As summer winds down, most Florida parents are prepping for the next school year. If your teen is heading into his/her junior or senior year, you may be fretting about how to pay for their college tuition. One issue that concerns parents today is whether their federal student loan debt will affect their child’s eligibility. The answer is, generally, “No.”
However, if you are struggling to maintain payments while still trying to help your child avoid mountains of debt, you may need some help of your own. At Lewis Roberts, PA, I often assist clients in managing their student loan debt. We can sit down, discuss your situation and determine which of the nine repayment programs meet your needs the best.
To help keep your student’s college tuition manageable, here are some common mistakes that can affect eligibility for financial aid.
Waiting or Failing to File the Free Application for Federal Student Aid
If there are two adult incomes available to contribute to tuition, you may assume your child will not qualify for need-based aid to help you pay for college in 2020. That is likely, not true. Financial aid algorithms are complex, taking into consideration a wide range of factors. They also disregard items such as net home equity and retirement plans.
You may be thinking about waiting to find out what next year’s taxes look like before filing the FAFSA. Don’t wait! Students who submit their applications early often receive significantly more aid than those who wait until later in the year – as much as twice the amount. Many states and schools have early deadlines, and they distribute funds on a first-come, first-served basis. File early and amend the forms if needed.
Overlooking the Potential of Scholarships
In addition to local and activity-based scholarships, there are also funds available for certain types of degrees and through a variety of foundations. This money is in high demand and awarded early. Many families wait until the Spring semester of their teen’s senior year before looking for ways to pay for school, missing most of the deadlines.
Many parents overestimate their child’s eligibility for merit-based aid. The competition for full-ride scholarships is extreme, and only a select few receive those awards. Start looking for private scholarships now, even if your student is only heading into 11th grade. This will give you time to make scholarships an integral, and potentially substantial, way to pay for college.
Failing to Capitalize on the American Opportunity Tax Credit
This partially refundable tax credit is worth up to $2,500, based on $4,000 in textbooks, fees and tuition. The IRS prevents double-dipping, so you cannot get both the AOTC and tax-free distribution from a 529 college savings plan. To qualify for the maximum amount possible, find $4,000 in expenses that will be paid for with loans or cash, each year.
Choosing a school based on the amount of aid awarded
Many families choose the college based on how much in aid they receive, rather than the net price. Although it may seem counterintuitive, this can result in making a more expensive choice. Calculate the net cost of college by taking the total costs and subtracting all gift aid. This includes tuition waivers, grants, scholarships and any other assistance that does not require repayment.
Consider out of state versus in-state tuition. The out of state school costs $50,000 per year, and they are offering a merit-based scholarship for $10,000. The net price is $40,000. There are many Florida schools which may offer equivalent scholarships. By taking advantage of in-state tuition, which may cost half as much as the out of state school, you could bring the net price down significantly.
The general rule is that total student loans should be less than one year’s salary. Although that may not be practical in all situations, it is a place to start planning. When looking at colleges, don’t ignore the costs because your student has his/her heart set on going there. The result could be decades of unnecessary debt.
Contact Me Today
Is your Florida federal student loan debt making it difficult to finance a car, buy a home or go on vacation? Contact me today or call 407-749-0080 to learn how I may be able to help you with student loan debt, bankruptcy or stopping foreclosure on your home. Lewis Roberts, PA law office is easily accessible from I-4. We are midway between 436/Altamonte Drive and North Street at the intersection of E. Orange Street and Palm Springs Drive.