Have you started planning for college yet? It might seem early to have a college funding plan in place if your daughter or son is only 14 or 15. College is 3 years away, but the time to start detailed planning is actually now.
The FAFSA (Free Application for Federal Student Aid) is the core application for all government and some institutional financial aid. It will ask for information related to the base year of income from two years prior to when a student enrolls in college (this is a NEW FAFSA rule). If your student is a sophomore now (in Fall 2015) the base year for the FAFSA (s)he’ll need to file on January 1, 2018 will be the 2016 income year.
How can you plan and prepare now to maximize your sophomore’s financial aid eligibility?
Here are 8 tips:
- Know your EFC (Expected Family Contribution). A good starting point for this is the FAFSA4caster. You can also run your numbers through a college net price calculator. If your EFC is lower than the cost of any schools you may consider, plan for a financial aid “need based” strategy. Strategies you implement to reduce income in 2016 (in some cases pulling income into 2015) will improve financial aid eligibility for your sophomore.
- Next, educate yourself on the range of colleges and college costs and determine the maximum you will contribute towards college and where it will come from (lifestyle, parent income student income, which assets, student loans, private loans, etc.).
- If your plan includes selling investments (including UTMAs and UGMAs) with capital gains to help pay for college expenses, do so before the end of 2015. Any capital gains that are earned in the “base year” (from January of sophomore year to December of junior year) will be counted by the FAFSA formula as income when it comes to determining the student’s need. To avoid this, investments must be sold in before the end of December of the student’s high school sophomore year.
- If you or your spouse is self-employed, make every attempt to close business and earn income this year versus postponing it to 2016. Also consider pushing expenses into the 2016 calendar year.
- If your company typically offers yearend bonuses, ask your employer if you can be paid in December of 2015, instead of January 2016.
- Pay off debt now to increase your family cash flow before the college expenses start.
- If part of your college funding plan is to cut back on lifestyle spending, start now. Even saving $500 a month could add $18K to the college fund in just 3 years.
- Get help from a college funding advisor. Westface College Planning helps navigate the paying for college process from start to finish including creating a clear plan. To learn more, call us at 650-587-1559 or sign up for one of our “How to Survive Paying for College” Workshops or Webinars.
Beatrice Schultz, CFP®, BSc, MSM is the co-founder of Westface College Planning, Westface Financial and Insurance Services and Westface Financial Advisory. She is also the host of College Smart Radio – Tackling the Runaway Costs of College.
College Planning Services offered through Westface College Planning. Insurance Services offered through Westface Financial and Insurance Services – Lic #OF35251. Financial Planning and Investment Advisory Services are available through separate agreement with Westface Financial Advisory