It’s no wonder that parents are making mistakes left and right with as little media coverage as college planning receives relative to other types of financial planning. Sadly there’s typically very little time to recover from college planning mistakes with so little time between a child’s birth and the start of college. It’s never too late to make sure you’re on the right track, whether you’ve just had your first child or major college expenditures are just a few years away. The EFC is the portion of your family’s income and assets that you’ll be expected to spend in any given year before financial aid kicks in. Financial aid will essentially only cover the costs leftover above and beyond your EFC.  It does make sense to make sure your child’s savings accounts are titled properly while it makes no sense to try and make less money to receive more financial aid. 20% of the assets in accounts owned by the child are expected, for example, to be used annually toward college costs. However, only 5.64% of the assets held in a parent’s name are expected to be used. None of the assets owned by a grandparent are expected to be used for the child even better.

College planning mistakes

You can expect to use up your college savings account over a 2-4 year window unlike retirement assets, which most people will slowly deplete over 20-40 years. This means, that you don’t have the freedom to ride out a temporary hiccup in the investment markets unlike your retirement account. You should consider moving towards less volatile assets as you get closer to actually needing to withdraw funds while higher risk investments may be acceptable when you have a decade or more left until the money is needed. Sadly, many parents are completely unaware they can claim these benefits. Many parents view student loans as an embarrassing sign that they fail to earn enough money or didn’t do a good job saving what they had.  It is important to realize that college costs are spiraling faster than most Americans can keep up while this occasionally may be the case. Properly utilizing the right FSLP can help parents and students finance a college education for as low as 3.40% annually. It is still important to fill out a FAFSA form whether or not you think you’ll ultimately borrow money through a program. This is the basic form used by most schools’ financial aid office to determine what you might be eligible for. “the worst that could happen is that they say ‘no’!, as the old saying goes. It is tough to do an adequate job of planning for college until you understand how fast college costs are spiraling out of control.  College costs tend to increase 5-6% every year while the broad “cost of living” has increased or “inflated” at a historical average of 2% annually. That means that college costs are rising three times as fast as life’s other costs, and likely three times as fast as your paycheck.