If you have college bound kids, chances are you spent the
weekend filling out the dreaded FAFSA or CSS
Profile forms. For some people, it’s like having to do taxes twice!
And for many people, they realized from filling out the
forms that debt – credit cards, auto loans, and student loans – doesn’t factor
in aid calculations. That’s right – I know people who are up to their eyeballs
in debt, and per financial aid regulations, it doesn’t matter. It’s not a good
feeling knowing that on top of everything else, the prospect of a bunch of more
student debt is coming.
Parents now typically are asking, now what? What happens
next? Generally speaking, financial aid letters will go out in March with the
results. They will show a combination of merit-based and financial
need-based aid. Merit based aid is based on your kid’s GPA and test scores,
among other factors. What is not true is that your kid has to be a genius to
get merit aid. Each school is different and could also vary by major within a
given college.
Financial need based aid is determined by your finances, and
why you likely spent the weekend pulling up tax forms and bank statements. Here’s
the important fact – just because you are eligible for aid does not mean you’ll
get it. Most colleges do not meet 100% of need eligibility.
That still means you are responsible for the EFC – expected family
contribution - your share of college costs. And for many regular working
families, this could mean tens of thousands of dollars!
Once you get your financial aid award letter, you’ll be
faced with a decision. First, add up how much your EFC is plus any cost that
was not met by aid. Most people find that figure shocking. Think about it – you’re
essentially buying a new car each year for the next 4 to 6 years!
If you’d like to compare, Motor Trend magazine has this nice
buying guide for new cars in different price ranges.
Just picture yourself in one of these new cars, and then
look at your kid. How much do you love your student, but some of these cars are
pretty nice.
What I told my own son is that money matters and it doesn’t.
After all, even if he got a full ride at a school, but didn’t like the school, he
would be miserable going there. At the same time, a very high cost school may
be unaffordable even if he likes it there. So there has to be a balance.
It is critical to go over the details of each award letter
and truly understand what is being offered. And comparing apples to apples.
Most people wouldn’t buy a new car without some research – it’s the same
concept here!
Decision day is, typically, May 1st when the
deposit is due. Note that housing deposits may have a different – even earlier
due date so make sure you keep track!
It’s a huge decision that will have a major impact of the
rest of your financial life. What you decide today could mean the difference between
retiring earlier or having to work longer.
If you’d like help deciphering the award letters, I’ll be running
a workshop on “How to Read Your Financial Aid Award Letter”. The dates /
locations are as follows:
Feb 24th – Westford
Roudenbush Community Center
Mar 1st – Acton
Boxborough High School
Mar 3rd – Littleton
High School
Mar 9th – Tewksbury
High School
See the Events page on my Facebook page for more details.
On a sad note, I found out recently that a good friend, Al
Blake of Seacoast Financial in Hampton NH ,
passed away last week. Al was a giant in our industry both in the region and
nationally. While I only knew Al professionally, he was always kind and
generous with his time and knowledge. I always learned something from him, and
was looking forward to learning more tips. I – along with many people – will miss
you “Uncle” Al.