“Yes, You CAN Afford To Send Your Child To College...

Even If Your Expected Family Contribution Seems Sky-High”

Dear Parent, 

Note:  Please pay attention to the bolded paragraph at the end of this newsletter!

If you’ve been following our suggestions and submitting all your paperwork on time, by now you should have received your Student Aid Report (SAR) from our office. We have processed it electronically, and have mailed or emailed to you a copy for your review.

Page 1 of the SAR contains a very important piece of information: your Expected Family Contribution, or EFC. The EFC is the “minimum” amount of money you are expected to contribute toward the cost of one year at each college to which your child has applied. It may be “expected” you will contribute one-third from current income, one-third from your accumulated assets, and borrow the remaining third in your name. This may not always agree with “good financial planning”!  Therefore, we’ll show you how to “fund” this in the most cost effective and tax-advantaged way possible if we have not already discussed this in our office.

 So, this is the moment of truth! If your EFC (located in the upper right hand corner of the SAR) is 08150, for example, simply put a dollar sign in front of the number and you have $8,150 as your minimum Expected Family Contribution (or out-of-pocket costs) at any school for one year. Your income, assets and other financial information you supplied when we processed the Free Application for Federal Student Aid (FAFSA) determines this figure. The EFC is based on what is known as the Federal Financial Aid Methodology. Don’t worry about what that means for now. It’s significant only because there is another formula—the Institutional Method—that is used by many private colleges and universities to determine your EFC at those schools. The Institutional Methodology factors in home equity, younger siblings’ assets, and some other financial resources. For that reason, your EFC under the Institutional Methodology may be higher or lower than it is under the Federal Methodology.

Right now, you might be asking: 

“How can we possibly afford so much out of our own pockets for a public college...and even more if our child goes to a private school?”

By the way, if your EFC is below $3000, congratulations! You should receive some federal grants to help, thereby reducing your “out of pocket” costs for your child’s college education! However, it’s far more likely that you are among the majority of families who have an EFC which is a significant figure. You even may be feeling a little light-headed and short of breath right now if your EEC is much higher than you had hoped it would be. But you’ll be feeling better in a moment. I’m about to tell you how and why your EFC is not necessarily cast in stone.

And, even if you can’t get your EFC reduced, there are ways to pay for your share of your child’s college education—without going broke! I call these cost-lowering strategies “Affordability Methodologies,” just for fun. Here they are...

         Affordability Methodology #1: Update Your SAR. You may be able to amend your financial information and get an updated SAR, with a new and hopefully lower EFC. When can you file amended information? There are several situations that qualify, but one of the most common occurs when a person “overestimates” their income on the original FAFSA or misstated their assets.  We usually don’t make this error, but we are humanJ.

         Did you and your spouse separate or divorce after filing the initial FAFSA? You may be able to get a lower EFC if you re-file with the new marital status information.

Affordability Methodology #2: Look Into Tax-Advantaged Funding. For those of you that do not have a Financial Planner who specializes in both tax strategies and EFC reduction, we can provide a “College Funding Financial Plan” for you that may go beyond what we’ve already discussed.  If you own any part of a business and would like to look into “tax scholarships”, give us a call.  Conventional Financial Planning often leaves you worse off!

These are a couple other “Affordable Methodologies” that may help you pay for the high cost of college such as cash flow loans, borrowing against your retirement plan (last resort), scholarships (if you have the time and qualifications), ROTC, and even W.U.E. Schools (http://www.wiche.edu/SEP/WUE/index.asp). But we may cover those in upcoming issues of this newsletter.

In the meantime, we’re happy to help you with any of your college funding questions, concerns or plans.  I invite you to call us at (602) 889-6500 to schedule another appointment to explore your options.

 It’s essential that each of you forward copies of your Financial Aid Award Letters to us for review.  Without doing this, it’s easy for colleges to make the “offer” look better that they really are! You and your student need to be able to make the best possible financial decision in “funding” his/her college education.  We’re getting several Award Letters from parents each day via our fax (602) 889-1991, and we sure don’t want to miss yours!

Until next month…Best Wishes!

Randy Stoltz, President