It’s Your Own Damn Fault You Are Paying So Much for Your Education

OK, maybe it’s not all your fault. Colleges themselves have something to do with the high cost, but it’s definitely because of your choices. Are you one of those individuals who complain about the high cost of your college education? Are you a graduate that gets depressed every time you have to make a ridiculously high student loan payment? If so, could you have done things differently and still received an excellent higher education?

According to the College Board, the average total published charges for full-time undergraduate students by type for 2013-2014 are as follows: Public Four-Year-In-State $18,391; Public Four-Year-Out-of-State $31,707; Private Nonprofit Four-Year $40,917. According to another study released by the Institute for College Access and Success (TICAS), the average debt incurred for student loans had climbed to $29,400 for the class of 2012. The 2013 figure is up by almost 10 percent compared to the group estimate the year before of $26,600. This shows an increase of an average of six percent each year from 2008 to 2012. When students and parents are looking for someone to blame for the high cost of their college education, they should look first to themselves and reflect on what they could have done differently. Here are some things to consider.

1. You could have studied harder.

As colleges compete to attract the brightest students to their school, they are prepared to offer the best deals possible including a full ride. Many colleges will offer additional grants and scholarships to high school graduates with high GPA, SAT, ACT scores; these are called Merit-Base Scholarships.

2. You could have gotten more involved.

Most college athletes are attending school on an athletics scholarship, however if you are not athletically gifted there are many other extracurricular activities you could have gotten evolved in. Some colleges and universities offer special grants and scholarships to students with particular talents. Music, journalism, drama and volunteering are a few categories for which these awards are made. In addition to schools providing scholarships to students with special interests, community and government organizations do as well.

3. You could have fought for more free aid.

Just completing the FAFSA is not enough; nor is it the only step in applying for financial aid. One hundred and fifty billion in financial aid is awarded to college students each year and over one million scholarships. There are scholarships based on athletic ability, academic merit, disability, race, nationality, religious affiliation, location, financial need and more. With a little research and patience, you could have found a long list of scholarships for which you are eligible even within your own school and community.

4. You could have chosen a school and major that offered you the best financial aid incentives.

How did you choose the college you applied for? The one with the best reputation, prestige, because that where your friends and family attended or maybe because you like their football tea? Maybe you attended where your boyfriend/girlfriend is going. However, a more responsible way would have been to select the school that offered you the best financial aid package.

When it comes to choosing a major, there can be many factors to think about. Studies have shown that most people don’t work in the field that their degree is in; it would have been financially smart to have chosen a major with the best financial aid incentive. Scholarships and grants vary by major, so with a little research you could have found a college and career field that was in need of people to fill them and offer several financial incentives to those who pursue a major within those fields.

5. You could have stayed in-state and off-campus.

A state college or university charges lower fees to state residents. Since public institutions are subsidized by state revenues, their tuition costs are lower than private schools’ costs. Here are the facts: A student living at home can save as much as $6,000 per year. Some students choose to attend a community college for one or two years, and then transfer to a four-year school. Tuition costs are substantially lower at community colleges than at four-year institutions.

6. You could have served in the U.S. Military.

The military offers many educational benefits that service members can take advantage of during or after service. Service members have access to benefits that range from financial aid and college funds to programs that convert military training into college credits. Here are some of those programs: Tuition Assistance, Post-9/11 GI Bill, College Fund Programs, Loan Repayment Programs, Service Members Opportunity Colleges (SOC), Community College of the Air Force (CCAF), Testing Programs plus others.

7. You could have asked your employer and/or parent’s employer for help.

Many employers offer Employer Tuition Assistance Programs to their employees and their families. Your employer may offer you up to $5,250 in employer education assistance benefits for undergraduate or graduate courses tax-free each year, per section 127 of the Internal Revenue Code. Another smart strategy would have been to get a job working for a college because many colleges offer tuition-free education to their employees.

8. You could have been strategic with your FAFSA to maximize your awards.

Studies have shown that one out of every seven FAFSA forms are completed incorrectly causing students to leave money on the table. In addition, many students never question their financial aid awards. Here are a few things you could have done wrong: you waited too long to complete the FAFSA or worse you did not fill it out at all, you kept assets in the student name, you overstated assets and income, you didn’t update the financial aid office when circumstances changed.

9. You could have saved on those expensive books.

You could have rented or bought used textbooks, sold your old book and reinvested the money for the next set. You could have borrowed, traded or teamed up with classmates to share the books or the cost. Doing so would have saved you thousands yearly.

10. You could have kept your grades up.

Almost all college funding are tied into your grades, each time you withdrew or failed a class it may have cost you to retake plus kept you in school longer which also cost you. If you did not meet your school Satisfactory Academic Progress (SAP) policy you would have lost or been at risk of losing your Federal Student Aid plus any other scholarships, military benefits and even employer assistance benefits.

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.