College Aid 101

How to save the most money and still remain eligible for the best financial aid package

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If your children are destined for college, one thing is certain–you can expect to write some large checks to pay tuition, room, board, and other expenses. Although inflation is relatively dormant in most areas of the economy, it’s running wild on university campuses. According to the College Board, the cost of higher education is up roughly 5% from a year ago. In the 2009-2010 academic year, the average cost of a year at a private university was over $35,000.

In an ideal world, you’ll start saving for college while your little one is still in diapers, and simply tap your education fund to pay the tuition bills as they come due. The reality, though, is that even the most diligent savers may find it hard to amass six-figure amounts for higher education, especially if they’re also socking money away for retirement. In that case, financial aid–grants, low-interest loans, and work opportunities–may need to fill the gap. Families in this situation are in good company. Nearly two-thirds of all college students receive some form of financial assistance, according to the National Center for Education Statistics.

Saving the most money for your youngster’s higher education, while also remaining eligible for the best financial aid package is a tricky balancing act. To maximize financial aid, you’ll need to minimize what’s known as your “expected family contribution” or EFC. Suppose you fill out the Free Application for Federal Student Aid (FAFSA), which determines that your EFC is $20,000 in your child’s freshman year. If you’re sending your child to a state school where the total cost is $18,000, you won’t qualify for any need-based aid. However, if your child is accepted at a school where the total cost is $42,000 and your EFC is $20,000, you may get as much as $22,000 worth of financial aid. “The lower your EFC, the more financial aid your student might receive,” says Joe Hurley, founder of

Lowering your family’s EFC is a matter of putting college savings in the right place. “One way to reduce your EFC is to save in the parent’s name rather than the child’s name,” says Hurley. That’s because the Department Education assesses a student’s assets at 20% for college costs, versus no more than 5.64% for a parent’s asset. How does that work, exactly? Let’s say you opened up an investment account for your daughter when she was born.

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  • Jocelyn Ross

    It is also a good idea to pay a small fee of approximately 2,000 or about $5.50 a day for a year and have a private company do all the work for the total college admissions process. The fee is well worth it and the possible merit aid can take away the shock of saving for many years and student loans.  Students can start in 9th grade and be coached for for years for one low fee. Improved grade, 24/7 test prep, application and award letter review, career and learning assessments. Wonderful program.  We need this. Not all high schools can give each student this assistance.

  • As an experienced college advisor, I warn my clients about falling victim to predatory college access companies which promise to do all the work for a fee. In the long-run, students and parents don’t benefit from letting someone else do all the work for them. They’re put at a disadvantage because families must resubmit the FAFSA each year. The earlier families familiarize themselves with the form, the better. Incorrectly filing the FAFSA can cost thousands. Besides there are many non-profits out here whose mission is to help our youth access higher education. In addition, has excellent articles around college financing. There is lots of information out there on successfully navigating the college admissions and financial aid process. We just have to tap into the resources and not rely on someone else to do the work for us.

  • John Simons – Black Enterprise

    Good to know, Alisha. Thanks for the information.