Parents Can Avoid The Poorhouse Before Students Enter College

Contrary to popular belief, much of that anticipated debt can be legally eliminated, and before it’s too late. While so many families stress out over the prospect of how much they and their student(s) will incur during the college years, there are a number of strategies, all legal, to make any college affordable.
Sadly, most families are not aware of the fact that in the financial aid formulas, students have no asset protection allowance. The following are considered student assets: cash, savings accounts, stocks, bonds, savings bonds, mutual funds, UGMA, UTMA accounts, a farm, a business, mortgages held and the net value of any real estate owned. For college year 2007-2008, 20% of every dollar a student has will be lost in financial aid. However, if the student is about to enter college and is unfortunate enough to have a hefty bank balance or brokerage account, it already cost them 25% or 35% in lost financial aid, depending on the college!
Parent assets are subject to a different formula, and it also depends on which school the student is applying to. For financial aid purposes, there are 2 categories of schools: Category 1 includes a few state colleges plus approximately 220 private schools. In addition to the FAFSA, they also require the CSS Financial Aid Profile. If you thought the FAFSA was difficult, this form is a nightmare, and pity the poor family that’s divorced, separated, owns a business or a farm! These colleges take into account all of the above plus Education IRA’s, and 529 Savings Plans. Category 2 schools (all the rest) only require the FAFSA and exclude the value of the primary residence and a farm, if the family lives on it.
When is comes to financial aid assessments, parents are more fortunate; they’re only assessed at 5.6% over their allowance, which increases with age. The asset protection allowance for a 2 parent family, older parent 48 = $45,000; a single parent age 45 = $19,700.
All that may appear depressing, but here’s the good news: with proper planning students and/or parents can legally become penniless in the blink of an eye, and all their money can be repositioned into financial vehicles that are not included in the financial aid formulas. The result can often get these families, with students about to enter college, more financial aid for the 2nd semester, but if that tactic fails, then surely for the sophomore and ensuing years. What a relief to know that!
Numerous strategies exist which have literally saved families millions of dollars over the years, and they include: the ambiguous non-custodial parent strategy, which has reduced the cost of college in some cases by as much as 90%; the winter clothing allowance for students from the South attending college in the frigid North netted one student an additional $2,600; the “no work” work-study award has been worth as much as $8,000 by graduation, and for virtually any student, even those with no financial need, appealing an unappealing financial aid offer and negotiating for the best possible financial aid package has produced incredible results. It‘s just like buying a new car – you don’t have to pay the sticker price. One other strategy few families are aware of is Professional Judgment. This comes into play when there has been a significant change in family income, assets, marital status or health.