That is the question. Sorry. Couldn’t resist. Every now and then families with six figure incomes tell me that they will not be filing financial aid forms because they feel they will not qualify for any financial aid. I also know that hundreds of thousands of students from lower income families don’t file either.

 
Over the years I’ve learned that parents should file the financial aid forms REGARDLESS of their circumstances. If anything is true, it’s that things can change. Other than the one I mentioned, parents offer these reasons why they don’t file for aid:

1. It will hurt the student’s chances of being accepted
2. Don’t want to share financial their information
3. The forms are complicated
4. Not wanting to take aid from another student

 
To the point that filing financial aid forms will hurt the student’s chances of admission there is some validity. Some colleges are need-aware and can offer admission to only so many students needing financial aid.

 
What this can mean is that two students who are academically similar, but one needs aid and the other doesn’t, is that the college will take the student that costs the college less. When a college sees the affluent student’s list of schools applied to, the college can find some money to attract the student.

 
Not wanting to share financial data is a legitimate concern but the information will be as secure as it is with the IRS. Only a few people will ever see it. It’s true that the financial aid forms are complicated, confusing and time consuming. That’s why we complete those forms for our clients. But if you are doing it yourself, it shouldn’t take you more than ten hours or so to complete all of them (assuming that your student is applying to colleges that have multiple forms). If only applying to a state school or two then it will only take a few hours to complete.

 
Some affluent families feel it is morally wrong to ask for financial aid when there are so many students that need the money. I won’t argue the ethics. However, these families won’t qualify for most federal grants anyway so they won’t be taking any money from another student. Some colleges also require financial aid forms for academic scholarships. The money won’t go to anyone if that parent doesn’t file.

 
Finally, we have seen too many instances where something happens to a family’s ability to pay and they want to or need to reconsider their position on filing for financial aid. It’s better to have the paperwork all in so funds can be distributed quickly, rather than it taking months. The last chance to get retroactive financial aid has to before end of classes for the academic year. Consider filing the forms like car or health insurance. You hope you won’t need it but it’s there if you do.

Appealing a financial aid award is a common practice but has its challenges. Many parents need more aid than ever, and college endowments have yet to gain back their losses. Some colleges will respond to your request to review your student’s award letter. Reasons why they should do so: your finances have changed; you had unreimbursed employee business expenses, unusually high medical expenses, or your student was offered a much better offer at another college that is very similar to the one he or she really wants to go to.

 
However, if you ask for more money without documentation of your problems or other award offers, it is doubtful that the school will see it’s way clear to offering your student more money. In fact, when you ask for money and don’t get it, 90% of parents end up sending their student to that college anyway. And financial aid directors know this.

 
Even if the odds appear to be against you, if you feel that you honestly deserve more help, then ask. The worst thing that can happen is they say no.

The college admissions process is far different today than it was even five years ago, and it changes a little each year. To get a head of the game you need to know what the potential outcomes are when a student applies to college, and what they mean. Definitions by Jake Talmage, the Director of College Counseling at the St Paul’s School near Baltimore, MD.
Early Decision Accept- you have agreed to enroll in that school. You have been admitted and need to enroll. Withdraw other applications.
Accept- you have been accepted and have until May 1 to decide where to go.
Defer- typically a result in an early process. The college has deferred you so they can see more information (possibly about your application, possibly about the application pool) before they make a decision. Colleges will typically try to get you a final decision by April 1.
Deny- the college has decided not to offer you a space. Don’t think this is personal. There can be all sorts of reasons beyond your control that affect this. They have denied your application, not you as a person.
Waitlist- the college is holding off to make a decision. Usually, this is offered before April 1 and students will not hear until after May 1 (although that can differ in individual cases).
Conditional admission- while all offers are usually conditional on finishing your high school similar to previous performance, sometimes colleges will add additional conditions. For in- stance, I have had offers to students that required a summer course, etc.
Guaranteed Transfer- a rare offering, but sometimes a college will say “we will admit you as a sophomore” as long as you do the following freshman year
Deferring enrollment- some colleges will let students defer their admission for a year after being admitted so they can pursue a special opportunity. This may be work, travel, etc. It is usually NOT to attend another college.

Don’t miss financial aid deadlines because you haven’t filed your taxes yet! Most schools have January and February deadlines for first-year students. Because they don’t expect parents to have their taxes done that soon, income estimates are perfectly fine! Use last year’s taxes and end-of-year pay stubs to make an educated guesstimate. Assets should reflect last known values. Usually this will be your most recent statement. Unlike income figures, asset values should NOT be changed on the FAFSA without a really,
really, good reason.

Business owners may use estimates based on 2010.

In the meantime, make every effort to get your taxes done by March 1st. I know this can be a difficult task, but some colleges and universities will ask you to send them a copy of your tax return and your student won’t get a dime until they receive them. If you will owe money to the IRS, send in your return anyway. The rule is that you send a signed and completed return, even if it hasn’t been filed quite yet.

You and your student have been so busy with the application process for so long that it feels as though you should still be working at it until your student has that acceptance letter in hand. It’s difficult to stop. Here are a couple of things not to do:

• There is no reason to call admissions to check on the application. The admissions process takes time. Calling constantly to check on the status of the application will not help. Calls from parents especially will not help. Unless there is a major change in some information in the application, do not call.

• Don’t ask your student if she has heard anything, or whether her friends have heard anything. It’s time to put this on the shelf and let her enjoy high school for a while knowing that the job was well done. Let her live in the NOW.

If you wish to discuss graduation rates with admissions, I’ve found it productive to ask what steps your student can take to increase the chances of graduating in four years rather than asking why the four year rate is low (or low compared to others).

Here are some top reasons why a student might not graduate in four years:

• Transferring to another college

• A change of direction or major

• College not offering enough classes each semester

• Completing a double major

• Failing too many classes

• Artificially raising GPA to keep scholarships by withdrawing from too many classes

• Low GPA

Here’s a leading question: Would you rather put your money in something that had a 70% chance of paying off or an investment that had only a 25% chance? Without knowing the four, five and six year graduation rates of the colleges your student is considering, you could be backing a losing horse! You might be awestruck to learn that many parents are sending their children to colleges with a four-year graduation rate of less than 25%.  I’m not going to show you the worst of the worst so let’s assume that your student has an SAT score between 1090 and 1300 Math and Verbal, or an ACT composite score between 24 and 31.  Here are some public and private institutions where they would have a good chance of being accepted and their four and six year graduation rates:When comparing apples to apples you can see that choosing the right college means graduating sooner for less money.  If you wish to discuss graduation rates with admissions, I’ve found it productive to ask what steps your student can take to increase the chances of graduating in four years rather than asking why the four- year rate is low (or low compared to others).  Here are some top reasons why a student might not graduate in four years:

•    Transferring to another college

•    A change of direction or major

•    College not offering enough classes each semester

•    Completing a double major

•    Failing too many classes

•    Artificially raising GPA to keep scholarships by withdrawing from too many classes

•    Low GPA

Standardized tests are a fact of life. They are not going away anytime soon. Even the so-called “SAT Optional” schools that don’t use test scores for admission still use the tests to award merit money.

The SAT is a reasoning and critical thinking skills test. The ACT is an achievement test. Students can do better on one test than the other. Because colleges accept either test, it’s a good idea to know which test your student will shine. So the question that begs to be asked: “Should I invest in a test prep course for my student”?

To help answer, a recent report by the National Association for College Admission Counseling criticizes common test-prep industry marketing practices, including promises of big score gains with no hard data to back up such claims. The report also finds fault with the frequent use of mock SAT tests. These are often much more difficult than the real tests, and so these lower scores can be used to inflate your student’s improvement when compared to the actual scores.

Jonah Varon, a straight-A student at Lowell High School in San Francisco, took a mock SAT from a test-prep company and scored 2060 out of a possible 2400. A few weeks later, he took the real test. Even though he didn’t take that company’s tutoring course, he scored 340 points higher and got a perfect 2400. If he had taken the course, his parents would have spent $1,500 with no improvement. In fact, most students who took the SAT before completing such a training course showed improvements of only 30 points.

To get higher scores on standardized tests, it’s better to learn the necessary skills and not rely on tricks to “test well”. There are tools that increase knowledge and build skills and are very affordable. One of them is the SAT Question of the DayTM. Each day a new question is emailed to your student and you can be copied, too. It’s very simple to register.

• Go to The Official SAT Question of the DayTM website and log on in to the MY ORGANIZER section (lower left of your screen) by clicking GO.

• Enter their user name and password and click SIGN IN.

• To the right of the MY ORGANIZER banner, you will see Manage My Email Subscriptions.Click on it.

• On the left at the top of the many the student emails you can get is The Official SAT Question of the Day. Check the box and click Submit at the bottom of the page.

IF YOUR STUDENT DOESN’T HAVE AN EXISTING COLLEGE BOARD ACCOUNT click: Create a College Board Account and enter the required info. That’s it! Easy peasy, lemon squeezy. The ACT has an ACT Question of the Day, but it doesn’t email the questions to your student, they have to remember to log on.

When it comes to paying for college, everybody needs all the help they can get.  So this week let’s talk about some tips to help with financial aid and tax aid as well.

Tax Aid Tip

The American Opportunity Tax Credit has been extended for tax years 2011—2012, and is available for taxpayers with a modified adjusted gross income of up to $180,000 (for married filing jointly), and $90,000 for single tax filers. The amount of the credit is based on 100% of the first $2,000 of qualified college tuition and fees paid, plus 25% of the next $2,000 in tuition and fees, for a credit of up to $2,500 per child. The credit phases out between $160,000—$180,000 of MAGI for married taxpayers filling jointly, and between $80,000—$90,000 of MAGI for single taxpayers. This credit can be used to reduce the taxpayers federal tax dollar‐for‐dollar, and is refundable up to $1,000 for some taxpayers.

Financial Aid Tip

1) If you are unemployed, you may be considered a “dislocated worker” for financial aid purposes, and that may help increase your child’s need‐based financial aid eligibility under the federal financial aid rules.

2) Some colleges require both the FAFSA (Free Application for Federal Student Aid) and the CSS Profile when students apply for financial aid. Both applications can be completed online.

3) Many tax deductions, credits and favorable tax rates have been extended for through 2012. Check with your tax preparer to make sure that you are making the most of all of the tax changes.

Q. We will need financial aid but can pay for the first year from our savings. We worry that if we apply for aid in our son’s first year of college, his chances of acceptance will go down. Our question is, will we be able to go back and apply for aid for his second, third and fourth years…or even the first year?

A. You are asking two questions. To address the first, generally, the answer is no: applying for financial aid does not have an impact of whether or not your student will be admitted. However, at some of the more selective private colleges if there are two equally qualified students and one needs aid and the other does not, chances are that the one needing less aid (or none at all) will be admitted.

As to the second question, parents who wait to apply for aid after the student has been admitted will find that they will be denied institutional financial aid (i.e., the college’s own funds) though they can apply for federal funds. Further, they will be denied in the second year, too. Many of these colleges will insist that the student have earned up to 64 credits or two complete years before they’re allowed to apply for institutional financial aid.

The four key areas that must be considered in the process of determining Your Best Strategy® to pay for college and save for retirement are: College selection, financial aid, tax aid and personal resources.  To make intelligent decisions in these four areas requires specialized knowledge of college admissions, financial aid, taxes, and financial planning. Even if you have people advising you in these areas, it can be difficult to pull that expertise together specifically for college planning and retirement purposes. Let’s take a look at an example to gain perspective. Parental income is the biggest factor in the calculation of a student’s expected family contribution (EFC), the minimum amount the student/family is expected to contribute toward the cost of college. The most common allowances against income in the EFC formula are: federal taxes, state taxes, FICA taxes, and an income protection allowance.

So the amount of taxes you pay helps reduce the amount of income that gets calculated in the EFC formula. Therefore, the more tax the parents pay, the lower the EFC is. But conventional financial planning strives to help parents pay less tax, not more. So you can begin to see how complicated college planning can be by just looking at two variables.Things like retirement plan contributions, whose names assets are saved in and what types of ac‐ counts those assets are in, are also big factors in determining EFC. The reason that a student’s EFC is so important is because it is part of what is referred to as financial need analysis, where the EFC gets subtracted from a college’s total cost of attendance to determine if the student has “need” for financial aid (Cost—EFC = Financial Need).

So it is safe to say that anything that affects your income, taxes and non‐retirement assets may also affect a student’s EFC, and therefore possibly the student’s aid eligibility. However, note that the first variable in the need analysis formula is the cost of college.Therefore, you can see that college selection may directly affect a student’s aid eligibility because, based on cost, a student with an EFC of $20,000 will demonstrate need at a college costing $45,000, but not at another college costing $18,000 per year. Moreover, the American Opportunity Tax Credit is an example of what we refer to as “Tax Aid”, and is available to some taxpayers when they pay qualified college tuition costs. So college selection, financial aid, tax aid and your personal resources are all interconnected. Which is especially important considering that what parents spend on college they don’t have to save for their retirement. It is fair to say that there is a lot more to college planning than applying to a few colleges and completing a financial aid form. Moreover, the college decisions you make today will create ripple effects for years to come. Hopefully this newsletter will help you make them well.