While many prices we pay may not be going up fast, one that hasn't slowed down is the cost of college. The average annual cost of tuition and education expenses at a public university is approaching $20,000, according to the National Center for Education Statistics. That has left college seniors with an average student loan debt of $24,000 in 2009, the latest numbers available, up 6 percent from 2008, according to the nonprofit Project on Student Debt. The question of how to pay for college is becoming more urgent for families.
While many lower-income families can qualify for subsidized loans, middle-class and wealthier families are finding less aid and have to pay out of pocket or through a non-subsidized loan. But with a little financial planning, more families on the edge may be able to qualify for better loans, grants or other student aid.
When determining what aid to give, colleges base their decision on financial need. This is a formula that takes the cost of attendance and subtracts from it what the family is expected to contributed toward costs. A family with what the college determines to be adequate assets is less likely to receive aid.
While many families think they don't have enough assets to spend on college, the way the assets are examined may make it look like they do. Therefore, positioning assets may help increase aid potential.
Positioning of assets should begin before Jan. 1 of the year the student is entering the junior year in high school, since colleges may examine finances that far back. For example, if students have assets in their name, it may make sense to reduce those financial assets since colleges put heavier weight on what the student is worth. Moving trust money into a 529 college savings plan may make sense since it would become a parent- or grandparent-owned asset. Students with large enough assets may want to buy their first car. Also, gifts to college-bound children could be postponed to avoid increasing the child's assets.
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Financial aid is a complex process that has many strategies that a financial planner with knowledge about the process can help. The key is getting a start as early as when the child enters high school. Planning that far ahead may make college a little more affordable.
