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, 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.

Ability vs. willingness

When I first started Collegewise in 1999, I enrolled in a course through the UCLA extension program to learn more about financial aid for college. I still remember one particularly pithy piece of information from the instructor, who’d worked as a director of financial aid for several prominent colleges and universities.

“Financial aid is designed to make up for a family’s lack of ability, not their lack of willingness, to pay for college.”

Financial aid officers treat paying for college as a responsibility that falls first on the family. The financial aid formulas determine the price a family can reasonably afford—it’s a snapshot of their ability to pay for college. When it works well, a financial aid package can make up the difference.

A family certainly has the right to decide that a particular college’s price is more than they are willing to pay. They also have the right to decide to live beyond their means rather than to save that money for college. But they can’t make those choices and then expect a financial aid package to make up the difference. That’s asking financial aid to make up for a lack of willingness to pay, not a lack of ability.

Given that every dollar you set aside for college is a dollar less that financial aid will cover, a family who diligently saves what they can afford to set aside, no matter what the amount may be, is taking more control of their college financial future. And they’re also demonstrating to financial aid officers that they have leaned into their responsibility. That willingness to save can increase a college’s willingness to help.

The formulas will calculate your need, but your actions can demonstrate your willingness.

What are the best student loans?

Mounting student loan debt has left many families far more reluctant to take out loans to send their kids to college. But done responsibly, loans can help some families make up that difference between the full cost of attendance and what they can afford to pay for the college that really is the best place for their child to learn and grow for four years. If you’re looking for—or would like to file away for future reference—suggestions for the best student loans, expert Mark Kantrowitz comes through again with this piece, “Which are the best student loans?”

How to save if college is not a sure thing

Saving for college is usually one of those just-plain-good-sense things to do, not unlike exercising or reducing your midnight servings of Oreos. And the prevailing wisdom from every reputable college financial planner I’ve come across is to save that money in a 529 plan due to the favorable rate of return and the minimal impact on your financial aid eligibility.

But you’ll incur a tax penalty if you pull that money out of a 529 plan to pay for non-approved expenses. So what should you do if you’re not sure of your child’s college future? Should you continue to rely on the 529 plan and run the risk of penalties, or take a different savings route that would leave more cash on hand if college doesn’t pan out, but likely cost you in financial aid if college comes to fruition?

The short answer, according to this article, is to take the 529 plan off the table only if you are sure your child won’t attend college. Otherwise, keep saving in your 529 plan.

If you’re interested in the math behind the recommendation, the article lays it out nicely. But this question of the 529’s viability for kids who may or may not be college bound was a new one for me, and one that seemed worth sharing here.