College Financial Aid Planning

According to a Wells Fargo survey, half of all 22-32 year olds (Millennials) that went to college financed their education with student loans. The delinquincy rate, borrowers who are at least 90 days late on student loan payments, has jumped to 12%.

The other problem with student loans is a lack of financial education. The first major financial decision many students are making is with their student loans.

It’s no wonder that more than half of millennials say debt is their biggest financial concern, calling it “overwhelming”.

Making a mistake on the FAFSA can delay the processing of your application, because it takes an additional 2-3 weeks to process a corrected application. It is estimated 40% of FAFSA applications have at least one error.

A common error is to report total income tax equal to the Adjusted Gross Income.

Another common error is to report taxes withheld or tax due instead of total income tax.

Note that the FAFSA asks for the last line in the Tax and Credits section of the income tax return, not the total tax line of the Other Taxes section. The taxes in the Other Taxes section are traditionally not included in the FAFSA’s “total income tax” field, in part because they are already considered by the need analysis formula. If you use the wrong line from your income tax return, you will have made an error that needs to be corrected.

If you filed an IRS Form 1040 even though you were not required to file a 1040, you should fill in the oval to indicate whether you were eligible to file a 1040A or 1040EZ. If you can file 1040A or 1040EZ parent and student assets are not counted.

Use legal names as they appear on your Social Security card. Using a nickname or any other name will cause a processing delay.

Be careful to write your Social Security Number (SSN) and date of birth accurately and clearly. Any errors in the SSN or date of birth will cause processing delays.

If parents are divorced or separated, the parent with whom the student lived the most during the past 12 months is the parent responsible for filling out the FAFSA. This is not necessarily the same as the parent who has legal custody.

Rental properties are counted as investments, not business assets, unless they are part of a formally recognized business

Pensions, annuities and the cash value of a life insurance policy are not reported as an asset on the FAFSA.

Do not include employer contributions to retirement plans as part of the payments made to such plans. Only the employee’s contribution should be listed.

Family businesses with less than 100 employees are not counted.

I will be doing college planning workshops next week at:

McNary High School
Tuesday 9/25 6:30-7:30

West Salem High School
Thursday 9/27 6:30-7:30

This is for parents of high school juniors and seniors.
Learn how to increase financial aid, reduce debt and out of pocket costs for college.

Rising college costs are taking a big toll on upper-middle-income families. This group has seen the biggest jump in student loan debt. The surge is leading many families to to closer at college costs. The sagging economy, lower home values and soaring costs for college (doubled since 1985) are the cause for this problem. The portion of students choosing a college because of costs being very important has increased substantially in the last 5 years. More than one-third of parents with a child entering college in 2011 didn’t save any money for college.

Planning before filing the FASFA the senior year in high school is critical.

This does not include the debt parents assume to help pay for college!

If you have a college bound student (Junior or Senior in High School) NOW is the time to start planning to minimize college debt and maximize financial aid.

http://finance.yahoo.com/news/student-debt-americas-1-trillion-153953849.html

Despite having top grades and strong test scores it is getting harder to get accepted into some colleges. Many students are applying to several colleges, which is expensive and time consuming. No longer can you apply to the college of your choice and expect to be accepted and get a nice financial aid package. In 2011, 29% of applicants applied to seven or more colleges. Schools actually promote low acceptance rates as a sign of desirability. Many elite schools admitted a record low percentage of students last Fall.

Preparing the student during their High School years to make them more attractive to colleges will increase the odds of being accepted and getting an attractive financial aid package. Getting assistance with the College search process to cut down on the time and expense of applying and visiting several colleges is important too.

The rates on federal student loans could increase dramatically July 1, 2012 if Congress does not take action to extend the law that has kept rates on subsidized Stafford loans at 3.4%. Rates will increase to 6.8% potentially costing an average college graduate with loans thousands of dollars in extra interest.
Now is the time for those soon entering college to have a plan to keep student loan debt as low as possible. There are several strategies available to accomplish that by working with a qualified college cost planner.

Great article in the Washington Post. Of the $85 billion in past due student loans, people over 50 owe 18%.

http://www.washingtonpost.com/business/economy/senior-citizens-continue-to-bear-burden-of-student-loans/2012/04/01/gIQAs47lpS_story.html?goback=%2Egde_38777_member_105080987

A new study has found there has been a significant increase in the number of consumers seeking the help of bankruptcy attorneys as a result of student loan debt.

The number of cases with sizable student loan balances has increased substantially in the last three to four years.

However, only a small number of student loan debtors obtain a discharge of the balances as a result of “undue hardship”. As a result consumers who seek out bankruptcy protection are unable to get their student loan debt cleared as part of the filing.

Moral of the story: minimize student loan debt! (Use a qualified college aid advisor)

Take a look at this interview with Reid Hoffman, co-founder of LinkedIn.

http://finance.yahoo.com/blogs/daily-ticker/tech-billionaire-reid-hoffman-college-worth-cost-thoughtful-174105749.html

Like any investment, you must consider the ROI: Return on Investment.