Category Archives: Cost saving strategies

What Year? (2020 Edition)

It’s hard keeping track of what matters when in the prior-prior year world of the FAFSA and CSS Profile. Here is a table summarizing tax year and asset dates for the next few college years:

School Year 2020-2021 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027
FAFSA/ PROFILE Income Tax Year 2018 2019 2020 2021 2022 2023 2024
Assets As Of Oct* 2019 2020 2021 2022 2023 2024 2025
AOTC Tax Year** 2020, 2021 2021, 2022 2022, 2023 2023, 2024 2024, 2025 2025, 2026 2026, 2027

To summarize based on where you are in high school:

Sophomores, this year is your first FAFSA income year. This year is your base year for EFC purposes. All future years will be compared to 2020.

Juniors (and seniors), 2020 income will also count for you for FAFSA purposes, but not until your second year of college. Families of juniors should think about what retirement contributions they can make this year and what to do with student summer job earnings to remove assets from the calculation come fall.

* Assets are as of the filing date, which may be as early as October or into the following year depending on the school’s filing date.

** Remember that the AOTC can only be claimed for four tax years, so families should decide whether the fall of freshman year is better than spring of senior year for claiming. With the income limit of $160,000 (married filing joint) or $80,000 (single), some families might not be eligible every year.

Parents may find that different strategies are needed during different years. For example, a family with a student beginning college in fall of 2022 might reduce pre-tax retirement contributions this year (to increase taxes, which are deducted from income on the FAFSA and therefore reduce EFC) and then maximize contributions beginning in 2022 to reduce AGI for AOTC claiming purposes.

Thinking of Transferring? Think Fast

If your student came home for the holidays unenthusiastic about their school and considering transferring, your first impulse might be to tell them to tough it out for the year and reconsider come summer. While that’s probably good parenting advice, it might not be good financial advice. In fact, students who are thinking of transferring are usually best off making the decision sooner rather than later.

Why? Because most schools offer substantially larger financial aid packages to incoming freshmen than to transfer students, and only those with less than a set number of post-high school credits qualify as incoming freshmen. Furthermore, once students have accumulated a certain number of college credits, their transfer application is based on their college GPA, not high school. A student who did well in high school but then underperformed in college will probably want their high school GPA to be the basis of an admissions decision.

The differences can be huge. For example, the highest merit award for incoming freshmen at the University of Oregon is $15,000 annually (a student receiving the Summit and Presidential award), and those scholarships renew automatically for four years. Transfer students, on the other hand, are eligible for a maximum of $3,000 in merit aid and must reapply every year. Similarly, the University of Florida offers up to $10,000 in merit aid to freshmen; as for transfer students, “While the Office of Admissions does not offer scholarship opportunities for transfer students, there are two scholarships offered by the Office of Undergraduate Affairs dedicated to Florida College Transfers.” These are a maximum of $4,000 and offered to a total of 12 students, with only two receiving the maximum $4,000 award.

If your student is thinking of transferring, they should research transfer vs freshman requirements and financial aid eligibility at the school they’d like to transfer to ASAP because this is one instance where a quick decision is often the best decision.

Cost of Attendance: What’s Included?

Among the apples-to-grapefruit aspects of planning for college costs is the substantial differences in what’s included in Cost of Attendance at different schools. All schools will quote costs for tuition and fees, room and board, books and supplies and personal expenses. But often, those are just a starting point. Continue reading Cost of Attendance: What’s Included?

Retirement Contributions and College

Perhaps the most frequently asked question we get is how to balance saving for retirement and college. And I can’t answer that in a blog post because the right way to balance depends on your specific circumstances. We have told clients to pause retirement savings to meet college years cash flow needs, we have told clients to stop funding college and focus exclusively on retirement, and everything in between. What I can do is help you to understand how retirement savings impact college. Continue reading Retirement Contributions and College

Why Saving Early for College is So Important

A recent Sallie Mae study shows that on average, parents begin saving for college when their child is 7 years old. This makes sense: it’s right around when a child transitions from preschool or full-time daycare to full-time school, so for many families it’s the first time that they have any financial breathing room. Continue reading Why Saving Early for College is So Important

Haven’t Done the FAFSA Yet? Here’s Why You Should

Many families think there’s no point in doing the FAFSA because they assume they don’t have financial need. That reflects a fairly limited view of the FAFSA; in fact, there are plenty of good reasons why every family of a student who’s even potentially college-bound next year, regardless of the family’s financial position, should do it. Continue reading Haven’t Done the FAFSA Yet? Here’s Why You Should

FAFSA vs Profile

The FAFSA gets a lot of attention right around now, but it’s only one of two financial aid forms. The other is the CSS Profile, used primarily by private colleges and universities.

The Profile differs from the FAFSA in several major respects: Continue reading FAFSA vs Profile