From time immemorial, a good number of students have been painstakingly applying for virtually all the college grants and scholarship opportunities they come across. It is considering the realization of their parent’s current economic status. In line with this, therefore, their college planning quest increases with the passing of each day. Getting to school or even going back to college can be likened to a road map, as students ought to know their starting point and destination. One thing is taking a bold step by choosing the degree and the type of college to attend. Another is to find means to start saving money or applying for financial aids that do not necessarily need to be paid back later. Most families are in quest of high scholars to shoulder the responsibility of the enormous amount of bills associated with sending their children to college. Furthermore, they are also bothered if a child’s earnings will be enough to foot his or her college tuition. This is because they do not necessarily want their children’s college bills to affect their financial aids.
The Truth About College Savings
The truth is that for the past few decades, student income and savings has been the major determining factors of their parents’ financial aid. Because of the pivotal roles, they have played in determining the financial strength and satisfaction of the appropriate and required conditions of their parents. It is thus, paramount to have indebted knowledge of the below (before being carried away by the worries of how students savings affects financial aid). In most cases, parents’ income influences the expected family contribution more when compared with parents’ savings. Furthermore, it also influences it more than students’ savings and earnings. In spite of the fact that student income and savings are determined at a higher rate, a larger percentage of today’s students’ earnings are not adequate to positively and satisfactorily increase the expected family contribution. The only instance it would have inflated it is if teens had a well and funded custodial account in their name.
In line with the above, many parents always feel surprised and upset when they realize their expected contribution compared to how teen’s money influence the EFC. Funny enough, the reverse is now the case realistically.
Surprisingly, a larger proportion of students’ income is being protected. It was, however, revealed by a recent calculation by financial planning forms, which showed that 50 % of teen’s income is being contributed towards the expected family contribution. It sounds larger that supposed or usual. Right? But the truth is that the federal calculation protects a large proportion from being determined and also taken into consideration. For instance, for 2017 to 2018, it is just $6,420. However, students’ income is being taken into consideration and counted, especially at a higher level. Take, for instance, if the student’s income is $2,000 higher than the allowance, then $1,000 is being calculated and directed towards the EFC. But this is not always feasible because students must have used about $7,000 to pay for college bills. It is pertinent to keep in mind that majority of high school students do not earn higher than the allowance starting point. Regardless of the procedure adopted by EFC is that up to 20 or 30 % of students earnings should be calculated. Moreover, the reverse is the case today as about 5.64% of parents’ assets are being calculated.
A Thought Exercise
Now, let’s assume on $10,000 savings. Colleges may demand $2,000 if the savings is for the student. On the other hand, it may demand $564 if the savings is for the parents. Unfortunately, the difference may have negative effects on some family’s financial aid. While for others, it may not. The truth is that in contrast to income, savings are usually determined (mathematically) in a single point record. It is usually done the day one fills his or her financial aid form.
Occasionally, it is good to venture into students savings. For instance, if a student demands a laptop, buying the laptop before filing reduces the points of record of the progress of the student’s savings. Not minding if the student gets paid back later. Furthermore, it is also good to venture into a student’s savings before filing, if he or she needs to buy a car for college.
It is pertinent not to spend in such a way that would drain your student’s account. This is because your student may need cash to buy books and pay necessary bills. This constant availability of the money to your student is without a doubt, paramount. Moreover, hiding a considerable or huge amount of students’ savings could raise a red flag. For example, a student can raise the alarm if he or she is having a balance of $30,000 savings in a form and discovers that he or she is having zero as an account balance on the updated form. Parents should be cautious of the dangers of custodial accounts. From time immemorial, regular transfer to minors account has been known as the child’s assets. It is usually assessed at the student savings rate. Interestingly, chunk balance can spring out of it and after that have a positive influence on EFC. Additionally, interest and dividends amongst others are usually considered as student income.
In line with this, therefore, it is highly suggested that one seek the services of a competent financial planner who is shrewd and has in debt and practical knowledge of making valid judgments to assist in assessing minors accounts for the effectiveness of financial aid forms.
A Deeper Dive in Needs-Based Aid
If a low-income family has an extremely committed and diligent student, the student’s earnings will thus go as far as increasing the family’s EFC to a very great extent. Experts have, however, said without regard or exceptions that students should stay away from saving to improve financial aid. Funny enough, lots of families out there are not receiving federal need aids apart from subsidized loans because their earnings are sufficient.
Some private colleges tend to give need-based institutional aid. The good news is that families are having an income of $125,000 or even more than may be entitled to benefit at the right college. Although there are still some bills, they have to pay. There is hope as savings will be used at this point. In most cases, it is advisable not to count on any financial aid, especially federal aid. The alternative here is to think and consider paying for college by consistently making a formal application to a particular college. If along the line, you still apply and receive federal aid, then take it as an opportunity to start saving. So the motivating factors to save are without doubt extremely boundless. From time immemorial, families are being advised to mathematically work out their EFC as early as they can, especially when they still have students in high schools and distribute assets in a manner that will no longer put them at an unfair disadvantage.
The good news is that virtually all the strategies tend to work for those families that are qualified for Pell Grants. The implication is that students will not want to dodge working and having the intention of saving for college.