03 Apr 2025 Navigating College Funding Options
Somehow, it’s already April. Hopefully those of us in North Carolina are almost through The Pollening and into Actual Spring.
April is also the month when high school seniors compare financial aid offers and make final school decisions. The recent changes in the Department of Education throw another level of uncertainty into an already weighty decision, as one of the Department’s roles is to administer Federal Student Aid Programs. In these times of uncertainties, it can feel paralyzing to make big decisions without knowing what the broader landscape will look like in several months or years.
We frequently talk about focusing on what we can control when investing. Beacon built its investment philosophy on those things – minimizing costs, investing tax-efficiently, eliminating market underperformance, and avoiding behavioral mistakes. We can take a similar approach when contemplating other planning decisions, like choosing and funding college education. We can focus on what we can control, including:
- Starting the research process early!
- Getting educated on costs and the different methods schools use to offer need-based or merit-based aid. Sticker price often is irrelevant.
- Understanding the capacity of your financial resources and evaluating trade-offs within your financial plan if there are competing goals for the same funds.
- Having open conversations with your student(s) to make sure everyone is on the same page early on in the college search.
- Protecting any designated assets by adjusting the investment allocation when approaching distribution years.
Example Application Timeline
To help this feel more concrete, I will use a current high school freshman as an example in this timeline below.
2024-2025: 9th grade. Start your research now! It may feel early, but getting a decent grasp of the landscape and financial aid/scholarship process can really help set you and your student up for success in later high school years when the stakes are higher. Research schools and know which schools offer discounts, whether merit or needs based. How much of an education expense do you hope to cover? Is that realistic? Are there any changes necessary in your overall financial plan to accommodate that level of spending? For example, what if you had to reduce your retirement plan contributions to pay for a portion of college expenses from your cash flow? Would you be willing to work longer to make up for those paused savings?
2025-2026: 10th grade. Continue the above! Once you understand the extent of college costs you hope or plan to cover, start having conversations with your student. Getting on the same page early can help set expectations before actually applying to schools.
2026-2027: 11th grade. For a student that plans to start college Fall 2028, the tax year 2026 (spring sophomore year/fall junior year) is what you will use on financial aid applications.
2027-2028: Senior year is busy (as you already know)! Hopefully, some of the earlier years prep makes this less overwhelming. Below are some of the key months.
Summer/early fall 2027: You can prepare by gathering updated balance sheet data and familiarizing yourself with upcoming deadlines.
August 2027: Your student applies to schools and any scholarships. Early decision deadlines are typically November 1.
October 2027: Submit FAFSA (federal aid) and CSS (non-federal aid) applications by November 1.
March – April 2028: Analyze and appeal any aid offers.
April 2028: Choose school and accept aid package, if any.
May 2028: Consider how to cover any shortfall.
Fall 2028: Reapply annually to aid!
Options for Financial Aid
FAFSA: The calculation changed in the last few years with a revamped application. And now with the recent changes in the Department of Education, we can likely expect more delays in this process. You submit your information to the federal government, which gets your information over to the universities, then the universities distribute funds in the form of aid letters to students. With less staff to support this process, families may have a compressed decision time to compare offers. This is another reason to prepare early, apply early/on time, and ensure accuracy to prevent slowdowns.
Below is a chart to explain the calculation used to determine eligibility. As you can see in this chart below, grandparent owned assets are not included in the formula for the Student Aid Index used to determine your financial aid eligibility. And more of a student’s assets are required to be used. So purely from an aid calculation perspective, it is best for assets to be owned by grandparents, then parents, and then the student.
CSS Profile: Many private schools and scholarship programs use the CSS Profile to award non-federal institutional aid. Check your colleges to determine if this is required. The CSS Profile uses an Institutional Formula to calculate potential aid. One of the bigger differences is that some schools still include a sibling discount in this calculation, whereas that was removed from the FAFSA consideration. This application can unlock institutional money, grants, or scholarships opportunities.
Some families wonder why apply for aid if they know they will not qualify. There are a couple reasons. Imagine a worst-case scenario in which the higher earning spouse loses his/her job or passes away unexpectedly. You can report special financial circumstances to be reviewed, and it is much faster if you are already in the system. Sometimes schools require that you apply to FAFSA for their own aid programs or scholarships, which may have different calculations than federal aid. You could use an offer from one school to appeal the offer from your preferred school.
Resources to Consult
I mentioned one of the most important things you can do early is to get educated. College funding can feel a bit like a maze. Junior and senior years are full with academics, testing, tours, and applications, and you can help yourself by preparing for the cost early. Here are some helpful websites and tools to explore.
- College Data: Compare schools, look at their admissions data, financial aid information, deadlines. This also helps search for scholarships.
- Saving for College: More details on how to save and student loans. Their guide on 529 eligible expenses is particularly helpful.
- College Planning Essentials from JP Morgan: If you really want to dig into the data, this report shows trends and current data on why college matters, college costs, and financial aid.
- CFNC Smart Borrower Calculator: Look up how much to borrow based on desired career choice and anticipated graduating salaries.
Whew – that’s a lot! We are here to help you navigate these decisions and can involve any other college financial experts to consult when needed. There are local and national groups that can help dig into school comparisons from a student fit perspective and financial perspective.
Good luck to all the seniors making their final decisions right now!
The content above is for informational and educational purposes only. The links and graphs are being provided as a convenience; they do not constitute an endorsement or an approval by Beacon Wealthcare, nor does Beacon guarantee the accuracy of the information.
