Tips For Financing College And Common FAFSA Mistakes | Ron Caruthers | Episode 97

Parents want to give their child the option of going to college, and especially the college of their dreams. But do parents really understand financing college—the options, the lingo, and must-do items? There are many things to consider and many ways to cut costs or secure funding for your child. Sandy Fowler has a detailed discussion with college planning expert Ron Caruthers. They discuss college savings plans and selecting a college. Ron shares why every family should complete the FAFSA and common mistakes to avoid since over 75% of families make a critical mistake that costs them money. They also get into little-discussed ways to minimize costs and getting more aid money from colleges. All this and more on this episode of the Mighty Parenting podcast.

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A Favorite Quote from the Show: 

“It’s not about getting your first child into college. It’s about getting your last one out and off the family payroll.” 

High Points of Our Conversation on Financing College and Common FAFSA Mistakes:

3 years ago CNBC reported that the average parent has enough money saved to pay for 1 semester of college for one child.

529 plans were not really designed for parents to use in financing college. They were really an estate planning tool for grandparents so they could give 5 times the legal limit without having to pay gift taxes. While there are circumstances where this makes sense, there are generally better options for families.

An unconventional way to save money is to work with your child in high school. Make sure they know why they’re going to college, have an area of interest, and know careers that fit the area of interest.

Changing majors often adds 1-2 years onto an education plan. This adds 1-2 years worth of costs.

Have them do an internship in the field they’re interested in.

Help your child pick a good school, one that works for them:

• • They have a fighting chance of getting in
  • It’s affordable—either you have the money or the school has good financial aid
  • The school has a major they want
  • Your child likes it

The #1 reason kids quit college and come home is they didn’t fit in. Help them select a school that fits them well.

Ron’s Five-Step Process When Selecting a School:

• 1. Know your share—expected family contribution, EFC. 
  2. Ask every college these 3 critical questions:
     • What percentage of financial need do they meet?
     • How much of it is free money vs. loans and work study?
     • How long does it take your average student to graduate?
  3. Calculate where you’re at for retirement and how much you have to contribute to your child’s education.
  4. Fill out the FAFSA paperwork. Read all directions very carefully! Over 75% of families make one or more critical mistakes that cost them money.
  5. You can appeal an award.

Congress put together a formula based on about 100 criteria to determine what the average family can afford when financing college. It’s called your EFC, Expected Family Contribution. You get to this number by completing the FAFSA. You want to get your EFC as low as legitimately possible. The government has their own definitions of asset and investment that is not used anywhere else. Make sure you understand their rules for what you need to declare as an asset or investment.

There are 3 different tacts to take when appealing an award:

1. • Not What We Expected – “When did our research we were expecting something more along the lines of this. Could you take a look at it and tell us if we were right or wrong or if there’s something else we might be eligible for?”
   • Other Offers – You can appeal based on what another school offered but do this very carefully. “We don’t want this to be about money but right now it kind of is about money. Perhaps there’s something you guys can look at that we might be eligible for. Could you please take a look at this?”
   • A change in circumstances – The FAFSA is based on a prior year’s tax return. Perhaps your income has changed, you had a lot of medical bills, you are no longer married to the child’s other parent, or something else happened which impacted your financial situation. You can document it and talk to the school.

Parents live through the pain of figuring out where they’ll get each semester’s tuition as the bill comes in. Ron plans it out so you know where all the money is coming from before your child starts college.

Banks will lend you money for financing college and they will not lend you money for retirement. Protect your retirement even as you help your child.

Work Study gets paid directly to your child as they complete work hours and receive a paycheck.

Students do not have go directly from high school to college. Kids can get a job or get a certification and then a job, work for a few years and save the money for college.

“It’s not about getting the first one in, it’s about getting the last one out and off the family payroll.”

FAFSA filing opens on October 1st but it does not need to filled out immediately. It’s more important to fill the FAFSA out properly than quickly. Also, remember to use last year’s taxes and read every instruction and definition very carefully. Avoid the common FAFSA mistakes of reporting assets and investments incorrectly.

Every family should complete a FAFSA. You may be surprised at what you are expected to put toward financing college costs.

Most schools require a FAFSA for merit scholarships as well as need-based scholarships.

Resources Mentioned in Show:

Career Anxiety In College And High School Students | Dennis Trittin | Episode 92 where we discuss strategies for helping your child find a career and the right college.

Our Guest Ron Caruthers:

Ron Caruthers is the nation’s foremost expert on college planning and college funding. He’s loved by hundreds of parents for finding creative and effective ways to fund their children’s college dreams while keeping them on track for retirement. Many know Ron as their Financial Fixer.

Ron was born and raised in Santa Monica, California—right up the street from the Santa Monica Pier. His parents later moved inland where Ron graduated from Sunny Hills High School in Fullerton, CA in 1985 as  valedictorian – ranked 1st of 419 seniors. However, Ron and his family found themselves unable to pay for college – a situation many of our clients understand all too well.

This setback forced him to take a hard look at how unprepared most students are for college, career, and managing their money after college.

Since then, he has worked with over 4600 families to help make their children’s dreams a reality, while providing sound financial guidance along the way!

To learn more or connect with our guest visit https://www.roncaruthers.com

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