Don’t Let Lack of FINANCIAL AID Stop Your Child From Attending a Good College

What parent doesn’t want their child to attend a good college, to further their education and let them enjoy all the social benefits that go along with studying outside on a college green with fellow students on a crisp autumn afternoon? Or cheering for their school team on a brisk Saturday afternoon? Unfortunately, as we saw with the recent college admission scandals, some parents want it too much. But that is not the norm. Most parents play by the rules when it comes to college admissions, although it sometimes seems like the game is rigged in favor of the school. How else to explain why, according to the U.S. Department of Education, of 1,364 four-year colleges and universities looked at, 17 admitted fewer than 10% of applicants in 2017, the most recent year for which comprehensive data are available. That group includes such prestigious names as Stanford (4.7%), Harvard (5.2%), Yale (6.9%) and Northwestern (9.2%). Another 29 schools admitted between 10% and 20% of applicants, including Georgetown (15.7%), the University of Southern California (16%), UCLA (16.1%) and the University of California, Berkeley (17.1%).

Still, let’s say your son or daughter is gifted enough to beat the odds and is accepted, what then? Most parents will be slammed with sticker shock when they see that some high-value institutions of learning will be asking for tuitions north of $50,000 per year. So it’s little wonder that I am frequently asked by my clients, “What can I do to increase my daughter or son’s chance for receiving college financial aid?” With all colleges, prior to admission the Free Application for Federal Student Aid, otherwise known as the FAFSA, needs to be completed and submitted to your school of choice, most often electronically. This is where the school decides how much financial aid to offer, based on your total income and assets. And this is where I want to discuss the ways to help reduce the impact of assets on your eligibility for financial aid. There are four main ways to shelter assets from the FAFSA. Understanding all of them will help you minimize the effects of those assets on your FAFSA application, with respect to needs based assistance. Each way is independent of each other and any one or combination of these four ways will help you towards achieving your financial goals. Please note that we are only referring to Federal and State Aid, not Private College Endowments, which work quite differently. Also, this type of planning is not meant to cheat the government but to give parents a choice of how to use their hard-earned assets. We find that many parents are forced to sacrifice their own retirement at the expense of their children’s education.

We can help you choose the right investment alternatives to best reduce the impact of assets on the FAFSA.

The first way is to understand the difference between Reportable Assets and Non-Reportable Assets. Just about everything you invest in is reportable. However, there are a number of non-reportable assets that will help shelter your money from the FAFSA. Knowing those are the most important of all. The second way is the strategic positioning of those assets. A student’s assets are more heavily weighted than the parent’s assets. So, you want to pay careful attention to how much you invest in Uniform Gifts to Minors or Uniform Transfer to Minors Act accounts as well as 529 plans as there may be better alternatives and solutions. For those of you who already invested heavily into those plans, I would suggest you have those accounts reviewed as quickly as possible. The third way is the Simplified Means Test, where all assets on the FAFSA are disregarded if parental Adjusted Gross Income is less than $50,000 and the family satisfies one of three other conditions.

Finally, the fourth way in reducing the impact of assets on the FAFSA is to spend assets strategically. It is best to spend down any remaining assets that are in the student’s name before using any assets in the parent’s name. This will help with student eligibility in the remaining years of college. At Higbie Advisory, LLC we can help you choose the right investment alternatives to best reduce the impact of assets on the FAFSA. Of course, this is only a short overview of how to shelter assets on the FAFSA. For a more detailed six-page report you can email your request to rstabile@higbieadvisory.com. Thank you and good luck with your child’s college choices! It is certainly one of the most important decisions in your life and we would certainly like to be part of that decision-making process.

Higbie Advisory, LLC is a Registered Investment Advisor in the State of NY.

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