Let's talk about the key 5 deadliest financial mistakes almost every parent makes when trying to get money for their child's college education.
If you make any one of these mistakes, it could end up costing you thousands or even tens of thousands of dollars in lost funding that you might have been eligible for.
I don't want to see you making these mistakes if you don't have to. That's why I’ve decided to devote this “College Tip” to teaching you how to avoid these common mistakes and make sure you get the maximum amount of money from every school your child applies to.
So, without further ado, let's discuss...
Not understanding the difference between "included assets" and "un-included assets" for purposes of filling out financial aid forms
Certain assets are counted much more heavily in the financial aid formulas than others. For example, savings accounts, CD's, stocks and bonds are all included and asked about on the Federal Financial Aid form. However, it does not ask about the value of annuities or cash-value life insurance anywhere on that same form.
It doesn't matter where I keep my money; it's all counted in the same way
Nothing could be further from the truth. Where you keep your money could mean the difference between you getting $10,000 in financial aid or getting nothing! For example, money in the child's name is weighted much more heavily than money in the parent's name.
If you don't know how to legally and ethically position your money properly for purposes of financial aid, you could end up losing thousands in financial aid! Even the people reading this who have enough money saved to fully pay for your child to go to college, wouldn't you rather "save" some of the money you've "saved" if the school is willing to pick up part of the tab?!?
"My CPA or tax preparer is qualified to fill out my financial aid forms - I'll let him/her do it"
Unfortunately, CPAs and tax preparers are experts at tax planning and preparation - not financial aid planning. For example, a CPA or tax preparer might suggest that you put some or all of your assets in your child's name to save money on taxes.
While this advice is well meaning, it will usually kill most if not all of your chances of getting financial aid. Also, CPAs and tax preparers are not trained in filling out financial aid forms.
In many cases, they will unknowingly fill out these forms improperly (i.e., omitting social security numbers, entering an incorrect phone number or misspelling a name, etc.), and these "minor" mistakes will bump your financial aid forms.
If this happens, you will have to re-submit these forms all over again, and you will probably end up losing thousands in financial aid since it is awarded on a first come, first served basis.
Waiting until January or even worse after January of your child's senior year of high school to start working on your college financial aid planning
Since financial aid is based on your previous year's income and assets, it is imperative to start your planning as soon as possible before January of your child's senior year.
If you want to legally set up your income and assets so you can maximize your eligibility for financial aid, you must start working on this, at least, one year in advance - preferably in the beginning of your child's JUNIOR year of high school.
The longer you wait and the closer it gets to your child's senior year, the tougher it gets to set up your financial picture without creating a "red flag" for the universities. It is also important for you to know what your "Expected Family Contribution" is so you can start saving for it.
And, you should also know which schools can give you the best packages before you start visiting and applying to them. My advice is if you haven't started planning, DO IT NOW!
Going Through The Financial Aid Process By Yourself Because It's "Cheaper"
If this describes you, the colleges and Federal Government are going to love you! This allows them to keep control over the process instead of you, the parent, understanding how the process works and taking back control from them.
It always amazes me that people will readily use a doctor when they get sick, a lawyer when they get sued, but suddenly when they are going to send their child to college and spend between $14,000 - $34,000 per year, parents want to save themselves a couple of dollars and do it themselves.
Unless you spent the last 5 - 10 years of your life studying and understanding the financial aid process, there is no way you are going to know how to get the maximum amount of money from each school. And, if you do try it yourself, you'll probably spend countless hours trying to figure it out.
The moral to this story is "Don't Be Penny Wise And Dollar Foolish!" Use an expert who can help you through this process and make sure you get everything you're entitled to.
On top of that, I would recommend reading the HERA (Higher Education Re-authorization Act), which is 400 pages of the smallest legal type you have ever seen and will only take you a couple hundred hours to read!
You won’t find this anywhere else in the college planning space…
It’s an “inside look” at your college funding situation with an authorized college funding adviser – absolutely free.
I’ll help you figure out where you stand… including whether or not you can lower your expected family contribution (efc) – and maximize your eligibility for financial aid.
Contact me today to set a date and time for the call.