Breaking the Small Business Code

New Spouse Pays for Step-Kids College

    Right on schedule -  I just got my annual call from a divorced parent who got remarried last year and is now trying to keep the new spouse's income and assets "off the college forms".  I usually hear lots of yelling when the new step-parent discovers that their income and assets are now included for college support.

    Then I am always told about the (1) prenuptial agreement clearly stating the new spouse is NOT responsible for the new step-kids and (2) her lawyer has put all her money into a "trust" so it's not really available anymore.  Both of which mean NOTHING to the FAFSA or FAP process!

    So here is today's teachable moment - You get married while you have children in college, the new spouse's income and assets are INCLUDED for the FAFSA if you are the tax custodial parent. They are included for the FAP regardless of whether you are the custodial or noncustodial parent!

    If your ex has tax custody (take a tax deduction), then your new spouse (and you) are not included on the FAFSA. But if your student is at a college requiring the FAP, your new spouse will be included either as the custodial spouse or the noncustodial spouse, period

     PRE-NUPTIALS:  Financial aid providers - the Department of Ed, your state and the college - were not parties to the pre-nuptial and are not legally bound to the agreement.  So the process requires that custodial parents (including step) are included in the income and asset calculation for the FAFSA.  ALL parents including steps are included for the FAP.

    TRUSTS: When parents tell me about a trust tht was set up by a new spouse, they almost always mean a "living" or inter-vivos trust.  But if the new step (or any parent for that matter) has "control and receipt" of the assets in a trust, they are included in the financial aid process.  That means a "living trust" is NOT a real "trust" for college purposes because the donor is usually the trustee and can use the assets any way they like.  The trust would have to be irrevocable and the new spouse would NOT have access to the assets for it to be "invisible" for college purposes.

    If you have any questions, make a comment or go to http://www.CollegeFundingNetwork.com and use the Contact Us form.

   

Is The Idea of Need-Based Aid Flawed?

     An article in the February 21st New York Times focused on the infamous FAFSA - Free Application for Student Aid - the gateway form for getting money for college.  The story focused on how terrifying, confusing and frustrating completing the form has become.  As with just about everything associated with college, the views of the people interviewed show that change is not going to happen anytime soon.

    In my opinion - and the opinion of many others involved in helping families pay for college - the basic premise of need-based financial aid is flawed. Therefore, the system designed to measure the need and then determine how to meet that need is flawed! 

    What is that flawed premise? 

     The idea is that (a) everyone should have access to college regardless of ability to pay and (b) if you cannot afford the cost of a particular college, the "system" should fill in the gap between what you can afford and what it costs. 

      This premise sets up the need to detemine how much you should pay based on your financial situation called the Expected Family Contribution (EFC).  That means someone has to decide how to measure your ability to pay (EFC) and then set some value or percentage that you should pay before getting outside help.

     This also sets up the assumption that someone else will fill in your gap between cost of attendance (COA) and your EFC.  That "someone" starts with the government (Federal and State) and then the individual college. What has happened is the need gap is NOT being filled.  For too many families, the FAFSA has simply become a loan application!

    I have several students with ZERO EFC getting nothing but Federal loans. The get the maximum in loans, grants and work-study but still cannot get close enough to the cost to make college affordable.  Unless a college meets 100% of need for all admitted students, families will face gaps as severe as before the premise of need-based aid!

    So before we discuss changing the FAFSA, how about revisiting the ENTIRE concept of paying for college!  Your comments?

   

Financial Aid for Foreign Students

This week's NACAC Conference in Seattle provided lots of information that may be of interest to many potential college students.  One is getting financial aid if you are a foreign student.

When asked if there is "traditional" need-based aid programs with state and federal grants and federally supported loans like Stafford and PLUS for non-U.S. Citizens -- the short answer is NO.  However, that does NOT mean a good student cannot receive college-based merit or need-based aid. 

There are six colleges that most of us in the industry knew will (1) admit international students in a need blind fashion and (2) meet their full financial need once admitted.  These schools include Harvard, Yale, MIT, Princeton, Williams, and Middlebury. At this week's NACAC  conference in Seattle attendees learned that Berea College, Colby College and Mount Holyoke also offer aid packages through the colleges to foreign students.

So there is good news is if you are a foreign student, some private colleges may offer aid packages if admitted regardless of citizenship.  It is more likely to happen at "need-blind" colleges meaning they will look at admitting you first regardless of ability to pay.  Once admitted, they will help meet your need with whatever dollars are legally available. 

If this is something you want to explore, check with the college Admissions and Financial staff to see what their policy on college-supported aid would be.  Also ask about the required financial aid paperwork.  Most of these colleges use the Financial Aid Profile in addition to the FAFSA so you will need to make sure you comply with their policies and due dates.

Lady Engineering Majors Should See More Outreach (And Money)

ORIGINAL DATE: 05/09/2008 07:50:31 AM

From 5/9/08 Inside Higher Ed:

 “A House of Representatives subcommittee discussed draft legislation Thursday designed to increase the flow of women into academic science and engineering.  Witnesses from government and academe, testifying before the House Science and Technology Subcommittee on Research and Science, generally supported the legislation’s aims of spurring federal agencies and universities to produce better data about the outcomes of federal grant making by gender, provide more financial support for parents and other caregivers, and sponsor workshops for academic administrators and others to “increase awareness” about gender bias in promotion, hiring and the awarding of academic honors.” 

Full transcripts:  http://science.house.gov/publications/hearings_markups_details.aspx?NewsID=2180

What makes this ordinary looking announcement exciting is that history has shown that when Congressional Committees talk, colleges spend money on scholarships and other programs to improve their numbers.  I have both a BS and an MS in Engineering from University of California Irvine and spent nearly 20 years as an environmental/civil engineer in the oil and gas industry and then in consulting.  The percentage of women in engineering, sadly, hasn't changed all that much since my college days nearly 40 (yikes!) years ago.  So it's nice to see this now.

I want to let ALL women, girls and daughters know that being an engineer is still who I am!  I take my math and science and SOLVE problems.  If you can follow a recipe,you can be an engineer.  The math is NOT that complicated and you use it to help people and that's a very nurturing thing!

So if your daughter or other female student is interested in math and science, you should discuss a major in engineering.  If you need more information, go to the Society of Women Engineers website: http://societyofwomenengineers.swe.org/

I APOLOGIZE!

ORIGINAL DATE: 04/27/2008 10:52:38 PM

It’s All My Fault And I’m Apologizing!

Here is a recent conversation I had with a mom I met at a birthday party for a mutual friend this past weekend in Orange County, CA.  After I introduced myself, she wanted to know more about what I did for a living.  Being passionate about my work, I spent about 5 minutes telling her how I help college-bound families with cash flow planning, tax capacity and minimizing debt – things she said she had never heard applied to college planning. I then asked her about her family. She told me that their daughter was graduating from UC Davis this summer after 5 years. She told me that her husband had had to postpone retiring because they had accumulated nearly $100,000 in PLUS Loans for the direct college costs as well about $18,000 they had borrowed from their home equity line of credit for the “incidentals” that kept popping up.  She had over $1,500 per month payments that were not tax-deductible. She was quiet for a minute and then asked me where I had been for the last 5 years! She was actually angry that she had never heard of people like me. I told her that fee-based college consulting is a very specialized occupation and sadly, very few “players” in the system really know how to help families in the right way.

She informed me that all she ever saw was all about either selling her something (529s, books, insurance, even the colleges) or telling her to borrow (students, parents, home, private loans).   She looked for the "free ride", did the FAFSA, read a "free report" on the "9 Secrets" from an insurance salesman, and attended every college night and seminar she could!  They spent lots of time searching for scholarships and found about $3,200 all 4 years. I then made a MAJOR mistake. I did some quick mental calculations based on what she had told me and gave her a couple of ideas that would have cut her costs in half. But before I could share some things she could do now, she told me it was MY FAULT she had all that debt and walked away, clearly upset. I was stunned but after thinking about what she had told me, she was absolutely right to be mad!  She had never been given the information I had shared!  She had told me about all the places she had gone for information – the colleges, the high school, her financial planner, her tax professional, the internet – and got nothing that helped her!  I was just a handy target for her anger. Good news is she came back later in the evening and she will be meeting with me to see if there is anything we can do now. Her husband works in law enforcement and he can retire anytime but he is still working because of all their college debt. Good news is there are ideas we can use. Then I got an eMail from Chuck Moore – one of the masters of college financial planning!  He had had an almost identical situation with the head of Human Resources at a company where he had been referred! The person he was talking to had massive debt for two children who were out of college and was angry at him for failing to let people like her know they had options! Chuck said it had really made him stop short! He felt it was partially ALL our faults in the college planning field.  We were not getting our information out to enough people!  No one knew they had options! I hate to keep repeating myself, this confirms that the College Leadership Foundation and their revolutionary College eCoaching Club is the right thing for families NOW.  Families who join the Club will have choices and options based on KNOWLEDGE that is unbiased and immediately useful.  Visit www.CollegeLeadershipFoundation.org.

Will The Elite Aid Changes Help Other College Families?

ORIGINAL DATE: 03/11/2008 06:23:31 PM A client family of mine just called who have a 2007 adjusted gross income under $75,000. Their son is attending an expensive private college but not one of the Elites who have been announcing they are offering free tuition, free housing and replacing student loans with grants in their income range. They were wondering if these new "policies" would help them? Basically, was there anything he can get from this trend? The key is whether or not his college is one of the schools that has changed their policies to be (1) competitive with these schools and/or (2) to be "politically correct" in expanding the use of their endowments. I explained it will depend on the administration and their goals for the college. If they feel competitive without making these changes, it probably won't have an impact on them. I also explained that their financial aid package was meeting 100% of calculated need and although it did have student loans, was pretty decent in the free money it gave their son. So in order to do "better" than their current package, they would have to get more than 100% of need.I suggested she write a letter to the President of the college and inquire about their matching those other schools for no loans or work study. She has nothing to lose and everything to gain by asking. If you are in the same situation, ASK! For the price of the paper, envelope and stamp you might score more money!