Financial aid tips from Jamimom and others requested.

<p>Our junior S is a year and a few months from entering college. While I’m busy obsessing about college admissions, I’m anxiously considering the COA. We are in that income range where we won’t qualify for significant need-based aid, but paying the full cost is not possible. I’m requesting that CC parents share their experiences about what has worked and not worked for them. How can we best situate our assets and create financial plans? For example, Jamimom shared the following observations in an earlier post: </p>

Most of us have enough money to pay for college, had we planned properly and live austere lives, but when it comes time to pay this piper, it turns out we are short, and every check hurts. The second year is the real killer, in my experience. The momentum and graduation gifts, scraping out the savings and getting all that money to squeak by that first year leaves the larder empty for year 2, along with the dreadful realization that there are still 2 MORE of these hunkers to pay even after getting through that second year. So second or third term is where the pain begins for many families. Just one quick tip--spend down those student accounts as they are assessed 35% vs. 5.6% of family assets. If your son has money in a savings account, bonds, etc, you might want to use that money for the visits rather than your own assets, and keep a mentally marked corner of savings for his college in your family accounts. When you are on the border of qualifying for financial aid, that could make a difference.


<p>Jamimom provided a lot of great information in one paragraph. I hope others have similar information to share. </p>

<p>I also have specific questions, such as: How do you document that money from a redeemed savings bond was used for educational purposes? Are the expenses associated with college visits considered to be educationally related? If a savings bond has my S’s name and mine, is it his asset, or mine? </p>

<p>We have one idea that I’ll share and let you know later whether it worked. As parents, my DW and I determined the total amount we are able and willing to spend each year for college, divided that total by 12, and we’re attempting to save that extra amount every month starting now. If we can save that much extra each month for the next year, then we prove to ourselves that we can do it, and we’re one year ahead in finances. If we can’t save that much, then it’s better to learn that now than in the middle of S’s freshman or sophomore year.</p>


Yep. I thought of that one ,too. Sure hope it works. LOL. So far I have that one, and reducing payments (by extending the term on business and personal notes), and eliminating discretionary payments (going to basic TV when the kid is gone,things like that-it all adds up).</p>

<p>This one is self-evident, but at your stage very important - start with merit aid schools FIRST. Pretend those nasty need based schools don't even exist. Depending on your child's educational goals, it may take more work to locate the merit schools with good departments in his interests. Get him/her involved - depending on the kid and your situation, you might say we have $X to spend on college each year, if you go over you need to plan on loans, and $Y loans is the largest amount we will support you taking out (in other words get a job); if you find merit aid schools and spend less of our out of pocket money, you get to keep as a nest egg for grad school, a house, etc.</p>

<p>Also be sure you have run a couple of calculators and are certain there will be no need-based aid if he is looking at the most expensive schools.</p>

<p>Re "educational purposes" - it depends on the terms of the account whether the spend-down needs to be for educational purposes. If it's a normal UTMA (Uniform Trust for Minors Act) account, spending the funds doesn't have to be for educational purposes. It just needs to be for the benefit of the minor, and beyond the legally required support that parents need to provide. So summer activities, trips, etc. can all be considered for the benefit of the minor. College trips, no question. </p>

<p>Who owns the bonds or accounts is determined by whose social security number is primary and on whose tax return the asset appears. I have a number that are in my dd's social, and a number that are in mine.</p>

<p>remember S can earn about $2,000 during the school year- so brush up on those interview skills now- for personal expenses and books.
$3,000 can be earned summers and applied directly to tuition.
S may be eligible for subsidized loans- but even if not- should certainly incur some loans to help out with their responsibiltiy for paying for their education
USNEWS has stats that give what the loans look like for students after 4 years- which schools are stingy and which schools have merit aid.
Out of state public schools which are a touch under students scores and stats may offer good merit aid as an enticement.
Our D also took a year off after high school to volunteer in Americorps and earn an education voucher and plans to do the same after graduation. This will knock almost $10,000 off of her subsidized loans leaving about $5,000- a manageable sum :)</p>

<p>We are full pay at a pricey private but cut the little bit we could by:</p>

<p>1) D used her high school AP credits to take a one-semeter leave during junior year. Instead of paying her school's tuition, etc. for a junior year abroad experience, she got a job abroad. She got modest pay, training in the language, experience, lots of exposure to the people and the country, and even got some paid vacation time and airfare reimbursement from her employer. Saved us $20,000, giving us a nice breather in that third year.
Yet she will graduate on time with her class. </p>

<p>2) When D decided on this school, rather than less pricey alternatives, we did ask her to take the relatively small Strafford loans (hers were non-subsidized, as they were not need-based.) The interest rate up to this point is quite modest, and we feel she then is "buying into" her education -- less likely to consider skipping a class she knows SHE is paying for! </p>

<p>3) She buys textbooks (often used) online rather than from the campus bookstore.</p>

<p>4) She is responsible for her own personal expenses, for which she uses her summer earnings.</p>

<p>Our son had a college fund of about $78,000 so at the onset we agreed that he would be responsible for tuition, academic fees, books and spending money. We would pick up room, board, health ins/fees, activity fees, etc.</p>

<p>He decided early on that he did not want to graduate with any student loans and have a minimum of $25,000 of his college fund left over for whatever. So he just did his research. He subscribed to USNews' web page which gave common data set info on merit aid for every college. My wife is a Rensselaer grad so he did a little lobbying with his GC and was selected as his HS's Rensselaer Medalist junior year which guaranteed him a $15k/yr merit scholarship if he chose to attend RPI, a good choice because he intended to major in CompSci and had been on campus with us several times over the years.</p>

<p>Using USNews data he was able to sort through those colleges offering a good deal of merit aid and whose admission selectivity would give him a decent opportunity to be awarded merit aid. We visited URochester, Allegheny, Wooster, Case, Rensselaer, RIT and he ended up applying to all except Rochester and RIT. He visited Oberlin too for reasons other than merit aid, realizing it was highly unlikely that any significant merit aid would be forthcoming. He was correct.</p>

<p>He did his research well and received merit aid offers in excess of $375k and elected to attend Rensselaer which offered him merit aid of $25k/yr and offered a unique interdisciplinary, dual degree AI program which he liked.</p>

<p>He spent very littlr time or effort competing for outside scholarships because the competition for the major ones is fierce and applying is often quite time consuming.</p>

<p>We are giving him a little break next year. He and 11(!!!) friends have signed a lease for a 3-unit, 12 BR off-campus rowhouse and he will be saving about $4000 in r/b. We offered to continue applying that savings toward his tuition each remaining year.</p>

<p>The bottom line is that he is attending a fine university and will graduate with more than $50,000 in the bank! And the choices he made were his alone. We merely agreed on the ground rules early on.</p>

<p>One suggestion I wish we had known: If applying to state universities, particularly out-of-state, apply early. Merit aid goes fast. My son didn't apply until January to Indiana, as he was going by application deadlines and didn't realize it made a difference for financial aid. Consequently he got mainly loans.</p>

<p>Though it may be too late for most here, you may be wondering how we had a $78,000 college fund for our son. When he was born my mom gifted him $7000 which we invested in zero coupon bonds that matured in value to $35,000. We also bought a new house just prior to his birth and when we arranged financing we set aside about $8000 which we invested in a mutual fund. Yes, we paid mortgage interest on this money but the capital gains outpaced the tax deductable mortgage interest and we paid the 15 year note off in about 9 years(wow are we frugal!). This grew to about $43,000.</p>

<p>We invested $30,000 of the zero coupon proceeds in T-bills maturing 1,2 and 3 years out at $10,000 per year.</p>

<p>To start tracking down merit possibilities: do a google search using test scores and the words merit scholarship. Most schools haven't updated their web pages to reflect the new SATs yet (and it is not clear if merit scholarships are going to change for next year to reflect them), but if you search for 1200 SAT merit scholarships you will turn up possibilities. Works for GPA too, although not quite as well.</p>

<p>And, as always, make sure that your son has at least one financial safety on there that he loves. Since he likes LAC's, he might take a look at Hendrix which is significantly cheaper than other LACs, or some of the LACs in Texas (Austin College, Southwestern U, Trinity U) which are also lower cost to begin with. All of these schools also offer nice merit money.</p>

<p>While some of the big name state U's like Michigan and the UC's are very pricey for out of state students, there are some excellent bargains out there at other state schools. Just yesterday, for example,. a mom here on CC mentioned that Bowling Green in Ohio automatically waives tuition for kids with SATs over 1300 and GPAs above 3.7. (double check those numbers). She thought that was only for in state students, but when I looked at their website, they seemed to indicate that it was also for out of state students. So, you could get a nice education for about $6000 a year there (room board, expenses). The University of South Dakota has some great scholarships too. And, if I recall, your "home of residence" in the states is Kentucky? Might want to check out what your son could get at the U of Kentucky. Also, your son might like St. Mary's College of Maryland - the "public" LAC, excellent school, beautiful setting on the water. Costs $27,753 a year for out of state students, plus they have merit money bringing that down to about $24,000 a year. Good bargain.</p>

<p>Thanks to everyone for their recommendations! Chedva and Susan, information about which SS# is on a bond, and applying early to be eligible for merit aid may seem basic to you, but I didn't know that. </p>

<p>Cangel and Carolyn, I agree completely about looking for schools that offer merit aid. That has been a requirement for consideration as soon as I learned the differences between need-based aid and merit-based. I continue to be shocked at our "Expected" family contributions. Our discussions with S have been similar to what you outlined Cangel. We said we'll contribute X amount. If you don't use it in undergrad, we'll contribute toward grad school. </p>

<p>Emerald and Jyber, You are definitely right that the student should be contributing a significant portion of the bill through loans and/or jobs. What I've struggled with is the maximum debt he should incur in student loans. Right now, we've told him we don't think he should finish undergrad with more than $20,000 in debt. I hope it won't be that much, but $20K seems reasonable. I'm impressed with how smart and practical Original's S was in his planning and how he has carried it out. Maybe he'll be willing to give my S some lessons.</p>

<p>Curmudgeon, I'll join Carolyn in asking for your impressions of Hendrix. From the descriptions, it sounds like some of the other schools we're considering. The next year is going to be very interesting. I'm glad were cyber-linked for the journey.</p>

<p>Hendrix is a true anomaly. A private college in Conway, Arkansas ,a half-hour from Little Rock. Pretty much in the center of town. A campus that I like with defined borders and attractive matching structures in a dark brown brick (as I recall).The student body is the kicker. Every liberal kid in Arkansas must go there making up 50% ,plus another 25% of the student body is from Texas, leaving another 25% scattered. We saw several states repped in the parking spaces. Picture Volvo's with ski racks used as a canoe holder. Crunchy-er than you could imagine from looking at a map. </p>

<p>D is not turned off by anything we saw EXCEPT that 75% are from Arkansas or Texas. (Don't ask me,I'm not picking.) The students were bright and engaged. The programs were thought provoking for freshmen with some frivolity thrown in (always a nice touch). Great rep and wonderful starting price and merit aid. I would suggest for a Western, Northern or NorthEastern kid with good stats -this school may be one of your better choices. I do get the feeling from the adcoms that they want a class profile more national than they have. If you can help them achieve that, I bet they'll treat you well.</p>


<p>Be careful with the $4000. 12 guys? Sercurity deposits may not be enough! ;)</p>

We did the same with D1...told her from the get go that we would be taking out unsubsidized Stafford loans in her name to keep her accountable...and to find that great job to pay it off! ;) We intend to do the same for the other children as well.</p>

<p>Jamimom is on target...1st yr was much easier. Unfortunately, college costs have gone up at least 5% in the last yr...but the economy has slowed to a halt...especially in CA where most workers have not received salary increases in the last 12 - 24 mos. Just in case, we have a home equity line of credit...</p>

<p>Cash bonds and move all proceeds to 529 to get the additional federal tax exemption. You will need to supply the 1099 form to the 529 people. You could also get another state tax (OR, your state may be different) credit by putting $ into the 529. Then request the 529 to send the money to the school directly. This procedure elminates the need for documentation other than keeping the transactions on file. </p>

<p>We did this process in the less than 10 days(b/c of mail) , the money resided in the 529 for just 2 days. </p>

<p>Use IRAs (child') to "mask" active income asset. Your latter have child use the IRA for college expenses without penalty. </p>

<p>There are specific rules to a 529 just like IRA's and Coverdell Education IRA's. Read or consult the appropriate people.
Good Luck. </p>



<p>Somewhere, I posted a comment with "Yep, Oh Well" as an observation on financial planning for whatever. This was a true conversation with bro many years ago. </p>

<p>In your planning for college expenses be prepared for all things to just screw up.
They probably won't. </p>

<p>As bro said to me, "We (big Bank) try to make the correct Decision based on the available information that we have today and what we expect in the future. Sometimes the Decision was just plain wrong not because of the information, but on its interpretation. Sometimes the Decision was correct but the information wrong, and we just lucked out. And sometimes the Decision was wrong, because the information was wrong. Even sometimes the Decision was correct at the time and now wrong because the conditions changed! We try to hire the best people and have the best analysis but the best we can only hope for, is that at the end of the game, we have made just a few more correct Decisions than incorrect Decisions." </p>

<p>You're intelligently guessing?</p>

<p>"Yep, Oh Well."</p>

<p>Yep, and Oh Well.</p>

<p>If you fall into any of these categories:</p>

<p>** Moderate income & savings, but put away too much money in the kid's name
** Divorced, with parents remarried, & step-parent income added to the mix
** Low/moderate income with high home equity </p>

<p>You may qualify for more aid than you think. </p>

<p>This is a list of top colleges that have agreed to abide by certain voluntary standards in assessing need, including:</p>

<li><p>Valuing assets held in the student's name the same as other family assets (i.e., assessing all at 5.6%)</p></li>
<li><p>Where parents are divorced, limiting consideration to income of only two parents/stepparents (rather than the possible 4 if parents have remarried)</p></li>

<p>*Capping home equity at 2.4 times income minus mortgage debt. </p>

<p>The 29 colleges that have agreed to this standard are:</p>

<pre><code> * Amherst College
* Boston College
* Bowdoin College
* Claremont McKenna College
* Columbia University
* Cornell University
* Davidson College
* Duke University
* Emory University
* Georgetown University
* Haverford College
* Macalester College
* Massachusetts Institute of Technology
* Middlebury College
* Northwestern University
* Pomona College
* Rice University
* Saint Mary's College
* Stanford University
* Swarthmore College
* University of Chicago
* University of Notre Dame
* University of Pennsylvania
* Vanderbilt University
* Wake Forest University
* Wellesley College
* Wesleyan University
* Williams College
* Yale University

<a href=""&gt;;/a&gt;&lt;/p>

<p><a href=""&gt;;/a&gt;&lt;/p>

<p>Note: this information is dates April, 2003 - so you might want to double check with the individual colleges to find out if these standards still apply. I've searched high and low, but so far have not been able to come up with more recent documentation of this practice.</p>

<p>Be careful with the savings bonds-I found out that the interest is excluded from taxes only if they are in the parents name OR if the parent is listed as a co-owner(being listed as a beneficiary doesn't count). I went to the savings bond website and e-mailed them this exact question and this was the answer I received. Seems quite unfair!</p>

That sounds unfair to me too. I'll need to check our bonds. What is the difference between "co-owner" and "beneficiary?" Some of the bonds have only my name on them, and others have S's name first, with mine below it. </p>

May I open a 529 plan in addition to a Coverdell Ed IRA? I've already been thinking about asking his grandparents to open a 529 and tell them to deposit money in it, rather than buy bonds for him like they have in the past. Is there a problem if his grandparents and we have different 529 plans with him listed as the beneficiary? One more question: As I understand it, Coverdell IRAs and 529 plans are considered to be the parent's assets, not the student's, correct? </p>

Thank you for your positive information. I know it will be useful to others, but unfortunately, we don't fit into any of the categories you described. Or maybe should I say fortunately we don't fit? This is so confusing! I refuse to get depressed by the fact that after 20 + years in my profession, I'm finally making a decent wage. OTOH, there are ironies compounding ironies here. Poor us! We're not poor!??? Or its too bad we're not divorced? Or thank goodness I haven't saved too much!??? Or its sad that we own our house free and clear! (Actually, we don't own a house, but that applies to someone.) It may be time for a sequel to "Catch 22." Working title: "COA 22." Okay...deep breaths...calmer now...semi-rant finished...thank you for letting me vent...</p>

<p>Okay C-mudge,</p>

Crunchy-er than you could imagine from looking at a map.


<p>I'll take the risk of looking like a bigger fool than usual...does the above quote refer to the percentage of granola-eating students?</p>

<p>Woah!! I just remembered! Didn't I read something about areas being covered by pecan shells? Maybe that's the crunchy-er? </p>

<p>Pine cones? Cap'n Crunch cereal in the dining room? </p>

<p>I like my first guess best, but I'm betting on the pecan shells.</p>

<p>Thanks for the review!</p>