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Consumer Guide to College Financial Aid Help for the parents of college-bound children

Contents Page

About BAY AREA PLANNERS................................................................................................... 3 Disclosures...................................................................................................................................... 3 DOES THIS GUIDE APPLY TO YOU? ....................................................................................... 4 10 COSTLY MISCONCEPTIONS ................................................................................................ 5 10 KEY THINGS YOU MUST KNOW ABOUT FINANCIAL AID ........................................... 8 10 COMMON MISTAKES PARENTS MAKE! ......................................................................... 13 4 STEPS TO TAKE NOW TO INCREASE YOUR FINANCIAL AID AWARD ..................... 16 SERVICES.................................................................................................................................... 18 Our 100% No-Risk Guarantee ...................................................................................................... 18 Definition of Financial Aid Terms................................................................................................ 20

This is an educational service provided by: BAY AREA PLANNERS 19925 Stevens Creek Boulevard., Suite 100 Cupertino, CA 95014-2358

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Dear Parent, Understanding the financial aid process used by the Federal government and by colleges is a huge challenge for parents. Why? Because the financial aid process is complex, arcane, secretive and confusing. Can you imagine submitting your tax return without any understanding of how the government calculates the taxes owed? How would you know how to best plan your affairs to pay the minimum in taxes? Yet this is the situation most parents face when applying for financial aid. Every year, simple mistakes cost parents like you thousands of dollars in lost aid! Worse, there are very few people to turn to for help. High school guidance counselors are neither trained in this aspect of college admissions nor willing to give advice because of liability concerns. Your CPA may know the tax rules concerning continuing education, but usually not how they impact financial aid. Most financial planners can help you calculate how much you should have been saving for college, but receive no formal training on the financial aid system (believe me, I went through the training). Finally, since nearly 90% of the government financial aid forms are initially submitted with errors, you cannot trust the advice of other parents either! So how do you start to handle this nightmare of a process? You start by reading this Consumer Guide. In this fact-filled booklet, you will discover 10 COSTLY MISCONCEPTIONS, 10 KEY THINGS YOU MUST KNOW about financial aid, 10 MOST COMMON MISTAKES parents make, and 4 STEPS TO TAKE to increase your financial aid award. With this information, you can now make informed and intelligent decisions that will keep more of your money in your pocket. I wrote this Consumer Guide to help you better understand financial aid; if you have any questions after reading it, I invite you to call me at 408-725-7135. I am a professional College Planner and have dedicated my business to helping educate parents of college-bound kids. I will be happy to help you in every way I can. Cordially,

David Beck, CFPÂŽ College Planning Specialist, BAY AREA PLANNERS

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About BAY AREA PLANNERS I am a professional, fee-only, independent Financial Planner specializing in planning for college. I can help you with your financial aid and college admissions paperwork, and also with finding the cash to pay for college without changing your existing lifestyle or ruining your retirement. College financial planning is NOT just “saving for college.” It’s implementing a variety of efficient and effective college planning strategies that fit your particular situation. There are strategies to reduce your college costs, and I can show them to you by preparing a financial plan for your specific family situation. The potential for saving thousands of dollars is so great, I guarantee your complete satisfaction with the plan or I will refund 100% of our fee. With your plan in place, you can relax knowing you have done everything possible to improve the quality of your child’s education.

Disclosures Fee-only financial planning and investment advisory services are offered by AMPA Inc. dba BAY AREA PLANNERS, a registered investment advisor in the state of California. I provide college planning services on a fee-only basis, and am not paid directly or indirectly by anyone other than my clients. I maintain complete objectivity in my recommendations and have a fiduciary duty to place my client’s interests above my own. All written content is for informational purposes only. Opinions expressed herein are solely those of David Beck, Principal Advisor, BAY AREA PLANNERS. Material presented is believed to be from reliable sources and no representation is made as to its accuracy or completeness. No offers of investment services may be made or accepted from any resident outside of California where AMPA Inc. dba BAY AREA PLANNERS is licensed. All information and ideas should be discussed in detail with your individual advisors prior to implementation. Important Consumer Information Public information about AMPA Inc., dba BAY AREA PLANNERS, is available on the Internet at www.adviserinfo.sec.gov. You can search this site by the unique identifying CRD number for Bay Area Planners: 144665.

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DOES THIS GUIDE APPLY TO YOU? “I’m rich! I won’t receive any aid, why should I apply?” Great! However, a private college may have endowment money to spend to attract the right kind of student. You will need to complete the financial aid forms and apply in order to be considered for this nongovernment aid. Also, are you sure you are maximizing your use of educational tax deductions and credits? Call us on this. “I’m poor, so won’t the government just pay for it all?” Possibly, if your family is able to claim the Earned Income Credit. Anything above that, and you will be shocked how much the Government thinks you can afford to pay for your child’s education! Don’t set yourself up for an unpleasant surprise, read this Guide. “Our high school is giving a presentation on how to fill out the forms” You should attend; they will give you good information about who can apply, the forms to submit, what happens after you apply, and the different types of aid that are offered. What they won’t cover is what matters most to you - how to maximize the amount of money awarded! This Guide will get you pointed in the right direction. “Our CPA handles all our finances” Many good tax strategies often actually reduce your financial aid, so are counter productive to college funding strategies. Ask your CPA if (s)he is familiar with the Federal and Institutional Methodologies for Financial Aid. If (s)he is, you are in luck, otherwise read on for an alternative source of help. “I did this last year for my eldest and received an award” OK, let’s see if we can do better this year with a bit of additional knowledge of the system. “I don’t have a Green Card” Is your child a citizen or an eligible non-citizen? If so, (s)he is eligible for financial aid. The Department of Education’s only interest in you is that you will contribute the balance of the money to your child’s education. They are not interested in your immigration status. “I can go to the Government web site for this information” Yes, at FAFSA.ed.gov or FinAid.com or FinancialAidSupersite.com. But why waste hours on the internet for the same information that is in the following pages?

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10 COSTLY MISCONCEPTIONS Misconception # 1: Only minorities get financial aid This is not true. “Need-based” financial aid is awarded based solely on financial need and is available to every legal resident of the U.S.A. Minority students, athletes, and academically gifted students may receive aid in the form of scholarships, but this is outside of the main government and state aid systems.

Misconception # 2: Applying for financial aid will reduce my child’s chance of being admitted Usually not true. Most colleges are “Need Blind”; the admissions staff processes the applications without knowing what the financial aid staff is seeing. However, the current economic situation is putting a lot of financial stress on colleges. To be sure, call the Financial Aid Office of the schools your child is considering and confirm they are “Need Blind”.

Misconception # 3: All schools will give me the same amount of aid money The amount the family is expected to contribute to the education of the student is based on the income and assets of the family. The remainder of the cost of attending a college should be met by government financial aid. Using the analogy of insurance, the family pays the ‘deductible’, and the financial aid pays the balance of the ‘claim’. So if the college is a more expensive one, the family is eligible for more aid to cover it. This means it is a huge mistake to only consider colleges based on cost. Also, see # 4 below. Be sure to read the Key Facts section of this Guide for more details on how this works.

Misconception # 4: All financial aid is ‘free’ money “Free money” is grant and scholarship money that you and your child do not have to repay. Your goal is to get as much "free money" as possible. In reality, some of the aid that is offered to parents is in the form of loans that must be repaid! You need to factor this into the equation as you compare the financial aid packages from different colleges. Private schools are often able to offer better packages with more “free money”, so don't limit your outlook (or your child's education) by applying only to seemingly cheaper public colleges and universities.

Misconception # 5: The school has to provide all the aid I am due Sadly, the amount of aid the family actually receives is a function of the college’s ability to come up with the money. Some colleges are well-endowed and receive a lot of money from alumni and corporations, while many other schools, like state universities, rely mainly on state and federal funds to fill a student’s need. In many cases, the college will not be able to offer the full amount, resulting in a ‘gap’ between the aid they should provide and the aid they are offering. You are the one that has to come up with the extra money to close this gap!

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Misconception # 6: I can wait and do this next year The biggest tragedy in college funding is that most parents wait until their child's senior year before they begin the planning and funding process for college. Since financial aid formulas are based on the previous year's income and assets, your college funding planning should start at least one or two years before your child's senior year! Even though we can help late-stage seniors, it's always best to start early! Be sure to read about the Base Year and the Secret Strategies later in this Guide.

Misconception # 7: Financial aid is for the parents Wrong! Your student is the person the government deals with. Your student is the one filling out all the forms (using information that you provide). So when a form says ‘you’ or ‘your’ it is referring to the student, not the parent. It may be the first time that you realize your child is now an adult and a party in a serious undertaking that you only have an indirect hand in.

Misconception # 8: There is only one financial aid ‘system’ Actually there are two methods of calculating financial aid: the Federal Methodology, and the Institutional Methodology. Many private schools feel that the Federal Methodology has become more of a rationing device than an accurate measure of ability to pay, so have decided to use the Institutional Methodology. While the Federal Methodology is standardized and predictable, the colleges using the Institutional Methodology ‘tweak’ the formulas according to their own individual philosophy. This makes it more difficult to predict what their aid package will be. The biggest single difference for most families is that the Institutional Methodology includes home equity as an asset of the parents, while the Federal Methodology does not. You should understand which one is used by the colleges your child is applying to.

Misconception # 9: I only have to go through this process the first year Actually, you go through the whole process of applying for financial aid each year your child is in college for more than an academic half-year. By the way, are you aware that on average it now takes nearly five and a half years to complete college? Don’t let this be the case for your child! Call me for advice on getting the best guidance counseling. While nobody wants to have to fill out these forms each year, without them there would be no financial aid the following school year! There will be a friendly reminder in the form of an annual renewal FAFSA (Free Application for Federal Student Aid). When it comes, complete the paperwork to keep the funds rolling in.

Misconception # 10: Scholarships will pay for college Many parents encourage their children to spend time and energy looking for private scholarships through the internet or local clubs and corporations. OK, but meanwhile, focus your time trying to qualify for increased “need based” financial aid. Many scholarships are very small, just a few hundred dollars, so do not plan on scholarships paying for your child's education. Overall, private scholarships make up less than 5% of the money available to help

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pay for your child’s college education. The other 95% comes from the Federal Government, the State of California, and the colleges and universities your child is applying to. You are much better off spending your time and energy going after the 95%, than the 5%. Also, if your child gets an outside scholarship (one given by an organization other than the college), the college may reduce the amount of financial aid it offers you, so you've worked hard to get a scholarship for nothing! This will happen even after they've given you an award letter. And don't think you can "hide" the outside scholarship money. You are required to report it, and, in many cases, the check is made out to the school, not to the student. You could risk forfeiting the entire aid award! If you would still like to try for some scholarship money, the Internet is a good resource. However, don’t be scammed into paying for scholarship searches. To get more information about scholarship scams call 1-877-382-4357 or go online to www.ftc.gov/scholarshipscams

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10 KEY THINGS YOU MUST KNOW ABOUT FINANCIAL AID Key # 1. Is your student eligible for financial aid? To paraphrase the U.S. Department of Education’s website: to receive aid from their programs, you must: (remember when they say ‘you’, the government is addressing your child)  qualify for financial need (except for certain loans);  have a high school diploma or a General Education Development (GED) certificate, pass a test approved by the U.S. Department of Education, meet other standards your state establishes that the Department approves, or complete a high school education in a home school setting that is treated as such under state law;  be working toward a degree or certificate in an eligible program;  be a U.S. citizen or an eligible non-citizen;  have a valid Social Security Number;  register with the Selective Service (if student is male);  maintain satisfactory academic progress once in school;  certify that you are not in default on a federal student loan or owe money on a federal grant;  certify that you will use federal student aid only for educational purposes. If you have a question about your citizenship status, contact the financial aid office at the college or career school you plan to attend. International students are not eligible for Federal student aid, but may be eligible for some state or institutional aid. International students should look at EduPASS. The Higher Education Act (HEA) suspends aid eligibility for students who have been convicted under federal or state law of the sale or possession of drugs, if the offense occurred during a period of enrollment for which the student was receiving federal student aid (grants, loans, and/or work-study). So this does not apply to students just entering college having received no previous aid. In future years, if you have a conviction(s) for these offenses, call the Federal Student Aid Information Center at 1-800-4FED-AID (1-800-433-3243) or go to the FAFSA on the Web site, click on "Before beginning a FAFSA" in the left column, then click on "Drug Worksheet" to find out how this law applies to you. If you are convicted of a drug-related offense after you submit the FAFSA, you might lose eligibility for federal student aid, and you might be liable for returning any financial aid you received during a period of ineligibility. If you regain eligibility during an award year, notify your financial aid administrator immediately. Even if you don’t expect to receive federal aid, you should complete the FAFSA because you may be eligible for non-federal aid from states and private institutions.

Key # 2. Which is your ‘Base Year’? If your child plans to start college in the fall of 2010, then tax year 2009 is your base financial year (see table below for other years). Your income, assets and taxes in the base financial year will determine your child's eligibility for financial aid and the types of aid that he or she will be able to receive. It's absolutely essential that you understand the importance of the base year and its impact on your family's eligibility for college funding, since there are many perfectly legal and ethical actions that you can take either before © BAY AREA PLANNERS, January 2010 Page 8 of 20 BAY AREA PLANNERS 19925 Stevens Creek Boulevard, Suite 100, Cupertino, CA 95014-2358 Tel: (408) 725-7135; Fax: (408) 264-0246; collegeplannersonline.com


the base year commences or during the base financial year to improve your chances of receiving increased financial aid next year. To use the table, first go to the block for the current month, i.e. Jan – Aug or Sept – Dec. Then go to the row for the current year, e.g. 2010, and find the column for your child’s current high school year, e.g. Senior. The table shows the base year and college Freshman year.

Jan Aug Year 2009 2010 2011 2012

High School Senior Base College 2008 2009/2010 2009 2010/2011 2010 2011/2012 2011 2012/2013

High School Junior Base College 2009 2010/2011 2010 2011/2012 2011 2012/2013 2012 2013/2014

High School Sophomore Base College 2010 2011/2012 2011 2012/2013 2012 2013/2014 2013 2014/2015

Sept - Dec Year 2009 2010 2011 2012

High School Senior Base College 2009 2010/2011 2010 2011/2012 2011 2012/2013 2012 2013/2014

High School Junior Base College 2010 2011/2012 2011 2012/2013 2012 2013/2014 2013 2014/2015

High School Sophomore Base College 2011 2012/2013 2012 2013/2014 2013 2014/2015 2014 2015/2016

Key # 3. What is ‘EFC’ and how is it calculated? EFC stands for "Expected Family Contribution" and is a critical number to you. It is the amount of money the government expects your family to pay towards the cost of one year of college – you want a low EFC. Your family’s EFC is determined by the information your child enters in the “Free Application For Student Aid” form (FAFSA). After submitting the FAFSA to the Department of Education, your student will receive a Student Aid Report (SAR), which will tell you your family’s official EFC (you will become familiar with these abbreviations as you go through the financial aid process). The EFC is calculated according to a formula set by Congress and is based on (1) a contribution from the parent's available income, (2) a contribution from the parent's discretionary assets, (3) a contribution from the student's income, and (4) a contribution from the student's assets. Other factors include: Size of family; Number of children in private school or college; Years until the parent's retirement; and Medical bills and other financial burdens. The formula requires the student's assets to be rapidly depleted before the family can secure financial aid. Many families are shocked at their EFC. The typical reaction is something like "How can we possibly pay that much for college?" Fortunately, there are many ethical and legal strategies that can help you to lower your EFC by adjusting how you receive income and how you hold your assets.

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Key # 4. How Cost of Attendance is calculated If you're attending at least half time, your Cost of Attendance (COA) is the sum of:  the school's average tuition and fees  the cost of room and board (or living expenses for students who do not contract with the school for room and board)  the cost of books, supplies, transportation, loan fees, and miscellaneous expenses (including a reasonable amount for the documented cost of a personal computer)  an allowance for personal expenses  an allowance for dependent care or costs related to a disability, if applicable  reasonable costs for eligible study-abroad programs, if applicable. Notice that the college provides average or estimated numbers and these may not always apply to your child or for your child’s major. You may have to search the website of the college for COA information, and often this will only include the costs for tuition and room & board – assume at least $3,500 for all the other expenses. The COA is something you should discuss in detail with the Financial Aid Office of the college. This will avoid the unpleasant surprise of setting a budget and seeing it exceeded because the cost estimate was too low.

Key # 5. How ‘Financial Need’ is calculated "Financial Need" is the result of subtracting your Expected Family Contribution (EFC) from the college’s Cost of Attendance (COA), i.e. subtracting what the government thinks you can afford to pay from the total cost of one year at the college.

Cost of Attendance – EFC = Financial Need Notice this formula has nothing to do with a student’s ethnic background, athletic ability, or grades. Also notice that since EFC is a fixed number, if you apply to a more expensive college (higher COA) you will have a dollar for dollar higher Financial Need. This goes back to Misconception # 3, which stresses that pricey private schools are not necessarily more expensive in terms of your out-of-pocket costs.

Key # 6. How your ‘Financial Aid Eligibility’ is calculated The ‘Financial Aid Eligibility’ is the financial aid you will actually receive from the college. In Misconception # 5, we raised the issue that not all colleges can afford to meet the student’s entire Financial Need and the result is a gap between your Financial Need and the aid package that the college will award you. The gap is called ‘Unmet Need’. The family has to fill this gap, so the Total Family Contribution is the government calculated EFC plus the Unmet Need. You probably thought the EFC number was bad enough! Pay attention to the historical percentages that were paid by the colleges you are applying to. It can actually end up costing you more to send your child to a “cheaper” school if they don’t have the money to meet your need. That's why your child can often go to a private school for less money that a state school. Strange, but true! So before your child applies, check the historical record of how much each college actually pays in grants and loans, and whether there is a gap. This will help avoid the problem of getting a bad financial aid package from your child’s top school choice. © BAY AREA PLANNERS, January 2010 Page 10 of 20 BAY AREA PLANNERS 19925 Stevens Creek Boulevard, Suite 100, Cupertino, CA 95014-2358 Tel: (408) 725-7135; Fax: (408) 264-0246; collegeplannersonline.com


Key # 7. How to apply for Financial Aid The FAFSA (Free Application For Student Aid) is required by all colleges and must be completed to receive any federal aid. Filing the FAFSA online is the preferred method, but you can also submit a paper copy. Access the application form and worksheets at www.fafsa.ed.gov The processor of the FAFSA uses the Federal Methodology (FM) to determine your EFC. Every accredited college in the United States uses FM in determining your eligibility for federal and, in most cases, state-funded student aid. Some private colleges do not believe that the EFC generated by the FAFSA gives an accurate picture of what your family can contribute to college. These schools may require you to fill out the College Scholarship Service (CSS) PROFILE form (as well as their own institutional forms) and perform a separate needs analysis using the Institutional Methodology (IM) to determine your eligibility for aid that the school controls directly. Contact the Financial Aid office at each school you are applying to and make sure you understand which methodology they use. If your selected school requires the PROFILE, you will need to obtain a Registration form and send it to CSS, which administers the forms. You can obtain the registration form from your high school guidance office, or you can call CSS (Tel: 305-829-9793) for information concerning the application, or you can register for it online (where you can also complete the application) at www.collegeboard.com. When you receive your customized PROFILE application make note of the school’s deadlines. Begin working on financial aid forms as soon as you receive them. Read the instructions carefully before completing the forms. Many FAFSAs are submitted with errors which may cause the form to be rejected and sent back to you for correction. Discrepancies between the FAFSA and the PROFILE will also cause their rejection. This loss of time may be critical in determining the amount of aid you will be awarded because financial aid is typically awarded on a first-come, first-served basis. Print out a copy of your online application, and make photocopies of any form that you mail. Be sure all forms are signed and dated (using PIN numbers for the online application). Bay Area Planners has a video presentation to guide you through the application process at www.LearnCollegePlanning.com California students will also need to complete and mail out their GPA Verification Form by March 2 high school will help you with this).

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Key # 8. When to apply The FAFSA can be filed as early as January 1, but not before. Be aware that colleges have their own deadlines for filing this form for their financial aid funds. If you miss the college's deadline, the student may miss out on all financial aid (except the Pell Grant and Stafford loan). One way to ensure accurate and timely completion of the form is to file on the Internet at www.fafsa.ed.gov. The CSS PROFILE Registration Forms are available in mid-September. The filing deadline for the Profile varies. Some private schools require the Profile to be submitted by mid- to late-November of the Š BAY AREA PLANNERS, January 2010 Page 11 of 20 BAY AREA PLANNERS 19925 Stevens Creek Boulevard, Suite 100, Cupertino, CA 95014-2358 Tel: (408) 725-7135; Fax: (408) 264-0246; collegeplannersonline.com


student's senior year for the following school year. As with the FAFSA, certain schools have their own deadline. Inquire directly with the school to determine their deadline. Many colleges' financial aid deadlines are before Feb.15. Few families have their tax forms completed by then. Since much of financial aid is distributed on a first-come, first-served basis the chances to receive aid are enhanced by estimating the financial information on the application forms, and later updating the FAFSA online or reporting the actual figures as corrections on the Student Aid Report (SAR). March 2nd is the deadline for the Cal Grant (GPA Verification Form).

Key # 9. What happens next A few days after submitting your online FAFSA, you will receive your Student Aid Report (SAR). The SAR is your OFFICIAL confirmation that you have applied for federal financial aid so DON’T LOSE this report. It provides your official EFC. Look it over carefully and send back PART II if you need to change or correct anything, e.g. based on updated tax return information. If you have been accepted at a school, you should receive a financial aid notification letter (Award Letter), typically in March or April. If you don’t receive one, contact the financial aid office at that school to make sure your application is complete. CAFEFULLY read these letters. If additional information is requested, send this immediately. If the amount offered is not enough, call (or better yet, write) to the financial aid office to make an appeal. Your letter of appeal should clearly state your personal situation and why you need more money.

Key # 10. Who to talk to The Financial Aid Officer (FAO) or financial aid administrator at the college or career school you plan to attend will determine your eligibility for aid and the make-up of the aid package (“free money” versus loans and work study). The financial aid administrator can consider special or unusual circumstances such as unusual medical expenses, tuition expenses for a private secondary school, or unemployment and can adjust your cost of attendance or some of the information used to calculate your EFC. Your student is beginning a four year relationship with the financial aid office at the college (s)he is attending and should get to know the personnel and the process. For example, ask about the award nd th philosophy in the 2 through 4 years – are they as generous after the college has enticed the student to join, or ask how outside scholarships are treated. Note: Bay Area Planners is available to help you through this complex process – see STEPS TO TAKE section of this Guide for details.

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10 COMMON MISTAKES PARENTS MAKE! Mistake # 1. Not planning before or during the Base Year Since financial aid is based on your previous year’s income and assets, it is imperative to start your planning as soon as possible before January of your child’s senior year. If you want to legally set up your income and assets so you can maximize your eligibility for financial aid, you must start working on this, at least, one year in advance - preferably in the beginning of your child’s junior year of high school. The longer you wait and the closer it gets to your child’s senior year, the tougher it gets to set up your financial picture without creating a “red flag” for the colleges and universities. It is also important for you to set a preliminary budget so you can start saving for your contribution after receiving financial aid. And, you should also know which schools can give you the best packages before you start visiting and applying to them. My advice is if you haven’t started planning; DO IT NOW! (see the section ‘4 Steps’ for help).

Mistake # 2. Not understanding how assets and income are counted in the formulas Many parents get hit with a high EFC on their Student Aid Report due to assets being in the wrong place. Certain assets are counted much more heavily in the financial aid formulas than others. For example, savings accounts, CD’s, stocks and bonds are all included and asked about on the FAFSA form. However, it does NOT ask about the value of annuities or cash-value life insurance anywhere on that same form. Where you keep your money could mean the difference between you getting $10,000 in financial aid or getting nothing! If you don’t know how to legally and ethically position your money properly for purposes of financial aid, you could end up losing thousands in financial aid!

Mistake # 3. Thinking you can shift money to your child There are some situations when gifting money to the child is a correct strategy, but for many parents it is one of the biggest mistakes they could make! Money in your child’s name is weighted much more heavily against financial aid than money in the parent’s name. The formulas take up to 25% of the child’s asset amount and add it to your EFC. If the asset is in the parent's name, the formulas would assess less than 6%. CPA's and other tax preparers often do not understand financial aid formulas, and how they are different than tax strategies. What might appear to a CPA as a great tax benefit may actually increase your out-of-pocket college costs! If you have any questions relative to shifting money around, talk to me first.

Mistake # 4. Not submitting an application for aid The biggest mistake high-income people make is not filling out the FAFSA. Even very well-to-do families qualify for Federal loans, a useful tool in funding college. Unfortunately, many parents assume they won’t be eligible and give up before they even start. This is exactly what the government hopes you will do so they can keep more of these funds. Don’t make this mistake! Every family, irrespective of income level, should file the FAFSA (and the Profile if required) whether or not you think you will qualify for any aid. The reasons are: © BAY AREA PLANNERS, January 2010 Page 13 of 20 BAY AREA PLANNERS 19925 Stevens Creek Boulevard, Suite 100, Cupertino, CA 95014-2358 Tel: (408) 725-7135; Fax: (408) 264-0246; collegeplannersonline.com


i) An appeal cannot be made to the Financial Aid Officer for increased financial aid unless these forms have been filed. ii) Unless the applications have been filed in prior college years, some schools (usually high-priced private colleges), will not consider the student for future financial aid. iii) In order to qualify for both the Stafford and the PLUS loans, the family has to have completed the FAFSA. Many variables, such as family size and parents ages, go into the formulas that determine your EFC, not just your income and assets. For example, will you have more than one child in college at the same time? Your Expected Family Contribution (EFC) is divided between the number of children in college at any one time, increasing each student’s eligibility for aid.

Mistake # 5. Waiting too long before submitting A dangerous mistake for the rest of us is filling out the FAFSA at a late date - like in April or later. The reason is because much financial aid is awarded on a first-come, first-served basis. If you are one of the last in the line, the aid offers you receive will probably not be as attractive as they could have been if you had applied earlier. When the money runs out - even though you may qualify - you're out of luck! You might say, "But how can I submit it any earlier. I don't have my W-2 statements yet?" Simple; fill out the FAFSA using your best estimate of income and tax payable. You can go back later and change the information to agree with your tax return. Get it in as soon after January 1 of your child's senior year as you possibly can. This will require some financial and tax planning on your part, but it’s worth it.

Mistake # 6. Making mistakes on the form CPA’s and tax preparers are not trained in filling out financial aid forms. In many cases, they will unknowingly fill out these forms improperly and these “minor” mistakes will bump your financial aid forms. If this happens, you will have to re-submit these forms all over again, and you will probably receive less financial aid since it is awarded on a first come, first served basis.

Mistake # 7. Thinking you can hide income or assets The FAFSA includes the following warning:

WARNING: You must fill out this form accurately. The information that you supply can be verified by your college, your state, or by the U.S. Department of Education. You may be asked to provide U.S. income tax returns, the worksheets in this booklet and other information. If you can't or don't provide these records to your college, you may not get Federal student aid. If you get Federal student aid based on incorrect information, you will have to pay it back; you may also have to pay fines and fees. If you purposely give false or misleading information on your application, you may be fined $20,000, sent to prison, or both. © BAY AREA PLANNERS, January 2010 Page 14 of 20 BAY AREA PLANNERS 19925 Stevens Creek Boulevard, Suite 100, Cupertino, CA 95014-2358 Tel: (408) 725-7135; Fax: (408) 264-0246; collegeplannersonline.com


Every school verifies the FAFSA’s of at least one-third of their students, and some schools verify 100% of the financial aid applications. Financial aid administrators are obligated to notify the US Department of Education when they encounter cases of fraud.

Mistake # 8. Not appealing the award Most parents do not appeal their financial aid award, even if it is disappointing. You should analyze aid award packages to identify if they are offering less than their historical average. If so, contact the Financial Aid Officer and give good reasons for reconsidering the award. While there are no guarantees that they will change the award package, if you don’t appeal, you are guaranteed it will not get any better. If you do end up with loans, call my office (408-725-7135) and learn how to optimize various loan options and save hundreds of dollars per year on unnecessary interest charges!

Mistake # 9. Forgetting the tax credits There are a number of tax benefits to having higher education expenses, including tax relief on student loan interest, and tax free earnings growth in Section 529 savings plans. The new American Opportunity Tax Credit effectively replaces the Lifetime Learning and Hope Education tax credits in 2009 and 2010. These credits are phased out at higher income levels, and there are complex rules for which expenses qualify for the credits. To make sure your family will benefit, you need to plan ahead and make use of appropriate college planning strategies. Check your CPA or tax preparer really understands the complex rules for taking these benefits, or talk to me first.

Mistake # 10. Not seeking professional help When you are sick, you see a doctor; when a tooth hurts, you see a dentist; when the car breaks down, you see a mechanic. When you are faced with selecting the right college, dealing with a complex and bureaucratic financial aid system, and investing thousands of dollars in higher education costs, does it really make sense to try and do it yourself?

© BAY AREA PLANNERS, January 2010 Page 15 of 20 BAY AREA PLANNERS 19925 Stevens Creek Boulevard, Suite 100, Cupertino, CA 95014-2358 Tel: (408) 725-7135; Fax: (408) 264-0246; collegeplannersonline.com


4 STEPS TO TAKE NOW TO INCREASE YOUR FINANCIAL AID AWARD Step # 1. Find out your EFC now! Key # 3 explained how critical the EFC is to your “out-of-pocket” cost for college. Knowing your EFC is the first step in planning how to come up with the money to send your child to college, without having to accumulate a large amount of debt. You can find calculators on the Internet that will give you your EFC if you enter your financial data. A good place to start is www.FinAid.com or www.fafsa4caster.ed.gov. Use a calculator that does not require you to enter any personal identification data, so you remain anonymous and no salesperson can call you.

Step # 2. Take action to reduce your EFC before the start of the first base year There are two ways to do this: the first being to ‘do-it-yourself’, which starts by studying the financial aid formulas and figuring out which questions on the FAFSA are critical to how much aid you will get. Once you have these identified, you then have to find out what you are legally allowed to do to about them. Books can help, but get one that is up to date on any changes in the process, like the recent changes to the ‘Kiddie Tax’ rules contained in the 2007 Small Business Act, or the introduction of the American Opportunity Credit. The surer way of taking advantage of all your rights under the system is to get the help of a professional college planner. Chances are you will come out ahead by hundreds or thousands of dollars, even after paying their fee. If you have a high income and lots of assets resulting in a complex situation, talking with a knowledgeable expert may be especially helpful. However, be aware that some offers of help are just scams promising ‘student aid’ which turns out to be the financial aid you automatically receive based on your EFC, or unsubsidized PLUS loans that all families qualify for. Make sure to interview the company and ask if they work on a fee-only advisory basis, with a fiduciary duty to work only in your best interests. BAY AREA PLANNERS is a fee-only financial planning service specializing in college planning. I do not sell products, though I can refer you to other professionals if that is appropriate for your situation. I offer professional advice to families facing the huge expense of paying for college. I only have time to help a relatively small number of families each year, so I have placed educational modules on the Internet as a way to give families like yours good information at a low cost, allowing me to use my limited time for personal engagements (see page 18 for details). Important: BAY AREA PLANNERS will not suggest any strategies that are considered unethical, dishonest, or illegal. For example, although I will describe strategies for sheltering assets, I will not provide techniques for hiding assets. This is an important distinction. I strongly discourage any family from providing false information on a financial aid form.

© BAY AREA PLANNERS, January 2010 Page 16 of 20 BAY AREA PLANNERS 19925 Stevens Creek Boulevard, Suite 100, Cupertino, CA 95014-2358 Tel: (408) 725-7135; Fax: (408) 264-0246; collegeplannersonline.com


Step # 3. Consider getting help selecting schools that your student will love and that you can afford Consider working with an independent guidance counselor to identify appropriate majors and schools for your student. I can refer you to trusted counselors to identify schools that meet your budget, taking into account available financial aid (both Need-based and Merit-based), the type of aid given, and the time taken to graduate. The true out-of-pocket cost often bears no relationship with the sticker cost of the school.

Step # 4. Look carefully at your cash flow to see how much you will have available to pay towards your contribution for college Once the scholarships and financial aid are settled, there remains the issue of funding the family contribution. Loans are certainly available, but remember they will build up over all four years (more if you will have multiple children in college at the same time). Paying for a college education is often the second largest investment after the house, and usually comes at a time when parents are trying to save for their own retirement. The choices and trade-offs can be very complex – which type of savings plan is best? What is a suitable type of investment? Should I pull money out of my retirement accounts or out of our home equity? Will I qualify for the educational tax-breaks? You want a tax-efficient solution that provides a quality education experience for your child, yet is in your best long-term financial interest. You want to pay as much a possible with before-tax dollars and use the latest financial planning techniques on your family balance sheet to put idle money to work, freeing up cash flow that can be used for college or other important family goals. There are sophisticated financial strategies that can help you do this, but now is not the time to be dealing with commissioned salespeople! Look for fee-only advisors who have a fiduciary duty to place your interests before their own.

Š BAY AREA PLANNERS, January 2010 Page 17 of 20 BAY AREA PLANNERS 19925 Stevens Creek Boulevard, Suite 100, Cupertino, CA 95014-2358 Tel: (408) 725-7135; Fax: (408) 264-0246; collegeplannersonline.com


SERVICES Educational eLearning Modules Each step in the college planning process is individually complex, with opportunities for improving your situation, or for making mistakes that will cost you money. A series of one-hour presentation on college planning topics is available to help you navigate each the various stages. The small fee will pay real dividends, saving you from buying books you won’t read, or surfing the net for information that is out of date and incoherent. You will have the information you need to move ahead at each step of this journey. For details, go to www.LearnCollegePlanning.com

College Solutions Plan Your custom financial plan for college funding will identify methods to lower your EFC and/or improve your cash flow to pay for college.  Answers to all your questions on the college admissions and financial aid processes  Calculation of your EFC, using both the Federal and Institutional methodologies  Cost of attendance and anticipated financial aid packages for up to six schools of your choice  A college funding plan based on your unique financial circumstances that allows you to set a budget o Asset and income strategies that reduce your EFC and increase eligibility for financial aid o Admissions strategies to position your student to receive institutional help o Gifting and other strategies to maximize use of before-tax income o Strategies to maximize the tax benefits the government allows for higher education o Review of your family balance sheet for opportunities to increase cash flow and pay for college without affecting your lifestyle  Help understanding the aid award, and appealing the financial aid package if necessary  Advice on student loan applications College Savings Plan Recommendations for an appropriate level of contributions and suitable investment vehicles to meet your goals. This service especially benefits the parents of younger children, but even high school seniors have four years over which to invest.  Determine investment goals, risk tolerance, time horizon  Recommend contribution level and strategy to meet plan objectives  Recommend type of savings account considering its tax-advantages and effect on financial aid  Recommend suitable investment vehicles and asset allocation options  Advice on structuring ownership and help opening account  Quarterly review of savings and investment results and annual formal review meeting (optional)

Our 100% No-Risk Guarantee My goal is for you to be thrilled with my service and the value I have provided. You must be 100% satisfied with the return on your investment in my fees, or I will refund all your money. Referrals are important in my business. I know parents talk with each other, and I want you as a champion of my services. This is your best guarantee of satisfaction. © BAY AREA PLANNERS, January 2010 Page 18 of 20 BAY AREA PLANNERS 19925 Stevens Creek Boulevard, Suite 100, Cupertino, CA 95014-2358 Tel: (408) 725-7135; Fax: (408) 264-0246; collegeplannersonline.com


THANK YOU! Thank you for taking the time to read this Consumer Awareness Guide and I hope you found it useful and informative. Your comments and suggestions are welcomed as I an always seeking continuous improvement in my services. On my website www.collegeplannersonline.com you can view my public presentation schedule, sign up for my FREE newsletter on college funding, read informative articles, and request a consultation. I offer a FREE, no obligation, 30 minute consultation that allows you to ask your questions on financial aid and gives me a chance to see if I can help you. Call me at 408-725-7135 for an appointment time. Or, if you would like to do more research into college planning before deciding if you need professional advice, visit www.LearnCollegePlanning.com for an in-depth education on the key topics. I look forward to meeting with you, Cheers!

Š BAY AREA PLANNERS, January 2010 Page 19 of 20 BAY AREA PLANNERS 19925 Stevens Creek Boulevard, Suite 100, Cupertino, CA 95014-2358 Tel: (408) 725-7135; Fax: (408) 264-0246; collegeplannersonline.com


Definition of Financial Aid Terms The COST OF ATTENDANCE (COA) at a school is determined for each college by totaling the costs for tuition and fees, room and board, books and supplies, personal expenses and travel. The EFC METHODOLOGY indicates whether the school in question uses the Federal (FM) or Institutional (IM) Methodology to determine your financial need. The EXPECTED FAMILY CONTRIBUTION (EFC) is set according to the EFC Methodology formula The FINANCIAL NEED is calculated by subtracting the EFC from the COA. The AVERAGE NEED MET is the amount of your total need that the school is most likely to meet. Data is provided by the schools. Information is based on either the number of incoming freshman the previous year or the total number of students that applied for aid the previous year and the percentage of overall need that the average package met. FINANCIAL AID ELIGIBILITY is the Financial Need multiplied by the Average Need Met percentage at the school. UNMET NEED is the amount of financial need that the school will not meet. For example if the school's COA is $20,000, your EFC $10,000 then your Financial Need is $10,000. But if the average need met is only $5,000 (50%), then an additional $5,000 will be needed to cover the COA. You are responsible for this amount. TOTAL FAMILY CONTRIBUTION is equal to the EFC plus any Unmet Need. GIFT AID % is the percentage of the need that the school will meet in the form of scholarships, grants etc. This is money that will not have to be paid back to the school. This percentage is provided by the schools and is based on the average financial aid package for full-time students the previous school year. ESTIMATED GIFT AID is determined by multiplying the Financial Aid Eligibility by the Gift Aid %. This is a forecast of the amount that you may receive in the form of Gift Aid (grants and scholarships). SELF HELP % is the amount of need that the school will meet in the form of loans or work-study. Loans of course will need to be paid off after completing school. Your goal should be to minimize this. This percentage is provided by the schools and is based on average financial aid package for full time students the previous school year. ESTIMATED SELF-HELP is determined by multiplying the Financial Aid Eligibility by the Self-Help %. This is a forecast of the amount that you may receive in the form of Self-Help (loans and work-study).

Š BAY AREA PLANNERS, January 2010 Page 20 of 20 BAY AREA PLANNERS 19925 Stevens Creek Boulevard, Suite 100, Cupertino, CA 95014-2358 Tel: (408) 725-7135; Fax: (408) 264-0246; collegeplannersonline.com


Consumer Guide to College Financial Aid