as a private scholarship which reduces the aid offered by the school.

A better way is to let the student qualify for the maximum aid while still in school and then helping out by contributing toward paying off the loan balances.

Family EFC Too High?

For those who know that their EFC is too high to qualify for aid, there are still options for grandparents who are still able to help out. These options at least offer some tax savings to them.

Tip #1: Pay the College Directly

Since aid is not going to be affected, then simply pay the school directly. Each grandparent can give up to the annual gift limit ($13,000 in 2010) to each student. This will help reduce the taxable estate of the grandparent and is an exempt gift to the student.

Tip #2: Establish a 529 Savings Plan

For grandparents who want to help out with college costs, a qualified tuition plan offers a great choice. Money set aside in these plans can be used for eligible expenses like tuition, fees, books and equipment.

These accounts offer a variety of investment options that can be tailored to the time frame before funds are needed. The funds grow without any taxes and if used for qualified expenses can be withdrawn tax free.

Grandparents can transfer large amounts of cash into these accounts without triggering gift tax. Each grandparent can effectively deposit up to five years of annual gifts which right now is $65,000. The assets in these accounts remain in the control of the grandparent and are not countable assets for the student.

Tip #3: Gift Appreciated Assets

Assuming that the grandparent has long-held assets that have increased in value, one way to pay for college tuition and lower a potential tax bill is to gift these highly appreciated assets to someone in a lower tax bracket. This could be the child or the parents.

This saves on the large capital gains tax bill that the grandparents would likely incur if they were to sell the appreciated asset and use the proceeds to help pay for tuition or other expenses directly.

Tip #4: Set Up a Charitable Remainder Trust

For those who are both charitably inclined as well as desiring to help out a student, the grandparents can establish a trust.

A Charitable Remainder Trust can be funded with highly appreciated assets which can then be converted into income-producing assets. The income that is generated can be used for helping the student. Eventually, the remaining assets can then be gifted to the charity. This strategy helps grandparents avoid paying capital gains on the assets and removes the asset from the taxable estate. While not an issue this year (no estate tax in 2010), this will change in 2011 with no congressional action.

For more tips and help, consider using a qualified college aid planner.

Scholarships For Single Moms – Suze Orman’s Tips For Single Moms to Get Financial Aid Revealed!

To be a single mom today is like one of the toughest thing to face in the world. One of the hardest things to do is to pay the huge bills. Dept is a hard reality for everyone but it turns out to be even harder for a single mom. Scholarships for single moms to get financial aid are a must these days. Looking at this, Suze Orman gives you some tips to get financial aid easily. Obama’s government has made this procedure quite easy in the year 2009.

You may begin this by consulting non profits around your resident who offer government financial aid for single moms. These organizations happen to offer assistance in employment, housing and even tuitions. State government also has offered programs to give help to single moms when they are in need. You may refer to TANF; it’s a program that helps you with food stamps, job training and assistance in placements. You can also take help from LIHEAP to give you assistance with the heating bill.

According to Suze Orman, Government assistance programs have certain criteria to give grants. Basic is that a single mom should be very poor in order to qualify for scholarship for single moms.

* Her income should not have many resources as well as they will just prove to be hurdles in her way.

* Some of the single mothers even have to resort in order to get a second job.

* Single mother is also offered to get counseling session to get over stress and frustration.

ASEAN organization gives scholarships for single mom to do their post graduation study. The fact that single parent households are getting increased in number day by day and the head is women leads to the fact that women should be independent and be financially settled. This organization makes it easier for single moms to get their post graduation degree and help them to take care of family side by side. University of waterloo deals with under graduation study and offers scholarships to single mothers.

Society survival in the United States may be dependent on the survival of single mother only. Scholarship for single moms is becoming easier to get provided you fulfill the conditions. This aid proves to be a safeguard for them.

Financial Assistance SOS

One of the most worrying aspects of applying to college is working out how you are going to be able to pay for your studies. Check out our guide below to see the options that may be available to you.

Need-Based Aid

Need-based aid is money awarded based on the ability of you and your family to pay for college. To apply for most need-based aid, you need to first fill out the Free Application for Federal Student Aid (FAFSA). FAFSA is the determining factor controlling all federal aid programs, such as student loans and grants. Many other forms of financial aid for students, including college scholarships and private initiatives, will also use FAFSA information as a factor in determining who is eligible for their financial aid programs.

Scholarships

Like Merit aid, scholarships are another type of financial aid that you won’t have to worry about paying back! The government, colleges, public institutions, private companies and religious groups are all possible sources of scholarships. Most are awarded based on specific criteria, such as your academic performance, extracurricular activities, community involvement, ethnic heritage or religious affiliation. Some scholarships are also need-based. No matter what the requirements, applications for scholarships are always hotly contested, so apply early! A small batch of students with 4.0 GPAs and high test scores may win a disproportionate number of scholarships.

Grants

Another great way to fund your way through college, grants are in essence money for nothing financial aid. The government aims many grants at students who would otherwise struggle to pay college fees, and these may be offered at state level, or through federally sponsored programs like the Pell Grant. They may be tailored to students who excel in an area of academic study, or be linked to the course or career that you choose to study for. Some colleges offer their own grants to students, while private groups or companies fund others. Be sure to check whether the grant you aim for has strings attached – you may find that there are certain qualifying requirements connected to your program of study or your future career.

Merit Aid

Merit aid is usually awarded as a scholarship, in recognition of your personal achievements in a specific area of study, sports, the arts or community activity. The great thing about merit scholarships is that you do not need to pay back the money, and may be offered on a renewable basis for several years. Another advantage is that merit-based scholarships are not competitive in its nature – as long as you meet the specified requirements, you are eligible to receive this form of financial aid.

Student Loans

As with a normal bank loan, you will be charged interest on student loans for college courses. The good news is, institutions that offer student loans are limited to charging a capped rate of interest, so they work out to be cheaper than other types of loan. Another big advantage is that you will not usually be required to start paying back your student loan until you’ve secured employment after graduating. You can find out which federal student loans you are eligible for by filling out the Free Application for Federal Student Aid (FAFSA). While some, such as the unsubsidized Stafford Loans and Parent PLUS loans disregard your perceived level of need, others, like a Perkins loan, are needs-based. If you’re still strapped for cash after trying all the federal opportunities, you can choose to look into private loan contracts with banks and credit unions, although the conditions of these may not compare favorably to federally sponsored loans.

Work-Study

Exactly as the name suggests, work-study programs offer you a financial incentive in exchange for work that you carry out while studying at college, and usually involve jobs that are completed on-campus.