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Taming The High Cost of College

Late Stage College Planning

TTHC02 Need Based Financial Aid – PART 1

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A leading expert in college funding, Brad Baldridge, CFP®, is the owner of Baldridge College Solutions and chief podcaster and blogger at Taming the High Cost of College.

During this podcast you will learn:

  • Financial Aid: need-based aid versus merit aid
  • Three types of families
  • How need-based aid is calculated
  • Two need-based aid systems
  • Top 5 need-based aid factors
  • Examples of Federal EFC (Expected Family Contribution)
  • “Brad Recommends” – Attending college fairs

Financial Aid: Need-based aid versus merit aid:Need Based Aid– Income and Assets
– Parents and Student

Merit Aid
– Academics
– Talents
– Geography and more

Three Types of Families:Type 1: Those families who will qualify for large amounts of need-based aid.
Type 2: Those families who qualify for some need-based aid. Good planning may increase the amount of aid received.
Type 3: Those families who will not qualify. These families need to focus their planning on other areas. (i.e. tax, merit-aid, athletics, cash flow or investments)

How is Need-Based Aid Calculated:COA – EFC = FN
Cost of Attendance – Expected Family Contribution = Financial Need

Two Need-Based Aid Systems:Federal Aid System
FAFSA (Free Application for Federal Student Aid) www.fafsa.ed.gov

Institutional System
CSS Profile – Approximately 300 colleges (Click here for the list)

Top 5 Need-Based Aid Factors:Student Income
Student Assets
Parent Income
Parent Assets
Numbers of Students in College

Income:Based on taxes from the prior year (AGI)
Un-taxed income is added to AGI
Student income is assessed more heavily than parents

Assets:Values reported are the values on the day you sign the forms
Not all assets are assessed
Student assets are assessed more than parent assets

Parent Assets NOT REPORTED using the Federal Method:
Retirement related accounts, primary residence, value of small business (under 100 employees, more than 50% owner), annuities, and cash value of life insurance.

Parent Assets REPORTED using the Federal Method:
Money in the bank, mutual funds, stocks, real estate partnership, real estate other than your primary residence (i.e. vacation home, rental property, hunting land), 529 accounts (for all students in the household)

Student Assets REPORTED using the Federal Method:
UTMA or UGMA accounts, money in the bank.

Examples of Federal EFC:

FAMILY #1 FAMILY #2
Parent Income $75,000 $150,000
Student Income $0 $0
Parent Assets $20,000 $20,000
Student Assets $1,000 $1,000
Students 1 1
EFC(Est) $10,500 $31,500

*Hypothetical example for illustrative purposes only

BRAD RECOMMENDSVisiting college fairs!

College fairs are important. They are an efficient way to:

  • Learn about many schools at once.
  • Give your student an opportunity to make a good impression.
  • Help immerse you in the overall process.

Depending where you are in the college process, the fairs can benefit your high school students as follows:

Seniors:
Connect with colleges that they will apply to and talk with the person that could be reading their application.

Juniors:
Good way to check out many schools in one place and find out who their competition is

Sophomores:
Collect brochures, compare small schools to big schools, schools that are close to home and schools that are far away.

The National College Fair is a great place to visit many colleges are in one place! Check out their website for more information for a date and location near you.

In addition, many communities have local fairs… for example Wisconsin has the Wisconsin Education Fairs (WEF).