Marc Ruiz of Oak Partners, Mind on Money: Dealing With College Costs

Marc Ruiz of Oak Partners, Mind on Money: Dealing With College Costs

The game wasn’t going my way. Although I didn’t really have a dog in this fight, I typically root for our Big Ten cousins in national games, and the Wolverines had lost all momentum early in the second half.

So I was already a bit perturbed when my 17-year-old asked, “Dad where is Villanova?” “It’s near Philly”, I replied, “out east”.

I saw her tapping into her phone. “Dad, did you know it was Catholic?” “Yes it’s Catholic”, I replied, seeking to focus on the mess unfolding on the TV.

“Maybe we should do a college visit there, it looks pretty”. My two-word response was designed to move us beyond the interruptions, “It’s expensive”, I said, hoping she would get the message.

My kids all know the standard Dad line when it comes to college costs. “You can go to school wherever you want, I’ll pay for Purdue”. It’s not really intended to mean how it sounds.

Of course, I will support choices to go to other schools besides Purdue, but all of the family’s college savings financial planning is based on the cost of an Indiana state school (which I think provide tremendous value to Hoosiers) and so this baseline cost should be assumed to be the extent of their Dad based financial aid.

The exchange reminded me I already had some conversations planned to help clients decipher their college financial aid award letters, which have been arriving following the acceptance letters over the past few weeks.

This is the sobering moment after the Facebook post of the soon to be graduate proudly holding their acceptance letter. The moment that leaves Mom and Dad thinking “that number is after the financial aid?”.

By now the FASFA has been filed, the planning is what it is, and it’s time to actually pay for this show. Unfortunately, not all schools have adopted what is called the Financial Aid Shopping Sheet (FASS) developed by the CFPB, and so many school’s award letters are still, in my opinion, confusing and perhaps unintentionally misleading.

That being said, whether a family is reviewing a standardized FASS or a school’s specific letter, the items illustrated are the same and need to be understood to the highest level possible before decisions are made.

If an aid package letter did not come in the FASS format, I would still recommend reviewing a sample of this letter online.

Of course, we all like free money, but only one section of the FASS actually displays “free money” in the form of grants and scholarships from the school itself, Pell grants from the federal government or other grants and scholarships the student has been offered.

The financial aid letter will also list the loan packages available to students with the family’s FASFA need profile. Of these loan programs, which are often misconstrued as “free” aid on some letters I’ve reviewed, only the Federal Perkins loans and Federally subsidized direct loans are needs based and involve attractive terms. While Federally unsubsidized loans do not require payments while the student is attending school, interest still accrues after disbursement.

After school and government grants and scholarships and Federal loan programs is where the real heavy lifting begins. Of course every family is unique, but my general order of preference on family contribution funding sources is parent and student income, then 529 plans, savings bonds, personal savings, life insurance cash values, home equity, 401(k) loans, IRA education withdrawals and finally PLUS loans and only then private student loans.