When you have kids approaching college, Financial Aid is a critical topic.

  1. Colleges have a “Cost of Attendance”, the total cost of a year. Then the FAFSA form is used to determine the “Expected Family Contribution”, the amount they say mom and dad can afford to pay. Subtract the EFC from the Cost of Attendance and what you have left is the “Financial Need”.
  2. If the EFC can’t be paid for, there are Parent PLUS loans available to parents or Private loans available to the student. These types of loans are dangerous, be careful not to get in over your heads.
  3. The “Financial Need” is covered by scholarships, and federal loans to the student. Federal loans to the student should be used wisely too.
  4. The FAFSA form takes your family income, cash, assets, and current savings rate and comes up with the EFC. The biggest factor is income, but assets play a big role too. If the student has money in their own name, or there are assets in non-retirement accounts, it is a good idea to talk to a Financial Planner to see if there are ways for you to save money. Often times, moving some money will save a family thousands of dollars per year.
  5. The FAFSA is not due until June, but submitting it as close to January as possible is in your best interest. The colleges have guidelines, but financial aid is first come first serve.
  6. The real price of the school comes in the Award Letter, that is where you can compare apples to apples. Sometimes the more expensive schools give more generous aid packages and will cost the same as a state school.

    RULE OF THUMB: Don’t borrow more than a first-year salary. Follow this rule to keep the debt manageable.

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