What Are Parents Paying For? Part 2

Last month's newsletter asked the question: why parents should pay for a college education when students work and study 40% less than they did 50 years ago, graduating knowing less each year.

In part two of "What Are Parents Paying For?" this newsletter will address what consumers are learning; that a pint of ice cream costs more for two ounces less. Colleges are no exception.

So, what is it that parents are paying more for and what is lost in those two ounces?

Too many of the people charged with actually teaching our students are not tenured professors. What we get are Teaching Assistants (TA's), part-time adjunct professors barely making minimum wage, decreases in career services, fewer majors and athletic programs, and a cutting of overall student services.

Even at the elite and more selective colleges, students are not being educated by full professors. Colleges make money on research, and that is what professors spend most of their time on. They have little incentive to teach.

Teaching Assistants are graduate students who are working on their post graduate degrees and need to earn money to pay for tuition and have no real interest in teaching. They do it to survive.

Start Looking For Scholarships Now

It's hard to believe, but some scholarships have deadlines beginning in August. Too many students treat the scholarship search almost as an afterthought. Students needing money to pay for their living expenses, such as books, supplies, personal items, etc. can use whatever free time is left of Summer to research and apply for free money.

The idea of finding scholarships can cause a little anxiety, but it doesn't have to if they know where to look. Google "scholarships" and you will find dozens of search engines. The better ones are: The College Board's Big Futures, FastWeb, Going Merry, Bold.org, and Cappex.

Each month, we provide you with tips on your best ways to pay for college regardless of your financial situation.

Who Is The Custodial Parent?

Historically, the FAFSA definition of the "custodial parent" was the parent that the student lived with for the majority of the 12-month period ending on the day the FAFSA application is filed. This often created a very favorable financial aid award if the student was living for a majority of the year with the parent who had lower income and assets.

Under recent amendments to the FAFSA, no matter the living situation, students will now report financial information solely for the parent who provides the most financial support.

For the 2024 - 2025 school year, the new FAFSA rules require the parent who provided the most financial support in the "prior-prior" tax year to complete the FAFSA application instead of the custodial parent. Prior-prior refers to the tax year two years before the beginning of the college semester. For the 2024 - 2025 award year, FAFSA would be looking at the 2022 tax year for this determination.

For example, Dick and Jane got divorced five years ago, and their daughter Sally will be a high school senior this Fall. Jane is a homemaker. Sally lives with her mother for the majority of the year, Dick makes $300,000 per year, and pays Jane $25,000 per year in child support and $40,000 per year in alimony. Under the old FAFSA, Jane would be considered the custodial parent, and completed Sally's FAFSA using her annual income and assets. Since Dick is not the custodial parent, Dick's income and assets were not included on Sally's FAFSA.

Under the new FAFSA, as Dick is providing the majority of the financial support via child support and alimony payments, Sally's FAFSA would now be completed using his income and assets. Since Dick's income is substantially higher than Jane's, it would most likely reduce or eliminate eligibility for need-based financial aid.

In another situation Dick's income is still much higher than Jane's but she earns $40,000 per year and receives child support of $25,000.

Just because Dick earns more money than Jane doesn't necessarily mean Dick is actually providing more support than what is required by a divorce decree.

In another scenario, Dick has remarried, and his new wife earns the majority of income. They file a joint return showing $300,000 in adjusted gross income. According to the new rules, Dick would be required to file the FAFSA, and again cost Sally financial aid.

In any number of circumstance, it would be in Sally's best interest to use her mother's income and assets on the FAFSA. Later, if a college aid office questions or dispute this, an appeal could be submitted supporting this filing.

There are many changes to the financial aid system that may negatively affect the planning that parents have done to prepare for college costs. Given these changes meeting with your college financial planner is more important than ever.

With all the changes related to financial aid eligibility and college affordability that are going into effect this fall, contact Lindsey Curry at 330-345-5000 to schedule a college-planning consultation. We can help to ensure that, despite all the changes going into effect, you can still save considerable amounts of money college costs, avoid needless student loan debt and improve your retirement savings outlook. It requires that you have access to the actionable information and advice needed to make smart, informed and prudent college selection, planning and funding decisions and that is what I am going to help you do!

Have a great summer!