For senior families: advice on the financial front

College decisions are arriving for seniors. And as families discuss where their students will be spending the next four years, here are three past posts with some advice about the financial factors in making your final college choice.

Here’s a reminder that affordability is part of fit.

Some advice on interpreting financial aid award letters.

And here’s a 2015 Washington Post article, How to Negotiate a Better Financial Aid Package. But while the advice is sound, please don’t let the title mislead you. You’re not buying a car, and treating this like a negotiation, especially one full of bluster or hostility, will backfire. Be polite and remember that while financial aid offices can and sometimes do adjust aid packages, they’re still holding all the financial cards.

Got financial aid? How to compare your awards

As college decisions begin to arrive for the class of 2016, those who receive financial aid will also get their “award letter.” Colleges know not to bury the lead, so you’ll often see a bold line of text summarizing the total award package. Some colleges do a much better job of explaining this than others do, but that number doesn’t necessarily mean you can just subtract it from the sticker price of the college.

There are three types of financial aid, and they are not created equal—(1) grants and scholarships (which are free money that doesn’t have to be paid back), (2) loans, and (3) work-study program. That’s why the awards are typically called “packages.” The rest of the letter should explain the breakdown for the recipient.

If you’d like some help deciphering your award package so you can accurately compare it to what are hopefully offers from the many other colleges that have accepted you, Mark Kantrowitz, as usual, comes through with all the necessary information and advice here.

Should parents or kids pay for college?

I’ve seen a few stories in the press debating whether parents should pay for their kids’ college educations, or whether the time has come to shift that responsibility to the student.  But whenever possible, I recommend that students and parents pay for college together as a partnership. The student will be successful during and after college, the parents will remain financially secure without sacrificing their retirement, and both parties can emerge from this process with a minimum of debt. Here’s why:

1. Colleges expect both parents and students to contribute.
College financial aid officers expect both the student and the parent to contribute to college costs to the maximum extent they are able; their formulas measure each party’s ability—not their willingness—to pay. When a parent or student refuses to contribute, the paying party has to bear the other’s share of the cost. Financial aid will not make up the difference.

2. Part-time jobs are good for college students.
Studies show that students who work up to 12 hours a week do just as well or even better academically than those who don’t. And in today’s economy, whether a student studies business or botany, they’ll need to have a resume that shows real experience if they want to get a job after graduation. In fact, a poll of 2010 graduates showed that 29% of them regretted not having done more internships or worked part-time in college.

3. Parents need to protect their own financial wellbeing.
Parents shouldn’t invest so heavily in their kids’ education that they put their own future at risk. A parent who sacrifices security or retirement to pay for their kids’ college is taking a big risk (and making it more likely that their kids will need to support them one day).

The best partnership approach begins long before the student actually starts college. We recommend that our Collegewise families have honest, open conversations about college costs when they begin the college search. Then we help them find and apply to schools where the student has a good chance of acceptance, as that can lead to merit-based scholarships. And every family of a college-bound student should apply for need-based financial-aid, beginning with the FAFSA (Free Application for Federal Student Aid). There are billions of dollars in aid available and the worst college financing mistake a family can make is to assume that they won’t qualify.

The early bird…

From 3 Steps to More College Financial Aid From FAFSA:

Because some aid is awarded on a first-come, first-served basis, the sooner you file your FAFSA, the better. [Financial aid expert, Mark] Kantrowitz says his research indicates that families who file before March 30 typically get more than twice as much aid as those who do it later. If you haven’t filed your taxes for 2015 yet, you can fill out the FAFSA with estimates based on your 2014 tax forms and update your FAFSA once you’ve finished your 2015 return.”

More free FAFSA help

Applying for financial aid always starts with completing the FAFSA. And fortunately, the National College Access Network (NCAN) is hosting free events around the country to help families complete this crucial form correctly. You can get a listing here of the events in your state.

Your FAFSA starting point

College applicants, it’s time to complete your FAFSA (Free Application for Federal Student Aid). But before you do, please head over to the Edvisors free online tutorial which will help you avoid both frustration and mistakes. The tutorial also includes a link to the even more detailed, but still free, Filing the FAFSA: The Edvisors Guide to Completing the Free Application for Federal Student Aid, 2016-17. Both resources have been updated to reflect the most recent changes to this year’s FAFSA, so if you’ve downloaded the previous version of the guide, make sure to get yourself the new one.

Senior family financial to-do

Senior families, please commit to the very important January to-do: Complete and submit your FAFSA (Free Application for Federal Student Aid) as soon as possible.

Every family who plans on sending a student to college this fall should fill this out. Do not make assumptions about your eligibility. Do not make excuses that you won’t qualify or that you’ve heard that applying for financial aid can hurt your chances. There’s a reason why every knowledgeable admissions and financial expert advises that families take this important step—it’s the smart thing to do.

The form just went live on January 1, so you’ll be a responsible early starter if you get going now. But more importantly, many states administer aid on a first come, first served basis. The surest way to miss out is to apply late (or to not apply at all).

What’s ahead and behind

I’ve met families who mistakenly believed that the time to apply for financial aid was after their student had been admitted to college. It’s not a pleasant discovery when they find out that they’ve long since missed the need-based aid boat.

Parents, if you have a student who is applying to begin college in the fall of 2016, please visit the “financial aid” sections on the websites for each of your student’s college choices. Find out what forms need to be submitted, and by when. The FAFSA, the starting point for all need-based aid, should be submitted as early as possible after January 1, 2016. But the colleges may have other forms that need to be completed, too.

Don’t wait for a college, counselor, friend, or neighbor to sound the deadline bell. As much anxiety as the idea of paying for college may bring, I promise that you’ll experience significant relief when you know what’s ahead, not to mention what’s behind you.

A financial aid to-do before December 31

Parents with college-bound students, the income you report on your 2015 tax return will affect your financial aid for the next two years.  If you’ll need financial aid to attend college, Mark Kantrowitz shares some good tips to keep in mind so you don’t look back later and realize you could—and should—have done something differently before December 31, 2015.

Is the debt can of worms open?

The increasing concern about mounting student debt has more families than ever expressing aversion to student loans. That’s a good thing. Student loans are not inherently bad. But the quickest way to get into financial trouble is to borrow money haphazardly without considering the potential return on the investment and whether or not you’ll be able to repay the debt in a timely manner. College is no exception.

But if you have a senior applying to college, this is not the time to exercise that caution.

For example, if you’re eliminating colleges whose sticker prices are beyond your budget, if you decline to check the box on the FAFSA indicating that you would like to be considered for loans and work-study, or if you’re so loan-averse that you won’t apply for need-based financial aid at all, you might be removing some potentially attractive options from the table.

Applying to a college with a large sticker price, agreeing to be considered for loans, applying for need-based financial aid—none of those decisions are tantamount to actually taking out a student loan.

Much as a student can compare offers of admission, a family who applies for need-based financial aid will have the opportunity to compare offers from different schools. Those aid packages can contain grants (free money that doesn’t have to be paid back), work-study, and/or loans. And you’ll have the option of declining pieces and parts of the aid package. You won’t take on debt until you (1) decide to do so, and (2) sign paperwork agreeing to the specific terms of that loan.

I understand why sending an application to an expensive college or applying for financial aid can feel like you’re opening a debt-filled can of worms. But don’t worry. That can remains firmly closed unless you decide to open it. And for most families, that decision won’t come until later this spring.