The journey toward a solid college education is a long one. It begins long before your child’s senior year, and it may even start before they’ve set foot in high school. In fact, the earlier you can begin your college planning, the better.
Funding a college education of any kind is a major investment. You can’t afford to wait until the last minute to start examining your assets and arranging your funds. Get to know the essentials of financial aid now so you’re prepared to maximize your opportunities for assistance in the years to come.
Keep a Keen Eye on Scholarship Opportunities
A scholarship is an award of financial aid for a student to further their education. It can be merit or need-based depending on your child’s application and situation. Scholarships are one of the best forms of financial aid for a college education. You don’t have to worry about repayment plans or investment terms because the funds your child will receive from scholarships you don’t have to pay back. You simply enjoy the windfall if you’re lucky enough to win.
There are far more scholarships than most people realize. For the 2013-14 school year, individuals and organizations awarded $122.7 billion in grants and scholarships. Of this, 40 percent was from federal sources, 39 percent was from colleges and universities, 13 percent came from private sources, and 8 percent was awarded by the state.
- Federal grants are completely free and are need-based. Need-based means that the grants are based on your family’s income.
- College and university grants/scholarships are both merit and need-based. Many schools give low-income students more grants than middle-class students. If your child has good grades, then he or she is more likely to receive a merit-based grant.
- Private scholarships can be both merit and need-based. There are thousands of private scholarships in scholarships.com and fastweb.com.
- State grants are mostly need-based. These grants take in consideration your family’s income to determine how much financial aid your child may qualify for.
Start your child’s scholarship search early. Many are only available to juniors or seniors in high school, so you don’t want to wait until your child is enrolled in college to start digging up these opportunities. Apply to as many scholarships as you can. Don’t rule out the smaller awards because these can add up fast, and it’s the small niche scholarships that often see less competition.
Learn to Maximize Federal Aid Eligibility
Federal aid for college is awarded based on the Federal Need Analysis Methodology. This is a complex calculation that analyzes your family’s income and expenses to determine how much financial aid you should get. The methodology gathers information from the tax year that occurs two years before your child’s first year of school. To best maximize your eligibility, you’ll need to think ahead.
The need analysis doesn’t take into consideration your credit card history. However, it takes a look at your assets to determine your eligibility for financial aid. Consider your financial decisions carefully in the years before your child goes to college. Actions, like withdrawing money from a pension plan or selling stocks and bonds, will increase your assets during this tax year, which will decrease your aid eligibility. A smart way to decrease your earning assets is to use some of your savings to pay down credit cards which will free you from some of the credit card interest you’ve been incurring.
It’s important, to be honest on all your financial aid applications. Don’t fudge the numbers to try and increase your eligibility. Do, however, make smart financial choices that can adjust the situation in your favor by keeping your assets in the best place possible.
File Your FAFSA® Early
FAFSA® deadlines change regularly, so check the federal guidelines often to make sure you’re current on the latest dates. For the 2020-21 school year, students can begin submitting FAFSA® applications on Oct. 1, 2019, using information from 2018 tax returns. Students do not need to apply to their desired schools before filling out the FAFSA®, so there’s no excuse for delay.
The earlier you apply, the better your chances are for getting the maximum amount of financial aid. There’s a limited amount of aid available both from your state and the federal government. The amount of aid for which you’re eligible isn’t necessarily the amount that you’ll get, particularly if you’re late to fill out this critical paperwork. Set aside a solid chunk of time to plow through the complex financial questions in the FAFSA® and get it done as close as possible to the first eligible date for submission.
Understand the Concept of Professional Judgment
Professional judgment refers to the ability of colleges and universities to adjust individual students’ financial aid packages at their discretion. Most financial aid is awarded based on a set algorithm that crunches the same numbers for every student, sending out boilerplate aid offers that are appropriate to each family’s financial situation. However, there are many outstanding circumstances that aren’t covered in standard aid applications.
If your family has suffered a financial hardship that wasn’t taken into account in your initial application, some schools may consider applying their professional judgment to adjust your student’s aid. You shouldn’t use this option lightly. However, if your family is facing significant financial struggles, reaching out to your student’s school could yield some beneficial results.
Situations that might impact your aid amount include the death of a wage earner, job loss, a major salary reduction, high unreimbursed medical bills, and other unexpected one-time events.
Take All Your Tax Benefits
Not all financial aid comes in the form of a scholarship or loan. You can also take advantage of some major aid opportunities in the form of tax credits. Make sure you’re utilizing every possible benefit that’s available to you. Some possible deductions include:
- Lifetime Learning Tax Credit: Up to $2,000 per taxpayer of the first $10,000 in postsecondary tuition and fees
- American Opportunity Tax Credit: Up to $2,500 per student for the first $4,000 in postsecondary education expenses
- Student Loan Interest Deduction: Up to $2,500 from interest on federal and private education loans
Take care when you’re filing your taxes with a college student in the home. If you’re paying for any portion of your child’s education, you’re eligible to reap the benefits of these deductions. Benefits like these offer a much-needed form of aid at tax time, boosting your refund, so you’ll have more available to funnel into your child’s education in the future.
Paying for college can be as overwhelming for the parent as it is for the student, if not more so. The earlier you prepare, the smoother your enrollment and financial aid experience will be. Start talking to your children about their college expectations early so you can set a budget, examine your finances, investigate aid options, and figure out where you stand. With the right assistance programs, an outstanding college education can become available to families at any income level.