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The 5 Biggest Mistakes Parents Make In The College Funding Process… and What To Do About Them

What we want to talk about are five of the biggest mistakes that I see parents typically make when they’re going through the College Funding process.  This obviously isn’t all of them, but this is five of the big ones that we see.

#1 is knowing the difference between includable and non-includable assets.  What that means is an includable asset is an asset that the Department of Education says has to be included in the financial aid formulas.  A non-includable asset is an asset in which they say does not need to be included in the financial aid formulas.

So knowing that difference and seeing is there any way that possibly we can make, we can either use some of our includable assets on things that we need prior to going through this process or possibly putting some of our includable assets into non-includable assets, depending on your situation.  You just want to know the difference between the two.  That’s a big one.

#2 is people who say it doesn’t matter where I put my money, and that couldn’t be farther from the truth.  I’ll give you an example is money that’s in a 401(k) plan that’s already there, doesn’t count against you whatsoever at most schools; however, money that you just keep lying around in a savings account does.  Same thing with having money in the child’s name versus having it in your name typically counts more against you.  Once again, depending on the school, but typically that’s the case too.

So it does matter where you keep your money, and you just want to know that and know how it’s affecting you in each type of account that you have whose name it’s in, how it’s titled, how that’s going to affect you before you go through this process.

#3 is a lot of people say my CPA or tax preparer will fill out the forms and help me with College Funding.  CPAs are the first to admit that this is not what they do.  We’re College Funding experts.  We’re experts in our field.  I wouldn’t even dream of going through the tax process on my own or doing my own tax forms.

 That said, we’re experts in College Funding just like a CPA or tax preparer will 99% of the time be open to tell you that, “What we do is tax planning. We don’t do College Funding planning.  I can probably help you with these forms.  I’ve done a handful of them in my lifetime.”  You’ve just got to be careful with that because sometimes some of the strategies they may recommend for taxes may actually hurt you for College Funding and vice versa.

So you just want to make sure that if you’re working with a College Funding Advisor, make sure that that advisor and your CPA or tax preparer are on the same page.  That way the strategies they’re both recommending are going to benefit you, that they work together and that they don’t butt heads.

#4.  A lot of people say, “I’m just going to wait until January of my child’s senior year because that’s when I can first fill out the FAFSA.”  That’s one of the worst things that you can do.  January 1st of your child’s junior year until December 31st of their senior year is what’s known their base income year, and that’s the first year that the colleges typically look at everything that you do.  So that’s the year.

Ideally you want to start your planning before that year even starts.  That being said, if you’re in that year, there are still a lot of things that you can do.  You just want to do them sooner rather than later, but ideally you want to start this process when you’re a freshman or a sophomore in high school.

We do late stage college planning.  Most of our clients, I’d say 95% of them, are freshmen, sophomores, juniors or seniors in high school.  The target that we really want shoot for are those who are sophomores and juniors are the ones that we can really do the most for.  Not that we couldn’t help seniors out because we have a lot of seniors that we help out.  It’s just more last minute.

But ideally if you have the chance, if your child is a sophomore, a freshman or a junior, don’t think that you should wait until their senior year to do this.  There are so many things that you can do before then that’s going to benefit them either getting into the best school or getting the most merit based aid, getting the most need based aid.

There are a lot of strategies that the sooner you do them the better, so do not wait until January of your child’s senior year if you have that chance or that choice.

#5.  Going through the process by yourself because it’s cheaper.  I love it when people say this, and the colleges will love you for this.  So many people are so quick to go to the doctor when they’re sick or they’ll pay a lawyer if they’re sued, but when it comes to one of the biggest expenses they’re going to have where they’re going to shell out $20,000, $30,000, $40,000, $50,000 plus per year for one kid, you’re talking about just an insane amount of money that people want to be pennywise and pound foolish about.

So we highly recommend at least talking to someone who is knowledgeable in this field and find out is there things that they can do that will help you.  If they are a reputable provider of College Funding services, they’ll tell you if they can help you, and they should be able to show you exactly what they’ll be able to do for you.  On the flip side, if they can’t help you, they should be open and tell you that too. 

You don’t want to fall victim to a scam.  You should look out for what types of scams are out there.  Any time someone guarantees you financial aid or tells you if you pay us $2,500, we guarantee you all of your funding for college.  Those are typically signs of scams.  Go to the Better Business Bureau and check out a company and make sure that they’re a reputable provider before you decide to sign up with them.

Once again, these are just five of the most common mistakes we see parents make.  There are obviously a ton more that are out there, but for more information on the College Funding and admissions process and things you can do to try to save money throughout that process, definitely check the other reports on this site.

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