If you’re a parent of a high school freshman, sophomore or junior, here are three strategies to maximize your financial aid when your student applies to college:
1. Open a 529 college savings plan.
Saving is the best strategy to pay for college. And even if your student is in high school, it’s never too late to start. 529 plans are a tax-advantaged investment program to help families save for college. Parents control the money and name their beneficiary, and anyone can contribute to the plan (parents, grandparents, the students themselves, etc.). The funds can later be withdrawn tax-free as long as they are used to pay for qualified educational expenses. Here’s a good website to learn more.
2. Don’t forget about good grades and test scores.
Taking rigorous classes, getting good grades, and studying for the SAT/ACT doesn’t just help a student get in—it can also have a nice financial aid benefit, too. The specific financial aid package you’re offered can have a lot to do with how badly the school wants your student. Stronger students may be awarded more grants (free money), and fewer loans or work study. And particularly desirable students may be offered money that has nothing to do with need.
3. Ask your student to contribute.
Earning and saving money from a part-time job is a great way for students to contribute to their education. But be careful—require that your student put at least 20% of her earnings into her 529 savings plan. Money in the 529 plan is treated as a parent asset, rather than a student asset, which is much kinder to families when the numbers are plugged into the financial aid formulas. And I’ve never met an admissions officer who didn’t like a kid who earns an honest dollar flipping burgers, bagging groceries or scooping ice cream.