130,000 Illinois Students Got Denied College Financial Aid – Will You Fall in this Trap?

Do you want your 8th-12th grade student sitting in this same position when it is time for them to apply for assistance?  Do you have a plan, at least in your head, how you are going to help your child through college?  Have you gotten confused how the college planning process works?

Well, we devoted a whole week on this topic during our daily radio show.  We had top college planning experts in the country dropping their words of wisdom on how parents can really make their child’s dream come true.  Click HERE to listen to those replays.

For some people, they have their child’s college paid for already.  They may have a trust fund established, grandma and grandpa flippin’ for the tuition bill, mom and dad may work at the college themselves so their education is paid for.  That’s great!

However, for the common folk like me, who had nothing but a middle-class upbringing and completely unaware of his options as high school student…we have more work to do.  I thought playing football, basketball and running track was going to get me a scholarship to college.  Although I had many offers, I didn’t know how to negotiate them and what questions to ask.  Boy, was I wrong about a lot of things!

Last week, as I was having my morning cup of coffee,  I read about people like, Melanie Ramirez, a young lady that happened to make the front page of the Chicago Sun-Times, rejected by Illinois state financial aid.  Why?  After all, she is a Latina, she should be at the top of the list for aid, right?  Wrong.  Incorrectly filled out applications and lack of timely submission was part of everyone’s problem.  It didn’t matter what ethnic background you came from – DENIED was your answer.

Click the picture below to view the video:

Click HERE to read this full-page article in the Chicago Sun-Times, it even made USA Today!

I tell you, the feedback we received from our radio show and email comments were amazing!  People wanted to know more about how to navigate through these tough times, especially since college planning does affect your retirement planning.

In the words of my friend, Tim Higgins, CFP and author of the book Pay for College Without Sacrificing Your Retirement, “You can borrow for college but you can’t borrow for retirement…and finding the right college is all about making a wise business decision.”

How are you doing on that “wisdom” that Tim suggests?  Whose mistakes are you learning from?  Yours?  If so, then it is too late.  Just like retirement planning, making mistakes in planning for college can be irreversible and only costs you more money down the road.

According to the Boston Globe (10/2008), the average college student today is graduating with an average of $20k in debt.  Is this how we set up our kid’s for success?  In drowning debt?

Here are some cost-cutting strategies:

1) PLAN EARLY! – Consider this your back-to-school special…getting the books, pens, pencils and new outfits are the easy part!  Discover what you child’s unique passion, ability and desires are.  Encourage them to be MORE of what they want to be based on their God-given natural talents.  Don’t be like my Filipino family who frowned upon anything else that did not involve being a doctor, dentist, engineer, attorney, accountant or…a nurse.  Having your child switch majors mid-way through college not only causes them to stay longer in college but cost more money and time, long-term.

2) Become an ATTRACTIVE STUDENT! – This is for the youngsters.  Your GRADES DO MATTER!  Your extra-curricular activities like the honor society, yearbook club, athletics and music add up to you being a well-rounded student.  Colleges LOVE THAT and will fight over you.  How do they win?  By sending your “grants” and “scholarships” from the colleges themselves! That means LESS MONEY comes out of your pocket so you can concentrate on finishing with your degree faster!  There is a reason mom and dad are so hard on you…there is very little time to waste.  Your future is starting to become more and more in your control so take don’t close the open doors of opportunity on yourselves! (Ok, Parents, you owe me one for that!)

3) SAVE FOR COLLEGE! – Sounds obvious?  Not really.  There is a myth out there that just because you save less means you qualify more for aid.  Families who DO SAVE not only establish a good financial habit but, when they save in the right places, they have an easier time paying for college.  Remember CASH IS KING and saving money gives you options!  Plus, if you can borrow, student loans have some flexibility.  Those who are eligible for a subsidized Stafford Loan, the U.S. Department of Education pays the interest while you are in school at least half-time, for the first six months after you leave school (your grace period) and during a deferment (a postponement of loan payments).  Wouldn’t it be nice to have a nice chunk of cash to pay-off these loans upon graduation?  OR, you can keep paying the loan after graduation, allow your cash to continue to grow and compound in your favor and utilize the power of “arbitrage” in your favor and not the banks! (You HAVE to be disciplined here!!)

4) OPTIMIZE YOUR HOME EQUITY! – By restructuring your mortgage, you can optimize the full value of your home.  I know this sounds a little counter-intuitive because the first thing that traditional financial planning wisdom has told you was pay off your home!  However, in the last 3 years and dealing with this recession, how has following that wisdom panned out for you? Chances are you LOST your home equity due to declining real estate prices and you NEVER harvested that equity when you could have.  But, if you still have an equity line of credit, a little bit of home equity left or happen to purchase a foreclosure property where the house is pregnant with equity…here’s your second chance to maximizing your greatest asset.  By taking control of your home equity, you may be able to increase your tax deductions, free up cash flow, save money by pre-paying college expenses and just have general peace of mind that your money is in your hands!  Lastly, for some private colleges who use the CSS Profile in determining your eligibility for financial aid, large amounts of home equity can actually disqualify you!

5) CALCULATE YOUR EFC to EVALUATE OPTIONS – EFC stands for Expected Family Contributions.  This is one of the most powerful economic tools for evaluating your choices.  As every college handles need-based aid differently, getting to know more about your future college choice, in advance, is important.  You will help yourself in providing them the information they are looking for, what they expect and make some close estimates about what you can reasonably expect to pay and what they will offer.  The variables involved are these four key factors:

• Parent’s income
• Parent’s assets
• Student’s income
• Student’s assets

When you know your EFC and how colleges award aid, you can plan for your costs and start negotiating.  In the words of Tim Higgins, “Acting like a CFO and carefully scrutinizing the numbers of a potential purchase, like college education, gives you more choices.”

In light of what is going on in our economy, there is still hope.  Don’t let the media turn your days of glory into days of fear.  I hope you understand that planning for college, retirement and other aspects of your financial life are all TIED TOGETHER to your overall plan.  The steps you take today will determine how your reach your God-given purpose and destiny.  I hope you join me in helping set up a nation for financial success, rather than financial failure.

Shameless plug (not really shameless because this has SO MUCH value on saving not only money…but TIME!) so here goes…

We have put together an awesome two-part webinar series with two of the nation’s top college planning experts.  This will be held on two-separate evenings, August 4th and 6th, 2009 @  8pm EST/5pm PST (7pm CST and 6 MST).  Details of this can be found on by clicking HERE.

Paid attendees will receive:

• 2 CD set of this series
• Video files of powerpoints from instructors
• Transcripts

Lastly, a BONUS! You will also receive a private, 1-on-1 interview I conducted with Jon Belles of College Funding Solutions – a leading college planning provider in the US via a MP3 download.

In case you missed this webinar series, you can still purchase this special Money for College hosted by Money Smart Radio by continuing to register and following the links you receive in your email.

RECOMMENDED READING: