Seniors: Making your Budget for College

Seniors: Making your Budget for College

Admission offers received – check! 

Enrollment decision made – check! 

What’s next?  You’ll be getting a lot of information about next steps from your college for registration and orientation.  Meanwhile, you might want to start a conversation with your parents about a spending money budget for college.

Here are 6 money management tips for you to consider.

  1. Open a bank account and get an ATM card (if you don’t already have one).  You may want to research the local banking options at the school you will attend.  Many colleges have a bank or credit union on campus.  Make it a joint account (you and a parent).  That way you can access your money when away from home (in college). 
  2. Learn how to check your bank balance from your phone It’s a good practice to check your bank balance before you get gas or stop by Starbucks to be sure you have money in your account for the purchase. 
  3. Learn how to deposit checks.  Most bank mobile apps will allow you to deposit checks right from your phone.  Great for those graduation checks you will receive. 
  4. Create a budget.  A spending plan is essential.  Know how much money you will have each month from your financial aid, a campus job, or from your family.  With your parents, create a realistic monthly budget.  Then, your biggest task will be to stick to your budget. 
  5. Learn how to schedule & pay bills from your account.  You might have a phone bill or other bills you are responsible for.  Learn how to pay on time and keep within a budget. 
  6. Decide with your parents and if you choose, open a credit card account BEFORE leaving for college Credit card companies will offer many promotions for new students on campus – free shirts, new tech gear, etc.  Don’t be tempted by free stuff!  Open ONLY oncredit card and use this card as a “backup” (if you don’t have cash) to help establish good credit.  

Start practicing good money management skills now so that you have one less thing to worry about freshman year. 

Take Action 

Use the Cost of Attendance on your college’s website to calculate your college budget. List your personal expenses.  Divide the number by 9 months to determine your monthly budget. 

Questions? Let’s chat!

Bettina Weil

Weil College Advising, LLC

info@weilcollegeadvising.com

Seniors: Financial Aid in the time of COVID-19

Seniors: Financial Aid in the time of COVID-19

Although the COVID-19 pandemic has caused some schools to push back their enrollment deadlines, some colleges are still asking students to deposit by May 1.  Financial aid awards likely play a big part in your final decision.  But interpreting those awards might seem a bit like reading a foreign language.  Below are six common terms that you will see on a financial aid award and some ideas on how to assess your offers.   

In addition, it’s possible that your family’s financial circumstances have changed since you applied.  Whether that is related to the current coronavirus pandemic or other reasons, colleges have a process for reconsidering your financial aid award. This process is often called Professional Judgement.  We’ve included information at the end of this post on how to appeal your financial aid award.   

  • Cost of Attendance – The Cost of Attendance is more than just tuition; it is an estimate of the total expense for one year of attendance.  It should include – 1) Tuition & Fees; 2) Room & Board; 3) Books & Supplies; 4) Personal Expenses, 5) Transportation (getting to and from the campus).  If the financial aid award does not include these items, search the website for the information or call the college.
  • Expected Family Contribution (EFC) – The amount your family is expected to pay toward college (your EFC) is calculated by the FAFSA (Free Application for Student Aid).  You can find your EFC on the confirmation page you received when you submitted your FAFSA form.  This number should be listed on all your awards.  If it’s not there, ask the college why. Cost of Attendance – Expected Family Contribution = Need
  • Student Financial Need – Use the financial aid equation above to determine your “financial need” for each school.  Then check the college’s award letter.  If the school’s total financial aid award is less than your financial need, you have a “financial aid gap.”  You must pay this gap (in addition to paying your EFC amount) with other sources of funding not provided by the school.  Scholarships from community groups or other sources, personal savings, or private loans are examples of how students pay their EFC plus any financial gap.
  • Grants and Scholarships – Grants and scholarships are awards that do not need to be repaid.  Are these grants or scholarships renewable (will you received them for just freshman year or every year)?  What are the eligibility requirements that you must meet to receive the scholarship for additional years (a minimum GPA, a certain number of course credits, etc.)
  • Loans – Has the college included student or parent loans in your award?  This money must be repaid by you or your parents.  A financial aid offer with only loans may not be the best choice for you.
  • Work-study – A work-study award is potential income that you may earn by working part-time in a work-study position.  Most work-study jobs are on-campus which can make them convenient, but a work-study award does not guarantee you a work-study job.  You must apply for work-study positions like any other part-time job.  And just like other part-time jobs, you will receive a paycheck for your work-study earnings.  It is not automatically applied to your cost of attendance.  Contact the university financial aid office to learn about the availability and application process for work-study positions.     

Are you being offered a mix of grants, scholarships, loans, and work-study?  The more money you don’t have to pay back or earn by working, (ideally – more scholarships and grants, fewer loans and work-study) the better.     

Appealing for Additional Financial Aid 

Especially in the wake of the coronavirus pandemic, many families find themselves facing a very different financial reality than a few months ago.  If a parent has lost their job, has become ill which has caused them to stop work, has lost wages due to quarantine or “stay at home” order, or even lost a substantial amount of savings/assets due to stock market changes, you may have good cause to appeal your financial aid award. Contact the admissions or financial aid office at the college directly.  

Tips on Appealing an Award, by Lynn O’Shaughnessy, author and higher ed/financial journalist

1. Contact individual schools regarding what their procedure is for appealing an award. Some might prefer that you complete an online form while others might want a letter.

2. The more specific you can be regarding your circumstance, the better. For instance, explain how much you lost in your college accounts. And mention, if relevant, that the money needs to stretch for more than one child.

3. Let schools know if a parent has lost a job or has had hours cut. Ideally, you will have a letter from the employer stating the salary cut back.

4. Also mention other extenuating circumstances. For instance,  because of the coronavirus crisis, you may now be supporting other relatives.

5. What you shouldn’t do is include in the letter how special your child is and how the college would be lucky to have her/him. Also don’t use the term negotiate. Financial aid staffers hate that.

For more detailed instructions on how to appeal a financial aid offer, contact us at info@weilcollegeadvising.com

Bettina Weil

Founder, Weil College Advising, LLC

 

What If I’m Waitlisted?

What If I’m Waitlisted?

By now, application decisions should be rolling in to your inbox/mailbox.  If you haven’t already heard back from all your schools, the wait is almost over.  Most colleges aim to have final decisions to everyone who applied before April 1.  But what if your “final” decision isn’t so final?…  What does it mean to be on the waitlist? 

Why do colleges have waitlists?  Can’t they just say yes or no?  
With students applying to more and more schools, it’s become more difficult for colleges to predict how many of their admitted students will actually enroll.  Students are being accepted to many colleges – but you can only enroll at one.  That means many students who have been admitted to the college are not going to attend.   

Enrollment targets are a serious issue for colleges – too many students result in overcrowded dorms and classroom, but not enough can mean funding shortages.  If a college realizes they may fall short of their enrollment target, they can accept students from their waitlist to fill the gap.   

So – I’m on the waitlist.  What should I do? 
Essentially, you can reply to the waitlist offer one of two ways: 

  1. “No, thanks!”  Although the college offered you a spot on their waitlist, you are not obligated to accept that offer.  Maybe the school that waitlisted you is not your first choice – if so, no big deal.  You can let the college know that you do not plan to remain on their waitlist.   
  2. “Yes, I’m willing to wait.”  If you think this school might really be the one, let them know that you are interested in waiting.  Follow the reply directions in your decision to confirm you intend to remain on the waitlist.  It’s also a great idea to follow up with a personal email to tell the school – if they accept you from the waitlist you intend to enroll (only do this if it’s true).  You can also reiterate why you think this college is such a good fit and ask if any additional information like new SAT/ACT scores, senior year final grades, etc. could help to improve your chances of admission from the waitlist.       

You should seriously consider all of the admission offers you receive.  Schedule visits, compare financial aid packages, talk with your parents and your counselor, make a pro/con list, etc.  You have to confirm your enrollment with a college by May 1 (that’s the National Candidates Reply Date).  Most schools won’t make decisions about their waitlist until after May 1.   

In addition, there are typically only a small number of students admitted from the waitlist (sometimes not any).  You should confirm your enrollment with one of the colleges that has admitted you (even if you stay on the waitlist at another college).  It’s hard to hear that you are on the waitlist (especially if it was your first choice), but maybe it’s an opportunity to get excited about a school that really wants you (and hopefully they offered you great financial aid to prove it).  Many colleges can be a good fit if you have the right mindset.   

Questions? Let’s chat!

Bettina Weil

Founder, Weil College Advising, LLC.

Comparing Financial Aid Offers from Colleges

Comparing Financial Aid Offers from Colleges

Comparing Financial Aid Offers from Colleges

You got into the top schools on your list.  Each has sent you a financial aid award.  One offer looks better than the other, but is it really?  It’s important to compare apples to apples when looking at financial aid offers.  Here are 6 questions to ask: 

  1. What is the Student Budget?  Does the college list all the costs for going to college: 1) Tuition & Fees; 2) Room & Board; 3) Books & Supplies; 4) Personal Expenses, 5) Transportation (getting to and from the campus).  If the award does not include these items, search the website for the information or call the college.
     
  2. What is your Expected Family Contribution (EFC) on your Student Aid Report?  The amount your family is expected to pay toward college is on the student aid report generated when you filed the FAFSA (Free Application for Federal Student Aid).  This number is needed for comparing financial aid awards.  If your family contribution is close to or more than the student budget, then your awards from the college are going to be based on merit, and not on the financial need you have.
  3. Is there a gap?  You should know your EFC from filing your FAFSA.  To calculate how much financial aid you should be receiving, subtract your expected family contribution from the total student budget (all five items from question 1).  The remainder is your estimated financial need at the college.  Is the college meeting your full need, or only a portion of it?Total Cost of Attendance – Expected Family Contribution = Need 
  4. How much of your award is grants or scholarships?  Grants and scholarships are money that you will not have to repay later.  You want to maximize the amount of grants and scholarships you receive and minimize the amount of loan money you must take out.  Are the grants or scholarships renewable for four years?  What conditions exist for the renewable awards (a minimum GPA, number of credits completed, etc.)?
  5. How much is in student or parent loans?  How much of the offer is a parent loan?  A financial aid award of $20,000 parent loan – but no grants or scholarships – is not a good offer.  Parent loans (when necessary) should ideally be used to help pay for the expected family contribution not meet your financial need.
  6. Is there a good mix?  Is there something missing?  Are you being offered grants, scholarships, loans and work?  Look for a good mix.  If you are not offered “work-study” ask about it.  It is especially helpful If you are looking for a campus job to earn money for your personal expenses while in college.   

Questions? Let’s chat!

Bettina Weil

Weil College Advising, LLC

info@weilcollegeadvising.com

Financial Aid Offers: How to Read the Fine Print

Financial Aid Offers: How to Read the Fine Print

Financial Aid Offers: How to Read the Fine Print

Financial aid terminology is foreign – to say the least – to most parents and students. After all, how would a “regular person” understand the complex scenario of grants, scholarships and different types of loans that are specific to college tuition and expense? Even us, full time educational consultants, have to stay on our toes with the changes and nuances of the financial aid system.

Here are some tips that might help clarify a few of the most common mistakes.

  1. What you receive from the Financial Aid office at your college is not an “award”. Grants and scholarship are awards. Loans are not awards. Work-study is not an award; it is the potential for employment that offers earnings to students.
  2. In the financial aid offer, look for the cost of attendance. For any student and/or family to be able to make an informed decision, the amount of aid received must be compared to the total cost of attendance in order to determine the student/family financial contribution. Net cost is the difference between the total cost of attendance (COA) and all grant/scholarship aid received.
  3. Break down the cost of attendance into clear components. For students and families to be able to plan how to cover costs, the provided cost of attendance needs to be transparent about what is and is not included. While basic needs like food and shelter are critical, other keys costs such as books, supplies, medical insurance and transportation also need to be anticipated as you determine if a school is a financial fit.
  4. Student loans have different sources: federal, state, institutional, or private. Federal student loans come with important protections for students and families, often have lower long-term interest rates, and repayment starts six months after graduation. Read the title of the loan to know the source and to identify which loans come with these protections.
  5. Parent PLUS loans are not student loans. Parent PLUS loans are different than student loans and involve higher risk. Repayment starts immediately for parents who borrow PLUS loans, not after the student graduates from college, and PLUS loans include higher origination fees and interest rates. In addition, a parent must have no adverse credit history to qualify and further application is required to confirm eligibility.
  6. The financial aid process can be intimidating, often with deadlines and fees that are not intuitive. Make sure you take note of the specific next several steps that a student/family should follow to accept or decline financial aid.

When students and families understand financial aid offers, they make informed decisions that help to increase persistence, completion, and successful repayment of student loans. It is everybody’s best interest that you and your family understand the financial aid package you are offered. If you have questions about a specific financial aid package, don’t hesitate to reach out to the financial aid office at the college.

Questions? Let’s chat!

Bettina Weil
Founder
Weil College Advising, LLC
info@weilcollegeadvising.com
914.723.8080

How 529’s Affect Financial Aid

How 529’s Affect Financial Aid

How 529’s Affect Financial Aid

A great advantage of 529s is that accounts owned by dependent students are counted as parental assets on the Fafsa.

How are 529 funds treated when students apply for financial aid?

“One of the great things about a 529 plan is that when a parent or a dependent student is the account owner, it’s counted as a parental asset on the Fafsa,” the Federal Application for Student Aid form, says Kathryn Flynn, content director at Savingforcollege.com. While the Fafsa generally counts 20% of any student-held assets as being available to pay for college, the system counts parents’ assets (including 529s owned by parents or dependent students) only at up to 5.64%.

For example, Ms. Flynn says, “If a student has $10,000 saved in a 529 plan, only up to $564 would be considered available funds in the year the Fafsa is filed, but if the student had $10,000 saved in another type of account, such as a UTMA, their Expected Family Contribution [EFC] would go up by $2,000.”

“Generally, parental income and assets are treated more favorably than child-owned assets and income,” says Rachel Ramos, a product manager for the American Funds 529 plan, CollegeAmerica.

You can take distributions from parent- or dependent-student-owned 529s for qualified higher-education expenses without the requirement to report this as income on the Fafsa, and it doesn’t affect your aid eligibility, Ms. Flynn says. This sets 529s apart from Roth IRAs, which also can be used to pay for college.

  • Parents Put Aside More College Savings
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“While it’s true that you can withdraw your Roth contributions before retirement age without triggering taxable income, these distributions will have to be reported as untaxed income on the Fafsa, and will be counted in the EFC formula,” she says.

A 529 owned by a grandparent, or any other adult aside from the student’s parents, is treated differently. Grandparents often want to keep control of 529 accounts they set up, because they may be able to receive state tax benefits, and they retain the ability to determine where the money goes. While the money is in a grandparent-owned 529, it has no impact at all on the student’s financial aid.

Here’s the problem: As soon as the student withdraws money for qualified expenses, the money is considered untaxed income to the student. Up to 50% of a student’s income will be calculated as part of the student’s EFC, Ms. Flynn says.

“A $5,000 gift from a grandparent could potentially reduce the student’s financial-aid package by $2,500,” she says.

The good news is that the Fafsa recently changed its look-back period, so the system now considers the “base year” as two years before the start of the school year for which you are seeking aid. Students applying for next fall, the 2018-19 year, should report income for 2016.

For this reason, grandparents who own 529s should wait until at least the second semester of the student’s sophomore year of college (if they plan to graduate in four years) to take money out of a 529, she says. “The grandparent should also consider whether or not the grandchild will be applying for grad-school aid soon after graduation, which would affect the withdrawal timing.”

***

Partially due to merit scholarships, we may end up having more 529 funds than we need for my children. I may leave some funds in the account for future grandchildren, but how can I withdraw funds penalty-free to use for nontuition purposes?

If your student receives a scholarship, you have three options for excess money in a 529, says Beth Walker, a partner at Wealth Consulting Group, a Las Vegas financial-planning firm. You can use the funds for graduate school; switch the beneficiary of the account to another family member who qualifies; or take out the extra funds and pay only the income taxes on your gains. The 10% penalty is waived if you are offsetting a scholarship, she says.

***

If you don’t use a 529 account for education purposes and the owner closes the account, how is it taxed? Is the 10% penalty on the gain only? If you transfer a portion of the unused account to another grandchild and close the remainder, how is the portion taken by the owner taxed? For example, if half the account is transferred and half closed out, can you take the position that the half transferred is made up entirely of the gain on the account or is it proportional?

If a 529 plan isn’t used for the beneficiary’s education, the owner may change the beneficiary to any eligible family member, says Gretchen Cliburn, director of financial planning at BKD Wealth Advisors in Springfield, Mo. However, if the owner withdraws funds for anything other than qualified educational expenses, the earnings—but not the contributions, which were made after tax—will incur federal and state income taxes in addition to a 10% penalty.

“In addition, if you were able to deduct your original contributions on your state income-tax return, you will generally have to report additional state ‘recapture’ income,” says Ms. Walker of Wealth Consulting Group. Distributions are allocated between principal and earnings on a pro rata basis, she says.

***

My son, a rising high-school junior, was admitted to Stanford University for an eight-week summer college program. He will be taking three college undergraduate classes. Can I use his 529 to pay for the expenses (room and board)? What about the plane-ticket costs?

Stanford is a qualified institution, but whether your son’s summer program meets the criteria for 529 funds is a question Stanford would have to answer, Ms. Walker says. For room-and-board expenses to be eligible, your son would have to be enrolled at least half-time. Check with the university on what counts as half-time, Ms. Cliburn says. Unfortunately, the plane ticket isn’t a qualified expense under the 529 rules, both advisers say.

***

The fund company that administers my 529 accounts for my young grandsons bungled a funds transfer and set them up as UGMA accounts instead of 529s with my grandsons as beneficiaries. I am concerned that my grandsons won’t be mature enough to take charge of this money when it legally becomes theirs under UGMA rules, and I want the money used for their educations. What are my options?

You’re right: You have a problem. You, as the adult, are in charge of this account until the beneficiary reaches the so-called age of majority (official adulthood) under state law, which is 18 in most states—and then the beneficiary gets full control of the account, says

Danae Domian, a principal at brokerage firm Edward Jones. This is determined by the state in which the account is registered. Some states might extend the age of termination up to age 25 in certain circumstances when the account is established, she says. But once the account is legally terminated, there’s nothing you can do to control how your grandsons spend the money.

“I would first contact the fund company to see if there is any way to correct the error internally,” Ms. Domian says.

If nothing can be done to change the structure of the account, perhaps you will be able to pay for some expenses before you lose control of the money.

“One strategy would be for you to direct or use the funds in the account to pay for their college expenses, or any other expenses that benefit them,” she says. Hopefully, the age of termination is 21 in your state.

By

Chana R. Schoenberger