I Love My Kids, But I Never Got Around To Saving For Their College – Now They Are In High School

I always thought about starting a college fund. I even set up a small savings account when they were born. Now they are in high school, time is running out and I am starting to panic. What can I do? Where should I start? Are they going to hate me? I really wish I had started earlier.

Get Started: As their guidance counselors, teachers and friends are helping them evaluate their strengths and weaknesses in an effort to narrow down their career options, you need to take action now if they are going to make it to college. Here is how to begin.

Relax: Your first step is to take a deep breath and realize that you are starting late. You can’t change the past, but you can take positive action to change the future. The fact that you are reading this article tells me that you are ready to make an effort to help your children as much as possible. It will take some time and effort on your part, but you WILL make progress one step at a time.

Follow These Steps: The following steps will get you started on a nice structured path. You will start a journey that will take you from where you are now, through to the college graduation of your youngest child. It will not be easy or without some sacrifices, but if you do it right, it will be fun and your children will appreciate your efforts.

Step 1 – Family Net Worth: Prepare a current Net Worth Statement so you can see where you stand right now. This is a financial snap shot that will show your assets and liabilities as of today. (You can find a free one-page net worth statement on our site listed at the end of this article – forms section – or by searching the internet.) Once you know where you are today, every positive step you take will improve your net worth and help your efforts to send your children to college.

Step 2 – Maximize Income: Now that your children are all in school, consider maximizing your earning and saving potential. If one spouse was the primary care giver for the children, maybe they were working part-time or not working outside the house. Consider having both spouses work full-time to add extra income into the family budget. These increased earnings can be directed specifically into college savings, but make sure you put them in the right type of accounts.

Step 3 – Talk To Your Kids: Discuss college and financial aid with your children now. Review the costs associated with community colleges, state universities and private colleges. Let them know that you may be late to the game, but you are trying to help them as much as you possibly can. Depending on your family size, income and assets, you can get an estimate of your expected family contributions by using one of the online EFC calculators. Once you and your children are aware of these estimates, you can begin looking into your best college alternatives.

Step 4 – Let Them Help: Finally, encourage and help your children to become more “Financial Aid Worthy” students. By doing the right things while they are in high school and positioning your assets properly, you can help them by qualifying for more financial aid and learning how to further reduce college costs.

Keep Moving Forward: The most important point to remember is that even small steps will help, so if hitting a college financial “Home Run” isn’t possible, a solid single or even a bunt will help your cause. Every little bit helps and if you keep moving forward in your efforts to narrow the college funding gap, your children will see your efforts and be that much better off.

In Summary: Don’t beat yourself up. You are in the same boat as plenty of other American families. Your kids won’t hate you, but taking the first steps now will help substantially. Talk with your children and give them realistic expectations about what you can and can’t do to help. Remember – Where there is a will… there is a way.

With the many options for college, students need to evaluate their own situation and decide which path is right for them. It will be easier if they know all the relevant details. They might surprise you, so encourage them and help them to make good decisions.

To discover very specific ways to maximize your financial aid and reduce college costs, I have prepared a FREE College Cost Savings Kit which you can download by Clicking Here.

Please consider printing this article and sharing it with a friend. Many parents are in the same situation as you are. By paying it forward, you could help them save a lot of headaches and plenty of money too.

College Admissions: Why You Need An Outsider’s Perspective

I recently saw a question posted by “David” on one of those “Ask an expert” type sites – it was all about financial aid – and the answer to the financial aid question was only half-right. Half-baked information will get you half-baked results.

But, what struck me more was the “self-assessment” of the person writing the question. It struck me because I “see” this A LOT from students.

“David” is interested in MIT but is now considering Yale,too, because of information he came across regarding financial aid on Collegeboard.com.

Here’s how he assessed himself (and his question):

“I have straight A’s throughout my high school. I have a pretty good SAT and ACT scores. I can write a killer essay. I have been doing a few extracurricular throughout 4 years. I guess recommendation is not a big problem. So I want to have a shot at MIT.

However, when I was searching for Yale this morning, my mind starts to change a bit. So here is my question:

– Does the average financial aid package mean the total money/scholarship you’ll get for one year (two semesters)?

– If that is the case, does it mean that average students pay around $2,000 each year for their tuition (ignore room, books, and other costs first)?

– So, if I’m lucky enough, does it mean that I can get a ride to college for FREE or almost FREE?

– Let’s say that I’m REALLY lucky, and get a scholarship that worth more than the cost of my tuition, does it mean that I can even “EARN” money as a college student (if I spend less on the other costs)?”

In this one statement, I can tell a few things about David, and so will the admissions officers.

First up, he believes that “Great grades, strong SAT scores and lots of activities are enough”. Well, the THOUSANDS of students who apply to MIT and Yale also have them. So, what else do you have to offer, David?

Next: “I can write a killer essay.” David, even Hemmingway needed an editor. And, writing a decent essay in class is not the style of essay you’ll need on the application. And, as a former English teacher, I’ve met a lot of English teachers who can’t write. So, relying on them may not be the best idea, either.

Next problem: “I guess recommendation is not a big problem.” (The way this is written makes me question his ability to “write a killer essay”). Getting a good recommendation is not simply a question of asking someone to write one.

And, finally, my favorite: “Let’s say that I’m REALLY lucky, and get a scholarship that worth more than the cost of my tuition… ” again, apart from the lousy writing, this sentence screams ignorance about the colleges he is looking to attend.

Yale (and the rest of the Ivy League) and MIT (and most of the other Ivy-Type colleges) do not offer scholarships. If you have a financial aid need, they will offer you need-based aid. But they don’t offer scholarships – because they don’t have to.

David also believes he should get a scholarship, but has no clue as to how or why it would happen.How do I know? “Let’s say that I’m REALLY lucky, and get a scholarship… “

There’s a lot he doesn’t know about these colleges and about the college search, selection, application and funding process in general.

And when you don’t know what you don’t know, you end up disappointed.

David may very well have a good shot at schools like Yale and MIT; AND, there might be other colleges he isn’t even considering yet that would be even better fits for the type of student he actually is. Problem is, there’s a lot he doesn’t know (and most likely there’s a lot his parents don’t know, too).

The solution is to get help with all of this. College is a huge investment of time, effort and money – now is not the time to cut corners.

Your Smart Plan For College Assignment:

Take a moment to be really honest with yourself: do you see a bit of yourself or your student in David’s story?

Do you know how the college process really works?

Are you sure?

Outline three steps you could take right now (based on the mistakes “David” is making or to avoid the myths he’s believing) so that you don’t end up disappointed.

If you can’t list three steps, it’s time to get some help.

6 Reasons Your College Financial Award Changed

“Why did my financial aid award change?” is typically a question asked after the student has lost money compared to the previous year.  Rarely does anyone ask this question if they received more money.

Here are 6 reasons why a student’s financial award offer will change from year to year…

1.  The family’s income has changed.  If income goes down, then the expected family contribution (EFC) will likely go down.  This typically results in a better financial aid package.  However, it is more likely that your income went up from the previous year.  This means your EFC went up and your financial aid package will be lowered according to the established guidelines.

2.  The family’s assets have changed.  As with income; if the assets go up, EFC goes up.  If the assets go down, EFC goes down.  Since most families will spend assets while their students are in college, this will most often have a downward pressure on your EFC (good for you).  But if you won the lottery or inherited money, those new assets are going to drive your EFC up (bad for you… sort of).

3.  The number of students in college changed.  The more students you have in college… the lower your EFC will be.  If a student graduated last year and you only have one in college this year, then you will see a big spike in that student’s EFC.  Consequently, they will get less financial help from the college.

4.  Changes in the federal Stafford loans.  Stafford loan amounts increase as a student progresses through college.  Currently freshman students can borrow $5,500; sophomores – $6,500; juniors – $7,500; and seniors – $7,500.  As students are able to borrow more under the Stafford program, colleges will typically lower the other sources of help in the financial award.  For instance, the student get’s an addition $1,000 in a Stafford loan, but their college grant is lowered by $1,000.

5.  Your college’s endowment has taken a hard hit in the market.  One of the unfortunate results of the current recession is many colleges have seen their investments drop… big drops in some cases.  This means the schools have less money they can give to their students.  The recession is unfortunately limiting the amount of money many schools are able to give away compared to previous years.

6.  Your college is a cheap-skate.  It is rare, but some colleges will do a bait and switch to get freshmen students.  They will give them very generous offers their first year, but then pull back the money in the subsequent years.  This is not common, but there are unfortunately some institutions that will do this.

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.