College planning is a complex process. Understanding all of the strategies and determining which ones apply to your family’s situation can be quite confusing. The planning required for college and retirement is extensive and must be approached proactively with a long-term perspective using a multitude of financial strategies.
In our Total Wealth Planning program for college planning, one of the five key components of our planning process is financial aid which involves two types: merit aid and needs-based aid. Need-based aid is based on your child’s financial need, and merit aid, which is awarded according to academic, athletic, musical or other merit.
Merit aid is offered through grants and scholarships as a way for colleges to attract certain students to their campuses. The availability of merit aid from year to year tends to fluctuate based on how much of their endowment a college earmarks, enrollment goals, and what specific programs they intend to target.
Needs-based financial aid is money primarily distributed by the federal government and colleges in the form of loans, grants, scholarships and work-study jobs. To make the need determination, there are two different aid applications. Most colleges require the FASFA (Free Application for Federal Student Aid) while some require the PROFILE or a college’s own formula. The result is a figure known as the expected family contribution, or EFC. The EFC is the amount of money that you will be expected to contribute to college costs. The difference between the cost of attendance and the EFC is the child’s financial need.
When a child is accepted at a particular college, he or she will receive a financial aid award letter that will detail the specific amount and type of financial aid that each college is offering. This is usually done through a mix of loans, grants, work-study, and scholarships. It is possible to negotiate a more favorable aid package. College financial aid administrators have the authority to exercise professional judgment to reduce the loan part of an aid award package.
At Total Wealth Planning, college planning is not just about financial aid. It is about college selection, financial aid, tax planning and the personal resources available to pay for college. It is our understanding of tax laws, college admissions, financial planning, financial aid laws, and most importantly the best ways to incorporate it all into one strategy. Our ultimate goal is to reduce the stress and anxiety of funding education for students and parents to have a successful college experience.
For more information about the Total Wealth approach to college planning, contact Rob Lemmons at 513-984-6696.