Ring in the New Year with College Planning Cheer

by Michael Waterhouse

With costs of college continuing to rise, a carefully crafted college planning strategy can help your children have a memorable experience while keeping your family financially comfortable. In today’s digital age, there are a plethora of resources available on the internet to help navigate college funding. Additionally, working with a financial advisor will enable you to explore finance options you may not have considered before.  Some of the solutions are:

  1. Take the free money
  2. Analyze savings options
  3. Look at college planning as part of an overall plan, not a separate, independent decision

First, we need to understand the difference between scholarships and grants; then we must apply for them. Both of these are free money that is never paid back. The difference lies in who is giving the free money for education.

Scholarships are a form of financial aid issued by non-profit organizations, corporations, or individuals. They may ask the student applying to write some sort of essay on a creative topic or some other requirement. One great resource to help students locate scholarships is a company called Scholly (www.myscholly.com). Scholly was created by a Drexel University student who, through hard work and determination, was awarded $1.3 million in scholarships. He was featured on the hit show, Shark Tank, and since then, his business has helped students earn more than $50 million in scholarships!

Grants are another type of financial aid with disbursements usually given by the government. There are many grants available to the public to help with different needs. To determine eligibility for these grants, you must fill out the Free Application for Federal Student Aid (FAFSA). The FAFSA is a government form filed before each college school year which determines how much, if any, government aid the student is eligible for. The FAFSA accumulates all assets owned by the parents, and by the student. Money in savings accounts and money markets, retirement accounts, businesses, investments, real estate (other than the home you live in), and college savings accounts are all taken into consideration. The more assets owned, the less government aid given, all the way down to no assistance at all. So where else do you go for help?

Next, we need to analyze where we are saving all of our finances. As mentioned above, the amount of assets owned is looked at for grant eligibility. Actually, a family can reduce the amount they claim on the FAFSA by making a few small financial adjustments.

  • A common unknown fact is that the cash value within a permanent life insurance policy is not included in the FAFSA calculation. The entire cost of college could literally be wrapped up within the life insurance policy while earning tax-free interest, and use the cash value on a tax-free basis to pay for college. At the same time, the student may qualify for additional aid, reducing the overall cost of college. You could use a life insurance policy on yourself or take out a policy on your child while they are young.
  • If a college savings plan, such as a 529 plan, is being funded, you could make someone besides a parent the owner, i.e. a grandparent. If this small change is made, the assets will not be included in the family FAFSA statement.

Starting early to save for college is an excellent idea, and something a family should definitely consider. Even if you start your college planning late, there are still ways to go about this planning in a strategic manner which allots for retirement savings, ensures your assets are protected, and reduces the overall cost of college. With every family situation being unique, the approach for accomplishing goals should be customized to each individual family. Utilizing the wealth of knowledge on the internet, and working with a savvy financial planner can ensure your goals are accomplished.

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), 1767 Sentry Parkway West, Suite 200, Blue Bell, PA 19422. (267) 468-0822. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. Independence Planning Group is not an affiliate or subsidiary of PAS or Guardian. 2016-32391 Exp 12/18

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