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Why Financial Aid Ain’t Like Social Security – It’s Not an Entitlement Program

“What does college funding mean to you?” I asked a parent.

The answer I got back surprised me. This parent told me – scholarships and grants.

I realized that in that answer, there was a serious disconnect between what I mean when I say “college funding” and what parents think of when I say college funding.

College funding means for parents – money that does not need to be paid back like grants and scholarships. And many of them falsely believe that they are entitled to get a majority of their child’s education paid for from these sources.

They falsely believe that they have the right to receive grants and scholarships that cover the majority of children’s education based on their kid’s grades, athletic ability or extra-curricular activities.

And in that answer, I began to understand why so many parents I’ve meet are so woefully financially unprepared to pay for their child’s education no matter what their income.

In order for you to deal with the escalating cost of a college education, parents have to be smart – as smart as your kids.

It’s about getting your own education. An education that starts with learning the financial aid system. Then taking that education and applying it to a comprehensive word problem with no right answer. You will be graded on how well you’ve studied and can integrate the various approaches into your final exam (paying for college).

The financial aid process starts with completing the Free Application for Federal Student Aid (FAFSA) required by more than 95% of the colleges and universities in the United States. It may also include completing the CSS Profile for a select list of colleges. Once the forms are you completed, the government sends parents a Student Aid Report (SAR).

The SAR tells parents how much they will be expected to contribute to their student’s education. It gives the Expected Family Contribution (EFC). So before parents will receive ANYTHING in the form of grants or scholarships, they will be expected to go into their own pockets first.

The Student Aid Report is sent to both the parents and the colleges your student applied to. They use the information to determine how much and what kind of financial aid (if any) they will offer you. Financial aid is based on a formula NOT an entitlement. The formula is:

Cost of Attendance
– Expected Family Contribution
= Family Need

Given that receiving financial aid is formulaic, informed parents do what they did to ensure their child received the highest SAT or ACT score. They hire a professional. Professionals in this arena are called Certified College Planning Specialists (CCPS).

They have met the rigorous requirements of the National Institute of Certified College Planners’ (NICCP) to attain the CCPS certification and have received advanced, specialized training in college planning. They know the ins and outs of managing money specifically for college. But more importantly, a CCPS knows the best ways of obtaining the kinds of college funding that will best fit your income, your goals, and your lifestyle. In order to retain the certification, a CCPS must refresh and expand this expertise regularly by obtaining 24 hours of continuing education credits every year and adhere to a Code of Ethics.

CCPS professionals know the factors that reduce the out-of-pocket cost a college education. In addition, their definition of college funding is much more expansive than most parents’ definition. Of course it includes grants and scholarships, but it also includes work-study, student, parent and private loans, personal savings including 529 plans and Coverdell accounts, savings bonds, UTMA/UGMA accounts, tax credits, Section 127 plans, Tuition Reimbursement programs and more. It also means utilizing academic strategies, cash flow strategies, financial planning strategies and tax planning strategies.

So, if your definition of college funding does not include a combination of some of the other items I’ve listed, you may be able to educate your child but you will not get an “A” in college funding. Parents that get the best grades, often save themselves $5000 – $10,000 a year depending on their situation because they took the time to figure out how to maximize their eligibility and decrease their out-of-pocket costs.

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