Your child is just a few years away from going to college, and the acid in your stomach is churning. You worry if you will have enough; you’re mad that you didn’t focus on this sooner. Desperation is a dangerous thing. It can cause reckless behavior — a gambler’s mentality of, “Let’s try and hit it big!” Of course, anything that can rocket can plummet; that’s the way it is with investing. When any goal is short-term (5 years or less), the money needs to remain “safe”. You can’t afford to lose it now. So, what can you do?
First, understand that you still have time to position yourself in a more favorable light to receive financial aid. Colleges start looking at your finances from January of your child’s junior year to December of your child’s senior year (the look back period — “LBP”). Effective 2017, they are changing this period to the “Prior, Prior Year” (“PPY”); meaning your finances will come under scrutiny from January 1 of the child’s high school sophomore year to December 31 the junior year.
They look closely at income, with assets in the child’s name heavily counting against you. Minimizing your income, and removing assets out of your child’s name prior to this LBP/PPY can significantly impact your financial aid eligibility. Here are seven key actions you can take now:
1. If your child has money or investments in his/her name (bank accounts, investment accounts, etc.) get this into your name before the LBP/PPY.
2. Make sure any 529 plans are owned by the parent with the child as the beneficiary. Having a grandparent as the owner would be detrimental, and this would count as student income.
3. Your income is looked at heavily. If you know that you will be getting a bonus/commission check during the LBP/PPY, see if your employer can pay this in advance of the LBP/PPY.
4. No consideration is given to the debt you are carrying. Pay down credit cards — it will take some cash out of your accounts (which would count against you for financial aid purposes) AND get you healthier, financially.
5. Spend — provided you can afford to, and it is necessary. For example, if your child needs a new computer for school, or a car; or if your roof needs to be replaced, spending the money can benefit you if it comes out in advance of the LBP.
6. Seriously consider the local, in-state education system. In NY, SUNY and CUNY schools are well regarded and very affordable. Community colleges can offer a steep discount on the first two years of college (when most students are taking introductory courses). Look into what Transfer Agreements the institution has with four-year colleges. Also, investigate Honors Programs, as they often have partnerships with prestigious universities.
7. Most important, make sure you fill out the FAFSA form, as it is required if you hope to get any merit-based scholarships or if you plan on taking a Stafford Loan.
You can’t control what you haven’t done in the past, so move forward, controlling what you can. Make the most of the time you have left, and make these adjustments while you still can. Remember, the meter is running.
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