Today marks the beginning of March, and the SALT™ Blog is celebrating by flipping our content switch from “love” to “hate.”
OK, “hate” is too strong a word. What we really mean is that we’re going to talk about some financial topics that may not sound fun but are necessary to ensure a successful future. (Don’t worry, we’ll make them fun … ish.)
First I would like to mention a conversation created by a blog.
Parents: We won’t be able to pay $70,000 per anum for our daughter education.
College representative: Don’t worry Medallion University provides financial aid based upon your family’s financial need.
Parents: Oh, that is interesting. Someone told me that Medallion University was need-blind, so I just figured you didn’t care if we couldn’t pay that much.
College representative: If your daughter is admitted to Medallion University, we will calculate your expected family contribution.
Parents: Well, we contribute to our church but we have never made a contribution to Medallion University, but someone told me this is expected in order to get in.
The above conversation shows, how we can speak different languages in English. The parents are concerned about the future of there while looking at their capability. On the other side, the so-called College Representative is speaking the “Language of Financial Aid”.
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Commonly Used Terms By Financial Aid Officer:
The Biggest issue faced by any student/parents is to understand the terms used by the Financial Aid officer. So, to make it easy I will try to mention all the common terms and explain them in simple words. If you want to learn the meaning of any other words, do comment below. We will try our best to help you out.
FAFSA is the abbreviation for Free Application For Fedral Student Aid. In short it is an application that the student have to fill and submit to check their eligibility for any Fedral financial Aid.
If you want to apply for FAFSA, you need to file your income tax return first. Then, you will be able to fill out the Form for FAFSA.
CSS is the abbreviation of College Scholarship Service Profile. It is ran by an organization known as College Board which is also responsible for conducting the SAT. Although, it is not required by all the Universities/Colleges. But still more than 400 Schools are using it currently and the numbers are growing each and every year.
Students Aid Report or SAR is generally submitted by FAFSA by gathering a lot of information related to the students. Some of the information are estimated cost of attendance (ECA) and estimated family contribution (EFC). The report is received after three to ten days of FAFSA submission.
Cost of Attendance (COA)
The COA represents the cumulative expense of the course length. The high quantity can actually shock most people. It should be remembered that not only the tuitions costs but also the boarding and hostel costs, libraries, visitor costs, personal expenses, often a computer and many more are included in it. This cost varies significantly between individuals depending on where the university is located, the cost of living, number of times or the distance from which a person needs to go home, etc.
The calculated EFC or Family contribution is a component in the SAR and an indicator of your family’s share of education costs. This figure is based on some of FAFSA’s financial considerations, including taxed / untaxed wages, the employment of parents, property of your family, family size and other necessary financial conditions, including unpaid loans, medical costs, and number of children in school and so on. The EFC is a clear indication of how much financial assistance you plan to get, which is the estimated cost of attendance, minus the EFC.
It is extremely likely that your parents will not be able to fully finance your college education, through the use of financial aid. However, if you intend to go to college for many years, your parents will relieve your responsibility. In this case, there are many ways to plan:
529 plans allow your parents to invest money to pay potential tuition fees. These are long-term savings plans and they achieve the same outcomes for a longer period of time than any other long-term savings plan. There are two forms-prepaid school schemes and college savings schemes.
Tuition prepaid schemes
Prepaid tuition plans essentially allow your parents to make tuition money prior to starting college, at the current rates. This does not sound like an outstanding investment. But if you know that tuition fees have risen by around 42% for private and 47% for colleges in the last decade, this could be a great investment, not least because tuition fees are projected to be risen by 5% annually over the next decade.
The maximum amount of the funds charged depends on the average tuition of public colleges in state countries. You have to pay the difference in charges if you want to go to a private college, or to go to an out-of-state public college. These plans also have a negative impact on your financial aid opportunities.
Saving Plans in College
529 College savings plans encourage your parents, along with tax incentives, to spend some money per year on your college tuition. However, unlike pre-paid tuition plans, these savings plans are not guaranteed and, depending on market conditions, will either appreciate or depreciate.
Parents can opt for investments with options ranging from high-risk, high-return equity funds to much safer, low-growth fixed-income investments with shorter investment horizons.
Another advantage of college savings plans is that, unlike prepaid tuition plans, this amount can be used for virtually any COA cost, such as books, boarding, and housing, supplies, etc.
A further good option for long-term school savings is the Coverdell Educational Saving Account. They are very versatile with limitless investment options, lesser limitations on where you can spend the funds, quick set- up at almost any brokerage company, and no expiration for tax benefits and tax- free withdrawals for eligible educational expenses.
There are, however, some downs and restrictions on who can participate and on who can participate there are also a $2000 annual donation limit. They also have a huge effect on financial aid eligibility.
To find out customized loan options, use College Raptor’s latest Student Loan Finder. Call for ideal student loan-FREE, and don’t forget to compare lenders and interest rates!
Prepare yourself when it comes to FAFSA, EFC, COA, and a bunch of other fun acronyms. Check out saltmoney.org.
I lead product content strategy for SaltMoney. Additionally, I’m helping our broader team of 4 evolve into a mature content strategy practice with the right documentation and processes to deliver quality work.
Prior to Instacart, I was a content strategy lead at Uber Eats and Facebook. Before that, I was a content strategist at SapientNitro, helping major Fortune 500 brands create better, more useful digital content.