Friday, December 15, 2017

Here we are again, meeting with Heather and her parents.  Since last week several developments have taken place that affect Heather’s financial aid and quest for “free money” to help her pay for college.

In the last meeting with Heather and her parents, we were discussing some of the places where “free money” is available to help pay for college. To recap: Heather is a hard working young lady who has earned good grades, desires to play division l sports, and has involved herself in school and community activities.

Heather came into the office very excited because she has been applying for many scholarships that she felt qualified for and had heard back from one of sponsors. The good news is that she is a finalist for a large award and has been invited to their annual banquet. Every year there are millions of dollars available from thousands of private scholarships that come from a huge variety of sources. These are sponsored by service groups, such as the Elks, trade groups, such as the Christermon foundation, and by individual sponsors. These scholarships can be very general or very specific as to who can apply and the awards can range from a few hundred dollars to tens of thousands of dollars. Many of these awards do not require the best grades, but often reward other qualities or interests that sponsors seek to promote. While it is true some of this money gets left on table every year, it is usually the scholarships that have very restrictive conditions to be eligible that have no takers. These awards are “free money.” Private scholarships amount to about 4% of the total scholarship money available – great if you get one, but a small piece of the total pie. There are many good, free websites that can help with searching for awards your student may qualify for. Start your search with or

Deserving of special note is that there are several scholarships exclusively for military personnel. In addition, veterans are also entitled to benefits that help pay for college. Last year approximately 2.1% of students qualified for and received veteran’s benefits averaging $5400 per year. This is money that does not have to be paid back.

Heather is also the fortunate beneficiary of another source of funds that don’t need to be paid back – money that was saved for her by generous grandparents. There are several tax advantaged ways to save for college: 529 plans, Coverdell savings plans and Pre-paid tuition programs are the most popular. These are sometimes referred to as Education IRAs. Funds that are in the parent’s name or student’s name will be part of the formula that determines the Expected Family Contribution, which is calculated when you complete the Free Application for Federal Student Aid (FAFSA). Funds held in the grandparents name are not considered by FAFSA and may increase a student’s eligibility for other financial aid. As with any planning it is important to look at each case individually and determine the best choice of tool to use. With all savings strategies flexibility is important. In the right circumstances, an Individual IRA or Variable Universal life insurance is another option to save for college.

Once again, we have made some progress in our search for “free money”. When faced with costs averaging over $100,000 over a 4 year period, all opportunities should be explored. Understanding and taking advantage of “free money” can help students afford school and start their working careers with less debt. The next time we meet the focus will be on resources available based on need.

Recall that Heather was invited to attend an awards banquet for scholarship finalists. At that event, she received a scholarship for $5000. Not the top award, but very significant money. Hard work found a payday.  Her parents however had different news this week. They have become part of another too common scenario for families that we work with. That is one, or even both, parents find themselves laid off, downsized or underemployed. Their income has been cut in half. For parents and students in this situation there are federal and state programs that may help them. According to the National Center for Educational Statistics Federal Pell Grants (need based grants to low income families, max amount $5500) are awarded to 27% of all undergraduates and the average award is $2600. This is money that does not have to be paid back. California has a program called the Cal Grant Program which grants up to $10,302, depending on the school you attend and other eligibility factors. Gal Grants are an entitlement program, meaning, if you meet the criteria you will receive the grant. Predictably, California’s fiscal problems are having an impact on this program, resulting in more restrictions on the eligibility of students and institutions to participate. Financial eligibility for these grants phases out above $50,000 of income.

Federal Supplemental Educational Opportunity Grants (FSEOG) is for undergraduates with the greatest financial need. Pell Grant recipients with the lowest EFCs will be the first to get FSEOGs. Just like Pell Grants, FSEOGs are “free money” and don’t have to be paid back.

Additionally, there are grants such as the TEACH grant and the SMART grants that will provide funds and forgive repayment if you meet certain conditions. More information can be found at

Last, but not least on our list of sources to find money, is the federal government student loan program. These are not “free money” as we have been looking at but they do include subsidized loans for students that qualify based on need. A subsidized loan is one that does not accrue interest on the money borrowed while you are in school. During your first year the max amount of subsidized loan is $3500, $4500 in second year and $5500 in 3rd year and beyond, to a maximum of $23000 in subsidized loans. Once you have graduated and begin to pay back the loans the interest will begin to accrue.

Let’s fast forward now to see how Heather’s quest for “free money” has turned out. There’s been great news, not so good news, and good news again. Great news: She has been offered a full ride to play ball at a Dl school. As we mentioned in the first segment, athletes with great grades are the more recruited because coaches can use other sources of funds to provide a scholarship besides those in his department. This also enables them to make commitments beyond the 1 yr that the NCAA limits athletic scholarships to. The not so good news: Heather has to return the $5000 award she received earlier, due to NCAA rules. However, her bad news is someone else’s good news: the runner-up to Heather’s award just found $5000 of “free money”.

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