Last week we started to talk about annuities, but since the college and financial aid application season is upon us, I thought we’d switch gears this week and return to the annuity topic next week.
As of this past Friday, Oct. 1, you could start filing the Free Application for Federal Student Aid (FAFSA) for the 2022-23 school year. Yes, that’s right. We’re already talking about next school year even though some of you may have students who are just entered college for the first time last month. Also, if you haven’t filed the FAFSA yet for the current school year, you have until June 30, 2022 to file, but it is better to file the FAFSA as early as possible and to be mindful of priority deadlines that each school might have.
If you have a high school senior, they’ve most likely started the college search process or should as soon as possible since they need to start applying to schools and, as mentioned above, file the FAFSA as soon as possible. There are a lot of assumptions made when it comes to searching for colleges. It is important to approach the process from a financial aspect first, which includes understanding your Expected Family Contribution (EFC), how it impacts your eligibility for need-based aid and what does each college look like from an aid viewpoint, including both need-based and merit. Here is a step-by-step outline to help guide you through the college search process to find schools that are potentially the right financial fit.
1. Calculate your Expected Family Contribution (EFC): Your EFC is a measure of your family’s financial strength and is calculated according to a formula established by law. It takes into account your family’s taxed and untaxed income, assets, and benefits and uses your tax returns from 2 years prior and assets as of the day you file the FAFSA and/or CSS Profile. You can use the College Board’s EFC calculator to estimate both your federal and institutional methodology EFCs. This will give you an idea of what you are expected to pay towards college based on your family’s income and assets. You can then use this information to estimate potential aid from schools (see step 3). You can also analyze your EFC to see if there are any ways to potentially reduce it. For this part, you will need to consult with your financial advisor and tax advisor. Visit www.collegeboard.org and search “EFC Calculator”.
2. Use various websites to search for schools: To compile a comprehensive list of schools based on your student’s criteria (geographic location, selectivity, SAT scores, private vs. public, majors offered, etc.) visit College Navigator at https://nces.ed.gov/collegenavigator/. You can export the search results to an Excel spreadsheet and use it as a way to keep all of the information organized for schools you’re comparing. College Navigator provides a wealth of information for each school such as net price, graduation rates, transfer out rates, percentage of students admitted, test score ranges and more. In addition, you can supplement your research using the College Board’s website (www.collegeboard.org), Reddit (reddit.com/r/applyingtocollege), College Raptor (www.collegeraptor.com) and College Vine (www.collegevine.com), which both help estimate admissions chances.
3. Use your EFC to estimate need-based aid: I mentioned before about using your EFC to analyze potential aid from schools. This is something you should do before your student even applies to any schools. Most often, the college search/selection process is driven by the student with little regard to financial considerations, and this can be the cause of a second round of stress once the acceptance letters roll in. Once your student has a preliminary list of schools, you should research the total cost and estimated aid they can expect to receive. There are two ways to do this:
a. You can find this information, if reported by the school, on the College Board’s website under each school’s “Paying” and “Financial Aid by the Numbers” tabs. For example, Saint Joseph’s University’s total cost of attendance (room+board and tuition+fees) for the 2021-2022 school year is more than $62,000, and on average, they meet 82% of need with averages of 73% being met by scholarships and grants and 27% by loans. If a family’s EFC was $15,000, their total need is roughly $47,000, and St. Joe’s meets about 82% of that need. If your student is eligible for need-based aid (i.e., your EFC is less than the cost of attendance), then you want to look for schools that meet a high percentage of need.
b. You can also use each school’s net price calculator. The net price calculator will ask for more in-depth information such as GPA, class rank, test scores, financials, etc. If the school’s net price calculator page displays a generic calculator clipart image, this is not a good calculator. The more accurate calculators will give more specific output, even merit aid info.
c. Keep in mind that with need aware schools, the financial aid office and admissions office work together and any aid offers are based on the student’s profile and offered by the admissions office. For need blind schools, the offices work separately. Aid is based on the family’s need and is independent of admissions.
Since I mentioned merit aid, it is very important to research it for each school. Don’t just assume that every school will offer your student merit scholarships. On average, private colleges give out $15,000 of merit aid (without need) per student and public colleges only give out $4,300*. There are also many schools that are shifting away from merit aid so they can offer more need-based aid. In addition, some test optional schools still offer merit aid. To view a list of test optional schools, visit fairtest.org.
Whether your student is already in college or just starting the process, we want to wish everyone a safe and healthy school year!
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.