by Grace aka costofcollege
As the deadline for high school seniors to choose a college approaches, the challenge of how to pay is has been a recent topic of discussion for many families. Totebaggers are savers and unlikely to qualify for much need-based financial aid, so this timeline may not be relevant to many readers here. But it does show some generalized steps along the path to saving and paying for college while giving us a starting point for discussion.
Before High School
Start saving for college ASAP: This is the relatively uncomplicated part. Although we can’t predict the costs of college over a child’s lifetime, it almost always makes sense to begin saving early on. Even if MOOCs or other innovations make higher education more affordable in the future, there’s usually not much of a risk in saving too much since there are options for dealing with “left-over money in your 529 plan”. Still, it makes sense to look at all the pros and cons of 529 plans.
Before Junior Year of High School
- NMS potential: If your child tends to score in the 95%ile of standardized tests, he may have a shot at earning a National Merit Scholarship. A little test prep can make the difference in qualifying for significant merit financial aid.
- Base Income Year (BIY): If there is a chance your family may qualify for need-based financial aid, you should explore ways to minimize income during the BIY, which is the 12-month period that begins January 1 during your child’s junior year. Since the BIY is used as a snapshot for determining financial need, you may want to avoid selling stocks or property that will create large capital gains, refrain from converting to a Roth IRA, and defer bonus or other income if possible.
Junior Year of High School
- Create list of schools: Get serious and make a realistic list that includes academic and financial safeties.
- Can we afford it? 1-2-3: Determine affordability by using the 1-2-3 Method or something similar.
Senior Year of High School
Senior year is the busiest time for families as they handle the many details of the college application process, including final determination of how they will be paying. Some important acronyms:
The two main forms used in determining financial aid eligibility are the FAFSA and PROFILE.
FAFSA is the Free Application for Federal Financial Aid. It is a form submitted to the government that collects the financial information needed to decide eligibility for federal FA. It’s also used by many colleges to determine institutional aid.
PROFILE is the financial aid application service offered by the College Board, used by about 400 colleges to learn if students qualify for non-federal student aid. There is a fee to submit a PROFILE, whereby the FAFSA is free.
The SAR (Student Aid Report) is a summary of your FAFSA responses and provides “some basic information about your eligibility for federal student aid”.
What’s your approach in planning on how to pay for college? Do you feel well prepared, or a bit nervous about how you’ll handle the costs? If your kids are older, tell us what you learned. Share your wisdom and ask your questions.
(A version of this post previously appeared in Cost of College.)