Don’t do the financial aid officer’s job for them

According to a study published in Research in Higher Education, students who don’t file the FAFSA forgo an average of $9,741 in aid.

Senior families, the FAFSA goes live today, October 1. Every student applying to college should file one (a recommendation shared by every trusted financial aid expert and college financial aid officer). And the earlier you file, the more likely you are to get aid. Don’t wait. Don’t make excuses that you’ll never get enough to afford college or that you won’t qualify at all. Assumptions like those lead to inaction, which only increases or even guarantees that you won’t get aid. It’s not your job to evaluate your financial aid qualifications. That’s a job for the financial aid officers. Please file the FAFSA and let them do their jobs.

Even spare change adds up

Financial aid expert Mark Kantrowitz has earned laudable trust in the education space for his willingness to share great advice for free. And with the posting of his latest piece, “Top 10 tips to growing your 529 plan funds faster,” I decided to put one piece of that advice to the hypothetical test.

8. Save the spare change. Every day, dump your spare change in a jar or jug. Every so often, contribute the contents of the change jar to your 529 plans. You’ll be surprised how quickly pennies, nickels, dimes and quarters add up.

SpareChangeHere’s the change jar that’s occupied the same spot in my house since my wife and I moved in five years ago. It’s taken that long to get even this full, mostly due to the advent of debit-cards-accepted-everywhere.

Today, I decided to count the contents. Total amount? $26.33—91 quarters, 45 nickels, and 133 pennies (plus a few Canadian coins and three tokens from a local car wash that did not figure into my calculation).

If we continued to accumulate spare change at the same rate, we’d have about $79  by the time my now 3-year-old starts college. But based on this college savings calculator, if we put that current amount into a 529 plan along with all future spare change as it arrived, we’d have approximately $179 saved for college. 100 extra dollars, just by ditching the glass and investing our (spare change) cash.

Now, I realize that $179 isn’t much when crashed against the expected cost of college in 15 years. But that figure is based on saving about 44 cents a month. Imagine how much you could save just setting aside $100 or $20 or even $5 from each paycheck.

Even spare change adds up. And it adds up even faster when invested with compound interest.

There’s a FAFSA app for that

Students applying for financial aid this fall will have the option of using the newly released “FAFSA App,” available on both Apple (iOs) and Android devices. The full version will be available on October 1, 2018 to coincide with the release of the 2019-2020 FAFSA form. That’s mostly good news, but I’d also suggest using the app with appropriate caution.

The ability to fill out the FAFSA on a phone will likely increase the number of families who successfully complete the application, a statistic I hope will be especially notable for under-resourced students. You won’t get the financial aid you need to attend college if you don’t file the FAFSA, so anything that gets more students to apply is worth doing.

But much of how phones are used today is for distracted time-killing–scrolling, “liking” and “disliking,” consuming information while we wait for the bus or the restaurant table or the signal that our doctor is ready to see us—so, we need to make a mental switch when we use our phones for something important. If you complete your FAFSA on your phone, please make the switch. The app doesn’t change the fact that the FAFSA contains over 100 questions, which is even more than appear on your federal tax return. If you submit the form with incorrect information, you can correct it later. But that slows down the process, adds to your stress, and for some students, could make the difference between ultimately submitting an app and just throwing in the FAFSA towel.

Whether you complete the FAFSA on a desktop, a laptop, or the snazzy new app, please give the form the time and even more importantly the attention it deserves. There’s a reason you wouldn’t want to take the SAT in a loud room with the TV on and friends or family asking you questions while you crunched the numbers. Your FAFSA completion deserves the same quiet focus.

For some good insight and tips on how to best use the app, here’s a piece from The National College Access Network and another from the imitable Mark Kantrowitz.

Prepare now to file your FAFSA

For students applying to college for the fall of 2019 term, the FAFSA (Free Application for Federal Student Aid) becomes available on October 1st. And while students have until the following spring to submit the form, according to the experts at savingforcollege.com, those who submit the application within the first three months after it becomes available are awarded twice as much grant money—that’s free money that does not need to be paid back—on average as those who submit the application later.

There are some helpful steps you can take now to get prepared for the October 1 opening, and  trusted guru Mark Kantrowitz offers an excellent guide to them here.

What is a 529 plan?

If you want to save for college, a good place to start is with Mark Kantrowitz’s “What is a 529 plan?” Every college financial aid expert I’ve heard or read recommends the 529 plans as the best college savings tool, but it’s always a good idea to understand what you’re investing in before you actually invest.

If you haven’t saved enough for college

A few weeks ago I shared Mark Kantrowitz’s advice about how much to save for college, but paired it with some of my own for families who hadn’t started saving as soon as they would have liked. Today, Kantrowitz returns with his own follow-up for later-starting-savers, and his piece can be found here.

There’s some overlap between his advice and mine, particularly around embracing the idea that it’s never too late to start saving and that applying for financial aid is a must-do for every family no matter how much or little you’ve saved. But Kantrowitz has always been my go-to resource for learning and understanding how to navigate the financial aid process, and I’ll default to sharing his advice here as frequently as he can churn it out.

How much should you save for college?

If you’ve ever wondered how much a parent should save for college, Mark Kantrowitz spells it out in his latest piece which, not surprisingly, includes all the math to back up his claims. The only potential downside is that it’s pitched to new parents who have the luxury of saving and earning compound interest for the next 18 years. If you have that kind of time, it’s a compelling argument to see that saving even $50-$250 a month will add up to a nice college nest egg. But if your student is in high school and you haven’t saved as much as you wish you had, the math can be a little disheartening.

If you’re in that latter camp, I’d make five recommendations.

1. Pay the knowledge forward.
Forward this article to someone you know who has or will soon have a new baby. It’s a generous thing to do and they’ll probably thank you for it even more profusely someday than they do today.

2. Don’t lose hope.
Many parents compare the cost of college to their cash on hand and become so discouraged they actually do nothing. But doing nothing doesn’t get you closer to your goal of paying for the right college. Save what you can. You may lament that you didn’t start earlier, but probably won’t look back and say, “I wish I’d saved less money for college.”

3. Don’t rule out colleges that seem too expensive.
If you can find colleges that are in your price range even if you don’t receive financial aid, that gives you more control over your student’s college destiny. But don’t immediately eliminate colleges based on sticker price alone. The formulas are complicated, and the actual award you receive can take other factors into account like the academic strength of your student. Bottom line: you don’t actually know what that college will cost if your student is accepted. So curate a smart list of schools with your counselor’s endorsement. But don’t cross schools that otherwise fit off your list just because the cost is more than you believe you can afford.

4. Don’t shield your student.
Many parents want to shield their kids from the economic realities of attending college, and I understand that instinct. But I still believe it’s good for parents to have honest, open discussions with their kids about college costs. Having that conversation now, however unpleasant it might be, is much better than having it later if your student has an offer of admission in hand but your family can’t afford the school.

5. Apply for financial aid.
Some of us have a tendency to shy away from topics we’d rather not think about. I’ve certainly done it. But the families who actually apply for financial aid are the ones who get the most financial aid. Which camp do you want to be in? Don’t make assumptions that you won’t qualify, don’t avoid the topic, and most importantly, don’t let fear or shame or anything else deter you from applying. Apply for aid and let the financial aid officers do their job.

One of my core college planning principles is to focus on the parts of the process that you can control. You can’t control the financial choices or circumstances of the past. But you can make choices today that you’ll feel good about tomorrow.

Student jobs and financial aid eligibility

Families who become savvy about the college financial aid process will sometimes ask how their high school student’s summer job will affect their financial aid eligibly. The FAFSA, the form colleges use to determine how much a family can afford to pay for one year of college, measures the income and assets of both the parent and the student. A student who’s diligently worked and earned money will have that income figured into the FAFSA’s calculations. A particularly earnest student who saved any of that money has now created an asset on hand. When crunched through the financial aid formulas, that income and assets can reduce the family’s demonstrated need for financial aid. So a student who’s never had a job could technically qualify for more aid than the student who spent the last three summers bagging groceries.

But there’s good news for good workers. The FAFSA has protections in place for student earnings—a student can currently earn up to $6,570 in one year before any of it is counted as income on the FAFSA. So that summer job lifeguarding isn’t likely to sink your financial aid ship.

For high school students who work enough hours out of desire or necessity to earn more than that amount, it would be silly to reduce your hours (or to quit your job) to earn less money and ostensibly protect your financial aid. Having cash on hand is never a bad situation. But there’s something you can do to mitigate the potential negative impact on your financial aid eligibility—save some of the money in a 529 plan.

A 529 college savings plan allows families to keep money in the student’s name, but to report that money as a parent asset on the FAFSA. That’s a crucial difference as while the FAFSA assesses student assets at around 20 percent, it assesses the parent assets at 5 percent. Saving $1,000 in your own name reduces your financial aid eligibility by $200. But saving that money in a 529 plan only reduces your eligibility by around $50.

There are a lot of benefits for high school students holding regular jobs—making money, earning work experience, and even impressing colleges. So don’t back off from your work opportunities just to protect your aid. But do be aware of how much you’re earning. And remember that no matter how much or how little you earn, saving some of that money in a 529 plan is a smart way to invest in yourself and to protect your eligibility for aid.