Video: How Much College Aid Is Out There and How Do I Get It?Submitted by Reby Advisors | Certified Financial Planners | Danbury, CT on November 2nd, 2018
Presented by Stephanie Mauro, November 2, 2018
Part 3 of 4 in Our College Planning Video Series
How to Pay for College Without Going Broke!
The third video in our series How to Pay for College Without Going Broke gets to the heart of the issue for most families: How much aid is out there and how do I get it?
Enjoy the video, and please do not hesitate to call us at (203) 790-4949 for advice on education planning or 529 plans. If you're a client and would like an introduction to Stephanie Mauro, the speaker in the video, please give us a call.
So, how much aid is out there and where and how do I get it? Well, the biggest area is the federal loan program. You have the Stafford Loan, which is a strong loan program I recommend, if you're going to debt your student up. You have the Parent Plus Loan, which is another lower interest loan, but it is your debt, not your student's debt. So, be careful of that.
You have the Grad Plus Loans as well. So, once your student has a four year degree, and they go to grad school, they can then do their own FASFA, and they'll get a 20 thousand 500 dollars Stafford Loan, unsubsidized, so it's all interest building on the whole amount, but it's still a nice chunk of change for grad school, under the Stafford Loan program. And then, all the Grad Plus Loans are also a better loan program. K? So, that's where the federal loans are the biggest.
The next line, the institutional grants, that's what so many families leave on the table. 'Cause they don't understand the positioning of their student. They don't think they qualify for need, and they really do, depending on the college. Like, if you're at 125 to 150 thousand dollars of need, you're not qualified for need at a State school, but at the 70 thousand dollar school, you are. If you have a lot of equity in your home, and you have a lot of assets, then they're has to be some calculations done, but that 150 mark, is like that magic number of qualifying on the higher-end college, on the more expensive colleges. Where, in your state schools, you're not going to qualify. Does that make sense to everybody?
Say that again.
So, the magic number on income is like 150, if you're making 150 or less, you might qualify for need at a very expensive, the 60, 70 thousand dollar, even a 50 thousand dollar a year school. If you have a lot of equity in your home and a lot of liquid non-retirement assets, then you might not qualify as much, but if you don't have a lot of equity in your home, and again, if they are taking the CSS profile. If they're not taking the CSS profile, and they're only looking at your income. You definitely will qualify for need-based aid if you're at the 150 or lower, on the 50, 60, 70 thousand dollars. K? 'Cause then, your EFC is not as high.
When you pay 79 thousand for-
Right, the 50, 60, 70 thousand ... You know, when you're into the 40, 30, and 20s then you're generally not qualifying for need at 150. So that, I find in my practice is that magic number, and that defining line over that, then we start coming out of the need. K?
So, the institutional grants are the merit based money. Again, merit is based on fabulousness of your student. Their SAT scores, their GPA, their extra-curriculars, volunteering is huge. Huge. And, students is like, "Oh, yeah I'm gonna join this club and that club." I'm like, "No, no, just join the clubs that mean something to you." I want my students to be true to themselves, but I do want them to be involved. Boy Scouts, Girl Scouts, huge.
So, there's a lot of great things that our students can be doing, musical, athletic talents, all of that. And students are like "Well, I'm not a D1." Okay, fine. I've had many D3 coaches give my students more merit aid. And then, if they don't wanna play anymore, merit is still merit. So, they still keep that, as long as they maintain the GPA.
So, I like D3 schools for that reason actually. And, I had Mizzy Acordia ask one of my students to get 50 more points on his SAT. March of senior year, and they'll give him eight thousand dollars more, he wrote it in a text. We had it in writing, he got 90 points more, and he did get the eight thousand dollars. In March of senior year. So, anything is possible. That's rare. Generally, what you apply with is what you're working with, but the SATs, ACTs are where the merit money is, most colleges admit by GPA and give merit scholarships based on the student, but it starts with the SAT or ACT scores.
And, I have clients who went to various colleges that their students are looking at now, and they're like, "I wouldn't get in with my SAT scores, or GPA." Every year it seems to go up just a little bit. They're looking is very competitive. Tens of thousands of students are applying to college. Since 2007 to current, is the largest application pools in the history of America. Because, we as parents know the importance of it.
And in today's world, a four year degree while is important, it's kind of like everybody's got that now. So, it's that Master's degree, but I always encourage my students, "Get your four year degree, get a job, and see if your employer will pay for your Master's." This online education makes it very, very convenient to work full time, and get your Master's.
So, we really have to be creative in how we handle those last two years, 'cause that's where a lot of the debt can be incurred.
Federal Pell Grants are for very poor people, private loans we'll talk about later. Educational tax benefits, we touched upon. State grants ... I don't think Connecticut has a state grant, I'm not too sure, I meant to look that up, but, I got busy today hanging out in Danberry Hospital with my dad, and that was one of my tasks for today.
I'm not sure, do you guys know if you have a state grant here? 'Cause in New York we have the Tuition Assistance Program.
I think maybe, yeah.
So, the Tuition Assistance Program is TAP, and if families make like under 70, 60, 70 thousand dollars, then they qualify for that, and it's income-based. And then, when ... Then, we have the Excelsior Scholarship in New York, which is a whole other ball of wax, I won't go into here. But, state grants, I know Vermont has a state grant.
There are other federal programs, and then campus-based work study is nice, but they always take it off the cost of attendance. So, here's your 50 thousand dollar school, you got 10 thousand dollars in merit, you're taking the 55 hundred dollars Stafford Loan, and here's two thousand dollars in work study. And then, you see that final number and you're like, "Oh wow, they're taking that off." But, they're not gonna take that off of your cost of attendance, you're student actually has to go in, get the job, and work. And you will never see that money. Ever. 'Cause that's their spending money.
So, we wanna be cognoscente of the work study, is something that you should not take off the cost of attendance, and your students should not work first semester. They need time to acclimate and get their feet wet on campus, and get comfortable, and then second semester, and then Sophomore year, they could work if it works for them. K?
So there are two types of aid, we talked about merit based on grades, GPA, class rank, extra-curriculars, athletic and musical talents. I had a student get 4 thousand dollars to be in Sacred Hearts marching band. Many students getting scholarships because they're applying to a music program, and they go in and they do their auditions and their auditions are so strong they get a merit scholarship for that.
And then, need, we talked about family income, assets, number in college. So, if you're expected family contribution is 50 thousand dollars, that's per family. Once you have two students in college, it cuts it in half and it becomes 25 thousand per student. And if you have three? It gets divided into thirds.
I have two clients now, with three students in college. I know.
With these numbers.
It's crazy, crazy. So, just keep that in mind, and other factors like age of the older parent. So, there's what's called the Asset Protection Allowance, and the Asset Protection Allowance says, if you have a hundred thousand dollars in assets, well, we're gonna say that 20 thousand of it's protected, so then that 5.64 percent, I was talking about earlier, would only be on 80 thousand dollars. Does that make sense? Asset Protection Allowance is the government saying, okay we're not gonna make count all of your money, based on number of people in your family and the age of the older parent, we're gonna determine that 15, 20, 25 thousand dollars is your protected asset, and then the 5.6 percent gets calculated over that. Understood? Okay.