It’s never too early or even too late to start planning for ways to pay for college or post-graduate school.
There are a number of myths out there that can adversely impact your planning efforts:
1.) There’s not enough aid available;
2.) Only students with good grades get aid;
3.) My family makes too much money to qualify.
In reality, both “self-help” aid like loans and “gift” aid like grants and scholarships are available. To increase your odds for getting your share there are a number of education-oriented and tax-oriented strategies you can use.
Some Tips When Applying for Financial Aid:
- Fund Your Retirement— “Federal method” for calculating need usually does not consider retirement assets so put as much as you can into these accounts.
- Reduce Assets Held in the Student’s Name—Parental assets are assessed at a lower rat: So buy the computer, dorm furniture or car in the base year (the year before filing the FAFSA) out of your student’s savings accounts.
- Avoid Cash Gifts to Students—It’s Better for Grandma to Pay the School Directly: If you’re not qualifying for aid, at least it may help out her tax planning. Better yet, take out the loans which are deferred until graduation and then let grandma help pay them. This way you maximize your student aid without having grandma’s help count against the student.
- Employ Your Child in Your Business and Use the Income to Fund a Roth IRA. The earnings won’t be subject to some of the typical payroll taxes because you’re employing family (restrictions apply) and by stashing it into the Roth, you’re building up a pot of money that can be withdrawn without tax penalty when used for qualified education expenses as long as the account has been open 5 years.
For more tips and help, consider using a qualified College Aid Planner like a CERTIFIED FINANCIAL PLANNER (TM) professional.