Since this site is part “lifestyle” blog, it will often focus on things that are central to everyone’s life, mine included. One of those things? Financial aid. FAFSA. Woof.
I find that the mere mention of FAFSA can reduce grown men to tears. And with good reason. The thought of Sallie Mae breathing down your neck every month for your $600 payment is beyond stressful. Especially when most of us spent our ‘grace periods’ in a full state of denial.
Financial aid wasn’t a concern for our parents. If you couldn’t afford it, you didn’t go. Back then, you had two options for “affording it”. Either your parents/you paid for it, or you got scholarships. Plus, college was exponentially LESS expensive even 20 years ago. Most college students in the 1980s didn’t even know what loans were. If they did, getting a good job post-graduation ensured that their loans would be paid off in a couple of years.
Unfortunately, the cost of a college education and the cost of living have both increased at a rate that far outpaces entry-level salaries. Our parents didn’t go through this, and therefore kids are relying on their High School Guidance Counselors for information about paying for college. There is far more information available to students now than there was when I went off to college, only ten years ago. We had no concept of loan payback, and were told by well-meaning parents to “go to the best school you can get into!” Many of us did. Many of us are now saddled with $100k-plus in student loan debt. Following your dreams costs a lot more than it used to. Is that a bad thing? Some may argue yes, but I believe it is only bad if you don’t know how to outsmart the system.
How to Avoid Financial Aid
- Start young. And by ‘young’ I mean when your child is born. Assume that they will want to go to college in 18 years, even if you didn’t go.
- To that end, sign up for a Upromise account when your child is still an infant. Shop online at the online retailers that you would shop at anyway. Every time you make a purchase through one of their affiliates, you earn money that goes into a college savings account. It involves no effort from you besides your normal online shopping habit. You don’t have to spend a lot. Over 18 years, every little bit adds up.
- Encourage entrepreneurship. What does your child like to do? Draw pictures? Make bracelets? Have them start by selling some to family members and neighbors. If they feel comfortable with selling, have them sell to their friends, or take their designs/services and sell them to your coworkers/friends. Use this to teach your children a lesson about finances, as well. Take 30% of what they make, and put it into a savings account for their college fund. Let them choose how to spend 70% of it. Sometimes, kids will choose to save 100% of what they earn. Either way, it teaches a valuable lesson and after 18 years of using their creativity to make money, they may have enough to finance their whole college education.
- Is your child into a ‘weird’ hobby? Encourage it. While I believe that parents should always encourage their child’s interests, know that your kid’s obsession with ant farms or log rolling or bocce could lead to a full-ride scholarship down the road. Weird = $$$.
- If your kid isn’t a fan of entrepreneurship, then they’re going to have to get a job as a teen. And put the same 30% into savings. (See below for advice on savings accounts)
- Go to a Community College first. Get superior grades, then transfer to a prestigious school (sometimes for free). Did you know that some states/school systems have a program whereby Community College students with exemplary records can transfer to a State University or even a private school and pay NO tuition? Each state is different, so check your State’s regulations on this program.
- High School juniors can start taking college classes for free. These classes often count towards both high school and college. Check with your local community college about their High School/Summer programs
- Work Study. In exchange for on-campus work, the students gets free money and an hourly wage. Students can also choose where they work. Need extra time to do homework and want a quiet environment? Pick the library. Know what career you want, and need experience? Pick the college’s IT Help Desk. At some schools, you can even make your own Work Study opportunity!
- Join the military, OR join an on-campus ROTC program. This is a very personal decision that should be made with much thought and care by the student and parents. Be aware of the inherent risks but also the myriad benefits (e.g. The Post 9/11 G.I. Bill).
- Scholarships. Apply. For every darn one for which you even remotely qualify.
How to Outsmart Financial Aid
- Never open a bank account in your or your child’s (or your) name to save for college. Why? Because the FAFSA asks questions about assets, and the federal government WILL find out if you have $10,000 socked away in a bank account for your kid, and will use that to give them LESS financial aid. Jerks? Yep. But you can outsmart them. Open an account in the name of a trusted family member (with a different last name!) or friend. When the bank issues a debit card for the account, either the parents or a (responsible) student can use the account to pay for books, tuition, expenses, whatever. And, they still qualify for grants (free money!) and scholarships (more free money!)
- Coinciding with #1, remember the acronym N.O.Y.N. It means Nothing In Your Name. Parents’ assets and accounts are scrutinized by the federal government as well. Got some awesome grandparents? Put everything in their names starting five years before your child expects to apply to college. That includes all bank accounts of the parents/child(ren), and even your above-mentioned Upromise account.
- Do not report your 401(k) on the FAFSA form. It’s entirely optional, yet many people still do it. Don’t.
- Become an “Independent Student”. The most popular way to do this? Emancipation. Each state’s laws differ on this, but a child can generally become emancipated at age 14, provided that they can prove that they earn enough to take care of themselves. In some states, a child can simply declare their emancipation. You could appoint a trustworthy Aunt or Uncle as legal guardian. This is, admittedly, an extreme example, but some families may find that this is a good option for them. It ensures that the federal government only looks at the student’s assets. If they don’t have any, they’ll get more free money.
- LGBT parents often get hosed when their children apply for financial aid. If you live in a state where LGBT marriages are not yet recognized as legal, have the child list the parent who makes less money and has less assets in their name as the “custodial parent”. The federal government won’t even look at the other parent’s assets and income.
- Well-meaning grandparents/family members may start a college savings/investment account and put your child’s name on it as a beneficiary. This is a mistake, as it will count against your child when it comes to filling out the FAFSA. Make sure these accounts are set up in the holder’s name. After the FAFSA has been submitted, and your child’s school delivers a financial aid package, the account holder can remove the funds and send a check to you or your student.
I hope you found this list somewhat helpful. In real life, I am an Educational Consultant. I help families and students navigate the crazy world of financial aid, college selection & admissions and offer tutoring and writing services as well! Shoot me an email if you’d like to chat more about you or your child’s college education!