Financial Aid Considerations

If your child has a lot of assets in his or her name, there may be financial aid implications:

• Twenty percent of a student’s assets are considered by financial aid officers as available for college expenses.

• Only six percent of the parents’ assets are considered available. Retirement accounts, such as 401(k) plans and Individual Retirement Accounts, don’t count at all in financial aid calculations.

• The parent should be owner of record for a 529 plan, with the child as beneficiary. That way the account is considered to be an asset of the parent, so less of the account will be viewed for financial aid purposes.

If You’re Getting a Late Start

There’s not much you can do to make up for the investment growth you could have had by starting to save early, but it’s not too late. Here are some tips to consider:

• Sock it away now. Add any extra cash you have to a 529 Plan.

• Forgo the iPod. Instead of gifts, your student could ask for seed money for college.

• Ask Grandma. If grandparents are planning to leave an inheritance someday, ask if they’d instead pay for part of their grandchild’s education.

• Consider loan options. There are many loans with favorable interest rates. If you don’t want your child to have a large loan, let him take the loan anyway so you get the best rate, then you can make the payments.

• Look for grants and scholarships. Associations to which you belong, religious groups, unions, and other organizations may have free money for your child.

• Take the home equity option. If you own a home, you may want to consider a home equity loan or line of credit. The interest may be tax deductible.

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Issue: September 2007