How does my home relate to my kids college funding?
Schools require either one or both of the following forms: FAFSA and CSS PROFILE. Most public schools require only the FAFSA, whereas many of the private schools require both the FAFSA and CSS PROFILE. Some even require their own institutional form.
But, it’s important to note that the FAFSA does not look at the primary residence. Whereas the CSS PROFILE does.
Equity in the house is not a good thing as it will be assessed. Talk to Michael about taking a home equity line of credit to reduce the stated equity in the house. A HELOC can provide a number of advantages like helping to pay for school, find you cheaper money, reduces stated equity in the home and the tax benefit of deducting the interest on the loan.
For more information about preparing for your kids’ college education you can contact Mitch at mitch@collegefinancial-consultants.com, toll free at 877-859-3243 or directly at 408-395-1200
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What does a college financial consultant do and why do I need one?
A college financial consultant can help in a variety of different ways. Most, will fill out all the forms for you, in order to provide the piece of mind that comes with knowing that all financial forms are filled out correctly and completely.
Second, they help with planning and ensuring you hit key deadlines. Missing deadlines on applications and financial aid can cost a lot of money in the long run.
Third, a good consultant will know where the money is. The percent of need met and the distribution of that need (need based grants vs. loans) will vary greatly depending upon the school. It would behoove you to know up front which schools can help subsidize the cost and those that can’t.
Lastly, and the most important service a consultant can provide, is to position you to reduce your exposure and in turn increasing your grant aid eligibility. The need analysis for the FAFSA and the CSS PROFILE are complex. It’s guaranteed that a professional who’s helped thousands of clients is far more prepared than if you’re doing it the very first time. A slight oversight or not fully understanding the methodology and how the different variables are weighted can cost you thousands.
For more information about preparing for your kids’ college education you can contact Mitch at mitch@collegefinancial-consultants.com, toll free at 877-859-3243 or directly at 408-395-1200
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What is the average price of college and how can I know the best financial choice?
In CA, the cost of attendance (COA) which includes tuition, room/board, expenses and transportation, for a University of California school will likely be in the neighborhood of $25-30k, based on whether they’re on campus or not. For a California State University the COA is likely to be $15-20k. For a private school, the sticker price is anywhere from $40-55k.
Important to remember, private schools are far more generous with aid than public schools. Depending upon your income range, private schools can be cheaper than public. It pays to know where the money is.
Last, while the price of school continues to rise, the net cost to the family at a private institution has remained flat over the last 5 years. The same, unfortunately, cannot not be said about public schools.
For more information about preparing for your kids’ college education you can contact Mitch at mitch@collegefinancial-consultants.com, toll free at 877-859-3243 or directly at 408-395-1200
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How do my investments relate to my children’s college tuition funding/costs?
When it comes to getting your children ready for college, you need to understand your full financial picture. This is what schools look at when calculating the financial aid available for your children.
As it stands with investments, your liquid investments (i.e. non-retirement) are assessed at 5.65%. You are allocated a protection allowance on your assets based on the oldest parent. If you’re 50, it’s in the neighborhood of $50,000. Above and beyond that threshold the 5.65% kicks in. Also, important to note is that money in retirement accounts are not assessed.
What this means is don’t be caught off-guard with money that’s slated for retirement, but rather sitting in money-market account. Those dollars will be assessed as part of your contribution. If it’s for retirement, move it into a retirement vehicle (e.g. IRA). Additionally, there are other investments that are not assessed (e.g. annuities) within the formula. In sum, while you have some protection on your assets, don’t have your money sitting around if it’s for retirement. Be fair to yourself.
It’s important to remember that a student’s asset is assessed at 35% with no protection, whether that’s in cash, savings, CDs or UGMA/UTMA custodial account. Again, a 529 is assessed as a parent asset.
In sum, if you’re looking to invest ahead of time for your child’s education, choose a 529. If you have a UTMA/UGMA, try to convert. Some plans allow you do that. But bottom line, having cash, savings, UGMA/UTMAs under child’s name should be avoided.
For more information about preparing for your kids’ college education you can contact Mitch at mitch@collegefinancial-consultants.com, toll free at 877-859-3243 or directly at 408-395-1200
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How soon is too soon to plan college funding?
It’s NEVER too soon.
A good way to start, is by setting up a 529. For those of you who don’t know what a 529 is, it’s a tax-advantaged investment vehicle designed to encourage saving for the future higher education expenses. It also possesses significant benefits relative to its counter-part, the UGMA/UTMA.
It’s good to start early with a 529 as your investment grows tax deferred and you get the effect of compounded growth. However, stick with a 529 opposed to a UTMA/UGMA account. Some important distinctions to name a few:
| 529 | UTMA/UGMA | |
| Assets | Parent (assessed at 5.65%) | Student (assessed at 35%) |
| Growth | Tax deferred | Taxed annually |
| Beneficiaries | Can change beneficiaries | Cannot change |
| Ownership | Parent | Student |
Also, engage a college financial consultant as early as the student’s Sophomore or Junior year in high school to ensure you’re well positioned and not over exposed. Last, keep in mind for the class of 2011, 2010 is the financial base year. Meaning, your expected family contribution is based on income and asset valuation in 2010, not 2011. Hence, the importance to talk to a professional no later than the student’s Junior year. You’re at a significant disadvantage once the student enters their senior year.
For more information about preparing for your kids’ college education you can contact Mitch at mitch@collegefinancial-consultants.com, toll free at 877-859-3243 or directly at 408-395-1200
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