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COLLEGE FINANCIAL PLANNING 101
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By Linda F. Jarrett
When your little bundle of joy enters the world, you want to promise him or her the moon, and it starts with college. Harvard. Northwestern University. Stanford.
Time passes. Like 16 years. And “little” John or Jennifer start their
senior year in high school. The
prudent parent will have, as on taking the child home from the hospital, stopped at the bank and opened a savings account. But what does the other 99.9 percent do?
Martha Harbaugh, director of financial aid at Maryville University, says, “More often than not, three out of four students have not even given a thought to how they’re going to pay for college, much less prepare for it.”
Not Too Late
Even if your child is a junior in high school, there’s no need to panic. Many options are available.
Dr. Tony Georges, financial aid director at the University of Missouri-St. Louis, offered a clear schedule of what students preparing for college should follow. The first step for juniors, he says, is to register at fastweb.com, a website that matches prospective college students with scholarships.
“Fastweb takes the profile and enters it into a database,” Georges says. “If there’s a scholarship that matches, they will notify the student.
“At the beginning of the senior year, students should make contact with the schools they’re interested in,” he says. “They need to become aware of deadline dates for the scholarship application process. If they know what they’re going to major in, they should contact the department to see if there are any freshman departmental awards.
“This also gives them the opportunity to get acquainted with an academic department on campus.”
Georges says that after January 1, the student should complete the application for the Free Application for Federal Student Aid (FAFSA). This is the one key application necessary to receive full consideration for federal aid.
“If they’re a Missouri resident and they’re going to an approved university or college instate, they need to have applied by April 1, 2006,” he says.
Following that, Georges suggests that
students sit down with their parents and see what organizations they belong to. “Church affiliations, union affiliations, fraternal
organizations. Find out if they’re offering
any scholarships.
“If they’ve done all that,” he says, “then they have probably done everything they need to do. And everything I’ve mentioned is free.”
The Options
Harbaugh says funding comes from four sources: Federal, state, institutional, and private.
 Martha Harbaugh, director of financial aid, Maryville university |
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Federal includes the Stafford Loan and
Pell Grant.
Stafford Loan is the traditional student loan program. On subsidized loans, the Federal Government pays the interest that accrues on the balance while the student is in school and six months thereafter. With unsubsidized loans, students are responsible for paying back interest with the loan.
Pell Grant, one of the oldest programs, is need-based and does not have to be repaid. In most cases, Pell Grants are only awarded to those undergraduate students who have not earned a bachelor’s or professional degree.
The state offers the Gallagher Grant, a need-based grant, Harbaugh says. “They
also have a scholarship, the Bright Flight Scholarship.”
Institutional funding comes from the school.
“Schools have scholarships,” she says. “An example would be for those students coming in with a 30 ACT score and a 3.5 GPA. Or if you bring in a $4,000 Pell Grant, the school would match it. But it differs from school to school to school.”
Private funding is offered by “Americans being altruistic about other Americans getting an education,” he says.
“Wal-Mart every year has scholarships for which John Q Public competes,” she says. “And they can take this to any school. Fraternal organizations or professional
associations such as the Professional Businesswomen’s Associations of St. Louis also offer scholarships. But they are privately funded.”
Nicole Moore, director of financial aid at Fontbonne University, also encourages
students to begin in their junior year at the
latest. “If they know what schools they’re interested in, they need to contact the
admissions office to get the detailed time line.
Moore says that she sees many more
students seeking financial aid now, and that between 85 to 90 percent of students seek some type of assistance. “All students, if they’re not in default on previous loans, can qualify for an unsubsidized Stafford Loan.”
Where to Start?
A family’s financial status does not matter in all cases, she says. “A student may qualify for more aid to a school like Fontbonne because our fees are higher than a state or community college where the fees are lower.”
For prospective students starting in the class of 2027, some figures for a four-year
private school have been estimated at $325,000 with public universities being half that figure. That’s assuming costs continue rising at the approximate six percent a year, which has been the case for the past 10 years.
With those figures in mind, it would behoove new parents to start planning right away.
Maurice Schutte, financial advisor for Banc of America Investments Services Inc., assists individuals wanting to do long range planning. “I work with people who are typically planning multiple years in advance, either to fund an account with a lump sum or with just a series of payments.
“In most cases, when you’re going to invest, it’s best to have a longer time frame to allow the investment to work for you,” he says. “However, it is possible to put together a plan when the child is in the 7th or 8th grade.”
One of these programs, the 529 plan, allows parents to invest and maintain control over their money while enjoying tax breaks. There are over 100 different state-run plans with varying fees and features, which can make this procedure time-consuming.
The Coverdell Education Saving Account works much like an Individual Retirement Account in that you can put aside up to $2,000 a year for each child, and is tax-free until you withdraw the money for your child’s education.
Another option, the Uniform Gift to Minors or Uniform Trust for Minors Account allows you to place money in your child’s name and act as custodian until the child reaches 18 or 25 (depending on the state). To get the tax break, you must use the money for your child’s expenses.
One Experience
First Bank Regional President Joe Ambrose has experienced the college financial aid maze first hand in that he has a child in college this fall for the first time.
“We went the student loan route,” Ambrose says. “There were traditional savings plans set up when our kids were younger, but now there are tax-deferred savings plans as long as you support a qualified undergraduate or graduate education.”
Besides the Stafford Loan and Pell Grant, parents can take out non-subsidized student loans where interest starts to accrue when the money is advanced. While the student doesn’t begin paying back the loan until after graduation, the interest is added on during the four years the student is in school.
“If parents don’t want to go that route,” Ambrose says, “They can take out a Home Equity Credit Line where the interest is
tax-deductible because it’s secured. Also, some people borrow against their 401K plan and pay themselves back the interest.
“The discipline is to start when the child
is born.”
Ambrose says his son asked him what
his college visits were like. “Visits?” I said. “The only visit I had was when I walked into the registrar’s office with a cashier’s check drawn on my savings account and they
said, ‘See ya’ Tuesday! Don’t forget your books.’”
College Financial Prep
When he and his brother were in high school, Greg Rupp’s parents sat them down and told them that, due to their dad getting a pay cut, there would be no money for college.
“We were devastated,” Rupp says. “My mom found a gentleman to help us fill out forms to get financial help, and when I saw how much that little bit of help impacted my future, I thought if I could devise a system that would take this process off a family’s hands, imagine what an impact that would have.”
Following that thought, Rupp founded Educational Funding and Financial Aid Specialists in 1992.
“We start at the freshman or sophomore level,” he says. “We find out what they like to study, what courses are necessary and what their degree would be, the schools they might want to attend, and what the parents need financially from those schools.”
From that point, the company guides
students through high school, helping them choose courses, tutoring, preparing for the ACT and SAT.
“Then, we identify local and national scholarships that they might be eligible for,” Rupp says. “We get their transcripts in order, letters of recommendation, and figure out their expenses. Then we sit down with the family and help them figure out how they’re going to pay the amount for which they don’t receive help.”
Rupp says families should be finished with all applications and be ready to go by September of the senior year of high school. “This is when most are just starting. The earlier families prepare the better off they will be.” |
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