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If You Are Serious About Your Child Getting into and Through College Without Crippling Debt

If You Are Serious About Your Child Getting into and Through College Without Crippling Debt

| May 28, 2019

This Information Might Help

I’ve written about things I’ve learned from College Inside Track in the past, and I just spent another couple hours with them absorbing everything I could. Below are my rough notes in case they are helpful for you.

Thanks for taking a look!

Tom Gartner, MSAPM, CFP®


One of the first questions to ask should be:

"What is this college ACTUALLY going to cost me?"

Normally you don’t really find out until spring of freshman year, after May 1st the decision deadline, they said often “moms are crying dads are angry.”

Three key factors

1) academic fit for the student

2) right social fit

3) right financial fit

Average college loan per child is $57,800

Why is it so hard to afford now?

1) triple digit tuition increases in thirty years

2) student loan borrowing capacity (programs) have not gone up as much

3) asset protection allowance (how much you are allowed to make and have as a parent and still get aid) has decreased from $52k to $12k in ten years

Four ways to pay

1) out of pocket
2) merit-based aid
3) need-based aid
4) loans

Then there is the skin in the game discussion

1) pay for it all no matter what it costs, on mom and dad 100%

2) we have 529 money rest is on you

3) we have 529 money and will pay as we go what we can

4) student pays for x %

5) all on the student, loans, and aid

They recommend starting early thinking about how we all will pay for this earlier rather than later. Perhaps akin to pre planning your funeral to avoid overspending? (My thought)

Shaving off a lot of costs with AP courses almost never works in their experience

Work study is not a gimmie, can be hard to get, a limited federal program

Declaring independence from Mom and Dad doesn't really work anymore, need to be married, in military, court, etc

Even relatively hard for legit kids without engaged parents, some loans aren't even possible without mom or dad participating. They do pro-Bono work for at-risk kids.

Don't try to shield your kids from the financial part of the equation. It's important for them to understand the long term implications for their situation. (We don’t want a starving artist, at least by surprise! – my words)

What is the ACTUAL right fit for ME? NOT what is the right BRAND for me?

You don't shop million dollar homes when your budget is $500,000. So DON'T do that with college!

Students in high school rarely if ever understand what taking on a $100,000+ worth of debt means and all of the implications. Adults should have a big seat at the table in the decision.

Fill out the FAFSA, of course, even if you don't think you will get loans. Schools use this to decide if the family has need. So you can be need-based at some schools, not at others because of the cost.

Expected Family Contribution EFC Is equal to roughly 47% of income.

College can then meet some or none of it; only 60 schools will cover all the gap.

You will not get your merit aid until you get the FAFSA done

Rejiggering the balance sheet is not something they recommend

Retirement accounts aren't an asset for FAFSA

Remember FAFSA is completed EACH year again until graduated

If you aren't going to be need-based, flex to merit-based aid

Interacting with some schools matters, private colleges especially. How you tell your story can make a difference. Sometimes they just need a kid from Minnesota to fill a slot.

Merit usually lasts for 4 years, but be careful of freshman specific offers.

Don't narrow your college search too soon or just assume it has to be a community college. Out of state, schools can be less expensive.

There are 3,000 universities in the US, and they break down into a few main categories

1) sweatshirt schools = no need to give merit aid

2) state schools - a grid of ACT and grades etc. gets you in, very straightforward and can be rigid

3) Kohl's schools - you never pay full price! Some are aggressively competing for the kids; you may be able to negotiate by using other offers

Some schools say they don't negotiate because they don't want to, but will. Hard to figure out, but think about supply and demand economics.

Unclaimed scholarship money is a myth, only about 7% of the money source, the average award amount is about $1700, and that is a one time deal you would have to reapply for.

Spend time researching colleges not working on little scholarships with essays.

Personal thought, “This speaker has credible, real-world experience has five kids, and the fourth just graduated yesterday.”

Don't be 100% against loans, but manage it intentionally. Almost nobody has $100,000+ saved, so loans usually have to be a part of the discussion.

Every student gets access to the Stafford loan program. Then it's subsidized or unsubsidized. 5.05% is the current rate, and it looks like it's going to go back down. Payments start six months post graduation. Subsidized means no interest until they graduate vs. immediately. So if you are going to be using unsubsidized loans, maybe burn your savings and cash flow ability first.

Usually, try to stay in the Federal program if possible, because of the lowest costs.

Loan forgiveness programs aren't a lock, not going well lately. You can also owe taxes on forgiven loans, legislation pending

Not unusual to have some subsidized and unsubsidized, but it's capped at $5500 for a freshman. “You should watch parents mouths drop when they hear this.” Every other loan is co-signed or other.

Then there is the state loan self loan program. Currently, 6% fixed for MN.  The website lists schools that will accept the program.

North Carolina has one of the best state loan program, NY doesn't have one.

State loans almost always require a co-signer

Parent Plus loan is a potential discussion point, not always easy to take out a loan for their kids.  7.6% interest & a 4% initiation fee!  Many other options could be better.

Be careful with Banks and credit unions, they often increase rates, and the terms can be opaque and difficult to understand.

Guidelines to think about for debt:

Students should not take out more in loans than the first-year salary in your chosen field.

Low-income field? = Be EXTREMELY careful with loans!!!

For every $10,000 in debt think $100 a month for loan payment

If Grandma and Grandpa have a 529, consider taking the distributions later in school because it counts as income in the student's name on their FAFSA.
Merit packages don't inflate like tuition


This article represents opinions of the authors and not those of their firm and are subject to change from time to time, and do not constitute a recommendation to purchase and sale any security nor to engage in any particular investment or legal strategy. The information contained here has been obtained from sources believed to be reliable but cannot be guaranteed for accuracy.