Case Studies

There are a lot of moving parts in the college planning process.  One of the key areas involves qualifying for financial aid.  How do the colleges establish your financial need?  And how can you get them to meet that need with free money for college rather than with tons of student loans?
The answers are as varied as the number of colleges who provide them.  However, we have found that you will most likely fit into one of three main categories when it comes to qualifying for financial aid.Before covering them, let’s define some terms.

Cost Of Attendance (COA) = The total cost of everything for one year at that college – basically, the sticker price.

Expected Family Contribution (EFC) = Your family’s estimated share of the college bill based on 74 criteria established by the Federal Government and the Department of Education

Need = The difference between COA and EFC.

Obviously you want to establish as much Need as possible in order to maximize your financial aid package and that takes time and know how to do morally, legally and ethically.  Also keep in mind that colleges won’t necessarily meet all of your Need.  Any unmet need gets added back to your EFC – and ultimately your out of pocket cost.

Which category do you fit in when it comes to qualifying for financial aid?

Category 1

This category is usually, but not always, characterized by a lower than average household income and usually very little savings, with often nothing earmarked for college.  This can be a single mom trying to keep food on the table, a struggling business owner who is using everything that comes in to keep the business going, or someone who has been out of work for a while.  Of course, there are other situations that would qualify for this category, but in general you can expect an EFC of under $10,000 and a lot of free money for college at this level.

Category 2

Families in this category usually have good incomes (between $70,000 and around $120,000) and some assets for college, retirement, and otherwise.  They may have accumulated some home equity, but not always.  Depending on the details of the situation, there may be substantial planning opportunities available to them that can drastically reduce their EFC and improve their overall financial condition.  This category doesn’t always receive aid, but for those in this group, it’s worth a look to see if they qualify before making any major decisions for college.

Category 3

Those in this category come in many shapes and sizes.  They could have a high amount of assets and savings at their disposal or multiple six figure incomes – or both!  They often live in higher priced homes and have a good amount of home equity and maybe a second home with even more equity in it too.  By all outward indications, they think they make and have too much to qualify for financial aid – but think again!  Depending on their goals and how their finances are structured, they may be eligible for boatloads of financial aid.  We may also be able to implement a “tax scholarship” that can save them even more!

So how much can a family in each category expect to gain by implementing a sound college plan? 

Here are some examples of real clients we have worked with over the years.  You’ll see the before and after scenarios along with the awards they received.

Category 1

Single Mom with no help from dad
Before Planning:

Income                             $26,772

Assets                              $49,300 (mostly in the student’s name)

Home Equity           $74,000

Family Size                       2

Number in College   1

EFC                                  $7,863

After Planning:

Income                             $26,772

Assets                              $49,300

Home Equity           $74,000

Family Size                       2

Number in College   1

EFC                                  $0

Like so many other hard working single moms, this client was overwhelmed at the thought of putting her daughter through college.  Her ex-husband had not paid child support, and she couldn’t count on anyone else to help her share the load.

We developed a plan that showed her how she could keep control of her limited amount of savings, qualify for free money for college, and afford the education of her daughter’s dreams!  In fact, based on our conservative projections, the mom will be in better shape financially by the time her daughter graduates, and the daughter will be able to graduate without any student loans!  Both are very happy and moving forward toward successful futures in spite of the financial challenges they have lived with for so many years.

Category 2

Middle class couple with 3 children bound for private colleges

Before Planning:

Income                             $112,236

Assets                              $186,590 (with some in the student’s name)

Home Equity           $58,500

Family Size                       4

Number in College   2

EFC                                  $41,711

After Planning:

Income                             $112,236

Assets                              $216,590

Home Equity           $24,000

Family Size                       4

Number in College   2

EFC                                  $11,660

Category 3

Wealthy former business owner with 2 in private college and one more on the way

Before Planning:

Income                             $161,411

Assets                              $4,200,000 (from the sale of a business)

Home Equity           $1,200,000

Family Size                       5

Number in College   2

EFC                                  $201,748

After Planning:

Income                             $161411

Assets                              $4,200,000

Home Equity           $1,200,000

Family Size                       5

Number in College   2

EFC                                  $8,918

While the circumstances behind this case are unique, it’s worth showing you the impact a sound college plan can make, even for someone who has been very financially successful!  By reorganizing some of the pieces of their financial puzzle, we were able to keep everything working together in a way that allowed this client to access their resources for day to day cash flow and still qualify for a huge amount of financial aid!

The cost of attendance at the private college was around $110,000/yr and their EFC was almost twice that at over $200,000/yr.  By using strategies available to everyone within the college planning code, we were able to reduce their share of the bill to under $9,000.  And here’s the best part, the college they are attending meets 100% of their family’s financial need with grants – no loans!  How’s a $100,000/yr. of free money at one of the top universities in the country sound?  It is possible with the right plan!