Financial advisers: Time equals money in college planning process
La Grange, IL
Spending half a day or more pouring over documents may seem tedious, but when it comes to financial aid for your child’s education, financial advisers say it’s time well spent.
“If you spend 15 hours and save $15,000, that’s $1,000 an hour,” certified financial planner Ryan Williamson said.
Williamson, partner and owner of Horizon Wealth Management in La Grange, often hosts sessions in the Brookfield and La Grange area with parents of prospective college students to explain the intricacies surrounding financial aid.
The fact is clear: college costs continue to rise.
The average cost to attend a private college is about $142,544, including tuition, fees and housing for four years. That number is projected to nearly double in 15 years, with the same education costing about $282,227, according to a 2009 report by The College Board, a nonprofit organization that connects students to college opportunities.
The price for public universities is less, with an average cost today of about $60,852 for four years, comparatively. However, those prices are scheduled to increase each year, as well, amounting to about $120,482 by 2024.
“The cost of tuition has gone up 400 percent,” Williamson said. “Student aid has gone up about 82 percent. It’s not keeping up.”
For local parents and students, that comes with a difficult decision: Should a student go to the best school possible or should he or she pick a less prestigious but cheaper college?
“More and more people are saying, ‘We need to have the (financial) talk,’” said Lianne Musser, a college counselor at Lyons Township High School. “It shifts the kind of schools you look at.”
Musser said the paradigm shift from choosing the best school to picking the most financially affordable college has grown more visible in the last 18 years she’s been involved in college counseling, and rightfully so with rising costs and bleak economic times.
“I don’t walk into a Maserati dealership or a Lamborghini dealership,” Musser said. “Because then I’m looking at something I can’t afford. You should do the same with college.”
That means, Musser said, that parents and students should start the process together by figuring out what is financially feasible. The average American family pays for college mostly through parent income and savings — accounting for about 37 percent toward the total cost — according to a recent study by Sallie Mae titled “How America Pays for College 2010.”
Because so much of financial aid depends on earned income, it’s imperative that parents figure out their Expected Family Contribution. The government uses the EFC to determine a family’s federal student aid eligibility and financial aid award based on a formula established by law.
This is done through the Free Application for Federal Student Aid form, which has a federal deadline of June 30, 2012, for the 2012-2013 school year. However, the state deadline is as soon as possible after Jan. 1, because awards quickly become depleted and financial aid is on a first-come, first-served basis.
The next biggest chunk of funding, according to the Sallie Mae report, comes from grants and scholarships, at 23 percent toward the total cost of college.
The FAFSA form, which Williamson said some parents see as daunting, collects information including: taxed and untaxed income, cash, stocks, mutual funds, benefits, family size as well as the number of family members who will attend college during the year.
Some parents don’t fill it out at all, assuming because they make a sizable income, they won’t be eligible for financial aid.
That’s a mistake.
“Parents should spend some time on it because it could equal thousands and thousands of dollars,” Williamson said. “There’s a lot of money out there. Everyone should fill it out.”
In the 2010-11 school year, more than $178 billion in aid was given to undergraduates, with the average aid of $12,455 each given to full-time undergraduates for four years, including more than $6,500 in grants that don’t need to be repaid, according to The College Board.
While the money is out there, it is dwindling.
The fight for financial aid begins with choosing a list of appropriate schools, meaning those that are financially viable as well as desirable to a particular student’s needs.
“I’ve had four or five students who got into wonderful schools and they couldn’t afford any of them,” Musser said. “They had no financial safety school.”
Parents are urged by college advisers to use tools such as the Net Price Calculator to figure out what they can expect to pay. Required by the Higher Education Opportunity Act of 2008, the Net Price Calculator offers customized estimates of college costs based on family size and income. All colleges, by law, had to have them on their websites by Oct. 29 of last year.
There’s also a FAFSA forecaster online that allows parents to figure out how much financial aid they’re eligible for, if at all.
“There’s definitely resources out there,” said James Franko, a college counselor at Riverside Brookfield High School.
The key, Musser said, is taking all these steps early.
She said for years, parents have been of the mind that if you can get into the school, they’ll find money to pay for it.
“We’re backwards,” Musser said. “We have to figure out what we can afford and start looking at scholarships from the beginning.”