education

If your student will be a sophomore or junior in high school this fall, it’s time to get serious (very serious, if they’re going to be a senior!) about preparing for college. This includes school choices, scholarship research, funding arrangements, and other financial issues.

Don’t know where to start? Give me a call. As a Certified College Planning Specialist, I am in a unique position to help you navigate this important preparation phase as you and your child prepare for this next chapter of their lives.

For those of you that have already dealt with these, I’m sure you’ll agree with me that filling out a scholarship application ranks right up there with tax returns, mortgage documents, and FAFSA forms. Plus, there’s a lot riding on it. Making the right statements could have a significant impact on your student’s educational future. Submit an application that has typos and grammatical errors, and you may as well have just skipped it altogether.

Listed below are some tips to help your student navigate through the process of completing the application and essays.

Scholarship Application Tips

• Pay attention to deadlines. Applications submitted past the deadline are not considered.
  Prepare a resume. Not only is this good practice for the student as they venture closer to the world of a career, but also gives the student an opportunity to “showcase” their activities and achievements.
• Send more than asked for. It may help to provide additional materials, such as evidence of awards, additional activities, or writing examples. This will give the decision-makers a more complete picture of the student. If, however, there are explicit instructions to limit your submission to specific items, follow the instructions. Any additional information will be considered “clutter”.
• Prepare letters of recommendation. The student should cultivate the sources of these letters fairly early on in their career – so that when the scholarship deadline is looming, the letter-writer isn’t put under pressure to produce a letter on short notice. These letters are an important source of information for the display of character, personality, and specific talents.
• Essay writing. The student should make certain that the essay allows their personality to show. In addition to scholastic and academic achievements, it is important to showcase the well-rounded student, highlighting sports, club memberships, honors, achievements, volunteer and community work. It is also important to include personal vignettes, lessons learned, and information on financial need where applicable.
• Proofread. Nothing will come across with a greater negativity than a sloppy, poorly written, grammar and punctuation nightmare. Have at lease two other people review your application and especially your essay in order to find all the errors and correct them before submitting.
• Copies. Always keep a copy of everything that you submit. Things have a way of getting lost in the mail. Plus, if you’ve got a copy of what was sent, if there are questions on a portion of your submission, you can easily answer them from your copy. (By the way, this is a good practice for anything that you send anywhere. In today’s world of computers with scanners, there is simply no reason to ever be caught without a copy of a form you’ve sent somewhere.
• Thank You. It’s a good practice to get into: regardless of the outcome by the scholarship committee, the student should send a brief letter or card, thanking them for their consideration. In the event that the student receives the scholarship, a more formal letter of thanks would be quite appropriate.

Congress passed the “Deficit Reduction Act”, or DRA, recently. I think the title of the Act is inappropriate, in that it provides for a reduction in the rate of deficit increase, rather than an actual reduction of the deficit itself.

Imagine if you or I decided we’d put into place a plan to reduce the rate at which we increase our credit card balance each month, while never actually paying down the principal! Whatever happened to fiscal responsibility??

At the end of the day, this DRA promises to reduce the budget deficits by about $40 billion over the next several years, or about 2.5% of the $1.6 trillion of projected deficits during that time period.

Here Are The Dirty Little Secrets I’ve Found 
(So Far)

A few Dirty Little Secrets were hidden within the DRA, two of which will have an impact on you if you are, or will be, paying for college costs by way of loans – and let’s face it just about everyone has at least some loans in their college payment plan.

The first Secret is that it will now be illegal to consolidate student loans while the student is still in school, which was a favorable option allowing students to lock in lower fixed rates. This may not seem like such a big deal until you hear about the second secret.

The second Secret in DRA 2006 is that, no matter what, you only have one opportunity, as a user of student loans, to consolidate them. In the past, there was a small loophole which allowed to you re-consolidate loans if you took out another student loan after the initial consolidation. Not any more.

So, who is the benefactor of these Dirty Little Secrets? Sallie Mae, the privatized holder of most student loans – because if favorable consolidations were openly available, Sallie Mae would have to compete with every financial institution out there for your loans. And we all know what happens when competition is allowed in the marketplace! Why, inefficiencies are wrung out, and the fittest survive! And Sallie Mae is not among the fittest.

Another change that we knew was coming is that the new rate for subsidized (Stafford) loans will be increasing from 4.7% to 6.8%, and PLUS loans will hop up to 8.5% from 6.1%.

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

* Medicaid Provisions
One last item that caught my interest in the DRA is the changes to the Medicaid program. Primarily, this provision makes some of the “qualifying” or Medicaid planning options a little more difficult. The other item allows for an exclusion of some Long-Term Care policy proceeds when qualifying for Medicaid benefits.

About this time of year, many families of high school seniors will begin to have some very serious discussions about money, education, and the realities of what is affordable versus what is not. In many cases, this discussion will have a dramatic impact on the student’s future.

For many parents, this brings up a dilemma: perhaps you’ve saved some money, but not enough to pay for the incredible cost of tuition at some of the higher-end colleges. It seems that the saving that you’ve done is actually working against you, because you’re finding that having some assets to your name takes you out of the running for many grant options.

At the same time, your child has, well, good grades, but they’re not the valedictorian by any stretch. What’s the next alternative?

Of course, there are plenty of loan options to choose from, including home equity loans, “PLUS” loans, and loans from retirement savings plans.

Each of these options (and there are many others to choose from) has shortcomings. Home equity has a tendency toward a floating rate, which could become very expensive in the long run. PLUS loans are non-deductible and often carry floating rates, plus the repayment period begins immediately. Borrowing from a retirement plan is never a good idea – it’s hard enough to put money aside in the first place, let alone continue putting money aside and paying yourself back at that same time!

So the issue comes back to the original question: what is college really worth? Obviously a college education is worth the expense in the long run, but is an education at a prestigious institution really worth the additional cost?

There are really two answers to that question. First of all, most of the “prestigious” schools operate on a false pretense when it comes to the cost of attendance. It is extremely rare that a student would pay the “sticker price” to attend. There are so many endowments and scholarships available at these schools, most students don’t come anywhere near paying the whole amount.

The second answer is a resounding “No!” – meaning, the quality of the education and the cachet that goes along with it are likely not worth the additional cost, even if you were to be required to pay it. When making comparisons between various different schools you need to keep in mind that the name of the institution makes far less difference in terms of career success for your student than does the simple fact that the student has taken part in and passed this milestone in their life.

So if the question comes down to cost – and let’s face it, you know it will – focus more on making sure that your student can get an education at a quality school, rather than believing that the prestigious name institution is going to make a big difference in the long run. The education is the important part; we just need to remember that.

Parents, when planning to pay for your child’s college expenses, you’ll receive an estimate from each school of the cost for tuition, fees, and other expenses. Most often, the “other expense” factor may seem very high, and a little hard to understand.

A recent survey by Student Monitor, tracking the spending habits of college students, shows that students tend to spend an average of nearly $7,000 on discretionary items. The following is a list of some of the discretionary spending that they uncovered:
· Transportation and Travel – frequency of visits, distance, and mode of travel will impact this the most.
· Personal Expenses – phone, laundry, toiletries, clothing, and entertainment
· Additional Fees and Dues – lab fees for science classes, honorary and social fraternities, and other fees
· Health Insurance – quite often this is an included charge on the tuition bill. If the child is already covered on the family policy, be sure to waive the institution-provided insurance.
· Books and Supplies – again, each class will have required books, and some will have required supplies. Used books can help lower the costs, but are often scarce or outdated.
· Room and Board – there are a lot of variables in the cost of room and board, depending upon the residence hall chosen, whether the room is a single, double, triple or quad room. Off-campus living may reduce the “rent” cost, but there will be additional costs for utilities, groceries, etc.
· Computer – many times, a computer is required, and if so the admissions requirements will explain the expectations. This will impact whether the student needs a basic PC or a more expensive laptop.
· Property Insurance – Most homeowner’s policies will cover the student’s personal property in a dorm room, but check your policy’s limitations against the value of the possessions. There may be a limit in the coverage. And if the student lives off-campus in an apartment, a renter’s policy is a must.

ATTENTION parents of students of the Class of 2006! The process has already begun for some families – that is, the Financial Aid process…

What does this mean? If you’re waiting, you’re losing ground. September 15 was the kickoff date for applying for the CSS-Profile information, and January 2 will be the first date to begin submitting your forms for consideration.

Remember, financial aid is given on a first-come, first-served basis!

Statistics show that approximately 90% of all financial aid applications have errors of some sort, and as a result you’re required to resubmit them, effectively “going to the end of the line” for aid. If you’d like some help with this process, give me a call.

* Retirement vs. College Saving. Those of us who are parents know this conflict very well – should we put aside money for retirement, or for college? It may come as a surprise, but a general rule of thumb with regard to this conflict is to put money aside for retirement first, and college second.

The reason behind this is that there are literally a boatload of ways to pay for college, such as grants, scholarships, work-study programs, student loans, parent loans, etc.. With this plethora of choices, it becomes clear that your student’s college funding needs can be met from quite a few angles, none of which should have a dramatic impact on your overall net worth (or your student’s).

On the other hand, no one will give you a scholarship to retire. It is solely up to you and your savings (coupled with Social Security and any available pensions).

* Congress has, as of the end of September, begun an oversight hearing on 529 plans. It is anticipated that this hearing will cover High Fees, Disclosure, Disparate Tax Treatment, and Questionable Broker Sales Practices, according to the title of the hearing. Stay tuned, I will pass along any significant developments that come from this hearing.
Some other Illinois universities’ costs:

* www.2save4college.com –I always welcome your feedback for new information that you’d like to see on any of my web sites. Use the “Contact Us” page on any web site to provide feedback.