Merit and need-based aid are the two major types of college funding that do not require repayment. Understanding the difference between them can save a family time and money, and help with college selection. This knowledge also helps a family save on the cost of college. As you know, we have been reviewing and discussing three aspects of creating a college funding program: saving for, shopping for, and saving on the cost of college. Saving for college employs a combination of 529 accounts, taxable accounts in the parents’ and/or child’s name.

Shopping for a college means finding the right fit academically, socially, and financially. Parts of the social and academic apply to the financial side. For example, a student’s GPA and test scores may help qualify him or her for a scholarship. The social component may have added costs, such as fraternity or sorority dues. Other types of clubs may be free. A family must also know how much it can afford to pay before the child attends a higher education institution. In performing this first task, feel free to download my college funding snapshot report. This report offers insights into the current funding status of the student’s higher education.

Saving on the cost of college means understanding the resources beyond savings that you can use to create price breaks. We typically call this bargain hunting or smart shopping to ensure you do not overpay. For example, while looking for deals online, you likely have come across a promotional code to receive a discount on a product or service. Perhaps while buying your last vehicle you received a rebate or 0% financing. You should pursue saving on the cost of college with the same vigor and skills. One way to create a price break for college, as mentioned before, involves merit. A second way to create a price break bridges shopping for college by strategically applying to universities with favorable need-based practices.

Understanding Merit-Based vs Need-Based Financial Aid


What is merit-based financial aid?

Merit-based aid is money based on something other than financial need. We often hear about sports or academic scholarships. For the latter, students must commonly maintain a minimum GPA. To qualify for the academic scholarship, the student must typically have met certain academic standards. An example may be a school that gives an automatic scholarship to students who earn a minimum SAT/ACT score with a certain GPA upon high school graduation. Other times, students must write essays or participate in civic activities or interviews. For more prominent universities, the student may have to provide a combination of all these.

As the definition suggests, merit-based money may be awarded for many types of actions. When considering merit aid, a family must be aware of a few things. If the scholarship is private, is it a one-time payout? How much effort will the student be exhausting for the scholarship? For example, if two scholarships are under consideration and require equal amounts of effort, students should apply for the higher payout. For multiyear scholarships, what standards must be met? If the student does not finish his or her degree or meet the standards, will the student be required to pay it back? Families may want to consider scholarships that “prepare” a student for the college application, which may require an essay. Specifically, does the scholarship essay ask the student to state what makes him or her different and the best fit? The student may be able to use this material later for the application essay. Make changes to fit the specific need; the more the student tells his or her personal story, the stronger his or her confidence will become and the more easily he or she will be able to tell the story in the future. This also creates efficiencies in the application process for other scholarships and college applications.

Merit aid may come packaged in a few ways. The first is a competitive scholarship. Here, students compete against one another in a range of areas, including interviews and essays. The second merit aid is more like a grid of test scores and GPA. If you earn a certain score and graduate from high school with a certain GPA, you may receive the funds automatically. Following is the merit scholarship from Miami University.

The last form of merit aid is a package from the university. Here, the student may receive funds based on a combination of factors, like extracurricular activities, interviews, GPA, and test scores.

A merit-based conversation would not be complete without a discussion of sports scholarships. I left these out for two reasons. First, many parents expect their children to receive some type of aid if the student was a better player on his or her sports team. However, the numbers don’t bear this out. Eight million high school athletes compete each year in the United States. Only 480,000 of those athletes will compete on a collegiate level (1.). That means roughly 1 in 16 high school athletes will compete at this higher level. Further, only 150,000 students in Division I and II schools receive athletic scholarship offers. Even then, they may not be full rides, leaving parents and students with some out-of-pocket costs. Division III schools do not give out athletic scholarships. However, it is not uncommon for a small group of student-athletes to receive some other type of merit-based aid.

What is need-based financial aid?

Need-based financial aid reflects the student’s and family’s ability to pay tuition. This does not stem from anything other than financial need. The driver for need-based aid directly reflects the basis college funding formula.

Cost of attendance – Expected Family Contribution (EFC) = Need

If you recall from my other article outlining the EFC, this is what the government thinks your family may pay based on the student’s income and assets as well as the parents’ income and assets. Typically, the largest driver in the EFC is parental income. Decreasing the EFC is one way a family can try to increase need. A second and often overlooked alternative involves increasing the cost of attendance. Typically, this involves bringing out-of-state state schools and private schools into the picture for consideration. On a side note, more out-of-state schools are offering in-state tuition prices for neighboring states. For example, I learned that several Ohio universities, both private and public, were offering in-state tuition to incoming Indiana students. A later blog post will provide more details about this pricing reciprocity.

Remember, you are trying to get the lowest net price possible. Combining the EFC and attendance strategies may be another option. However, most upper-middle-income families do not consider these tactics because they do not fill out the FAFSA or CSS, which also serves as an application for many school-based grants and scholarships.

Understanding merit-based and need-based aid does not stop here. Families must also understand the differences between institutional and private scholarships

Private and Institutional Scholarships

One of my favorite activities is fly fishing. Admittedly, I am not good, but the simple act of casting a line over moving water with a smooth movement of the rod back and forth is beautiful. I make a few special trips each year to earmarked locations simply to engage in this activity. The experience creates the proverbial fishing stories we hear, tell, and share with friends. In my case, though, I can count on one hand the number of fish I have caught with a fly rod.

What does this have to do with scholarships? It seems that families have the same experience with scholarships. We hear and share stores about the “big money” given to the boss’ nephew’s daughter, or maybe our student even gets a few scholarships himself or herself. Often, it will be a few one-time hits for a few hundred to a couple thousand dollars from a specific nonacademic source, like a community foundation or business. These nonacademic sources provide private scholarships.

Institutional scholarships are given through the big players, like universities and the government. In fact, undergrads receive a much higher dollar amount from institutional money than from private scholarships.

I make this point not to say that private and employer-based grants are not important, but rather to explain where the large pool of money sits. Back to the fishing analogy. If I want to catch several fish, I should stop using my fly rod and instead fish with a stick of dynamite. Families may gain more aid money for their efforts if they refocus on where the large pool of money sits.

An important side note: If your family plans to use a college financial aid company or individual, make sure you understand what they are providing. Last year I attended a seminar that promised to get my daughter scholarships and get her into “great institutions.” However, the burden of the work for getting the scholarship still rests on the student’s shoulders; the aid company may simply screen for scholarships for which they suggest the student apply. The student must still write the essay. Some free sites match the student and the scholarship opportunity. Many of the best opportunities come from specific scholarships at the school. When you are shopping for schools, it is a good idea to ask about grants and aid at the university and department levels.

Merit vs. Need Tendencies

Colleges often favor one form of merit or need-based financial aid. Knowing how your prospective school favors aid will help you create a college funding strategy. Let’s take a look at two examples.

The University of Notre Dame has 100% of financial need met, with 79% of the funds coming from scholarships and grants and the remaining 21% coming from loans and/or jobs. Miami University meets only 59% of a student’s financial need, with 59% coming from scholarships and grants and 41% coming from loans and/or jobs.

In a nutshell, Notre Dame focuses more on meeting the student’s financial need while Miami seems to focus on the grid system. Does this make Notre Dame better? No; the two universities simply take a different approach to scholarships.

How do I take advantage of need-based or merit-based financial aid?

Hopefully, you have picked up on the fact that most schools lean one way or the other in dispensing financial aid to students. Families should become familiar with where the schools on their list lie. The best way to perform this task is to lay out a grid for the student as a means of understanding where to focus.

It is not enough to say that a school leans more toward merit or need aid; after all, the student will be the one attending school. A family’s best aid option does not lie on a clear path. Rather, a continuum exists. Income shows the point. The parent’s income will most likely be the biggest driver in controlling the Expected Family Contribution or EFC. We know families make $0 to millions.

The continuum exists on the GPA and test side of merit aid. There is no pass/fail.

The best way to understand where a school sits is to create a grid style of analysis, like the one below.

Start by asking, “Where does the student fall on the chart?”

Are you high need and high merit (quadrant II)? Or maybe low need and low merit (quadrant III)? This will in large part determine the tactics you can leverage to help with your college funding.

An example

Let’s imagine we have two students, Jonny and Suzy. Suzy was diligent in keeping a high GPA, was part of the band, and joined a few clubs to round out her extracurricular activities. She also scored well on her SAT. Jonny was not as active and did not keep a high GPA, nor did he score well on the ACT or SAT. As you can see, we have a high-merit student and a low-merit student.

Let’s further assume that Suzy was raised by a single parent who worked three jobs to make ends meet. Jonny’s parents work in middle management at the local Fortune 500 company, making at least $100,000 each.

Now we know where each student lies. Suzy will be in quadrant II as a high-need and high-merit student. Jonny will be in quadrant III as a low-need and lower merit student.

What comes next?

Each student should continue plotting his or her list of schools on the graph. Do the schools meet a high percentage of need? What about merit? Students should take note of the schools located in their quadrant. While acceptance is not guaranteed, these schools will likely be the easiest for the student financially.

While we have clearly divided the graph into quadrants for discussion purposes, a fuzzy divider exists as you move from one quadrant to another. Students and families must ask the following two questions:

– Which factors move the student around in the quadrant the most?

– Which levers must we pull to get us closer to the school we want?

The first question identifies those factors on which a family may work to improve its college funding plan. The second question introduces action the family can take to move the student to a better position relative to the school.

Let’s get back to Johnny and Suzy.

With Johnny being in quadrant III, he can focus on selecting a favorable school, getting a higher test score, and receiving “tax scholarships.” The latter point means using the tax code to find funds that help pay for school. The two most common examples are the state tax benefits provided by contributing to a 529 and the American Opportunity Tax Credit (if the parents qualify.) Selecting favorable schools means paying more attention to the choice of in-state vs. out-of-state and public vs. private. Price will be a bigger factor. The last component, higher test scores, helps the student work on merit. Not all scholarships are given to high-merit students, but higher test scores help as the university seeks to bring in the best freshman class it can; test scores are a key ingredient for creating a great incoming class.

Suzy, being in quadrant II, has many alternatives. High need means focusing on those schools that meet a large percent of the need. If Suzy and her mom can get the Expected Family Contribution down even lower, her need increases. Lowering their EFC may be another way of helping with college funding. Merit money based on GPA and test scores open the door to those schools that provide merit-based aid. Working on her test prep to gain a few extra points on the SAT/ACT may mean thousands of additional dollars in institutional aid.

The small difference each student makes in his or her plan can yield larger cumulative savings and cost reduction.

Have questions about where to start your college funding plan? Download the College Funding Snapshot Report and watch the video on how to effectively use it.





HOW TO PICK A COLLEGE: 6 Factors to Help

Can you imagine wanting a car and heading to the dealership located close to where you typically park, then seeking acceptance from your friends and family for your purchase? This seems like a ridiculous way to buy a car, yet this is exactly how most families approach higher education. Most families select a college based on location and flash when other important factors should drive the selection.

As college consumers, we must change the way we approach higher education. Families must save for, shop for, and save on the cost of college. So far in our series, we have talked about saving and covered information about shopping for college. Saving for college means starting as soon as you can. Accounts like the 529, custodial accounts, and taxable brokerage accounts in the parent’s name help satisfy the saving portion. As we know, shopping for college occurs when the student is close to the age of 18 and means developing a budget so you know how much you and your student can spend on higher education.

Shopping for a school also means knowing the best fit for the student socially, academically, and financially. These are important characteristics because they will ensure a better fit, thereby resulting in more happiness and satisfaction and a lower cost. However, many families don’t properly consider these characteristics, which results in longer academic careers, higher costs because of the extended time at school, lower satisfaction, and missed income from the student not working.

How we pick a college

Most students choose a college that is within a few-hour drive from home. When families tour colleges, the larger names spend large amounts of money to create a warm, glowing front. Admissions counselors tour the state or region, attending college fairs to attract the next freshman class. We can’t forget about sports; how often do we hear a university’s name for the first time during a sporting event? Think about the NCAA basketball tournament and the big names – and the “Cinderella” teams that rarely take part. The point is, the flash mentioned earlier is all around; reputation is a big factor in choosing a college. The reputation may be for academics, research, sports, or partying.

For those families that do a little more research, popular rankings like the US News and World Report one become a common tool. However, the question remains: Do these rankings correlate with success and better well-being after college? In a 2012 blog post (link to the post), a popular college admissions expert, Lynn O’Shaughnessy, notes: “Unfortunately, the methodology fueling the rankings are a collection of subjective measurements that students and families are supposed to rely upon to pinpoint the schools doing the best job of educating undergraduates. U.S. News relies on proxies for educational quality, but these proxies are dubious at best.”

She goes on to note four ways in which the rankings hurt students and parents.

– Rankings encourage the college to favor well-off students.

– Rankings encourage admissions tricks.

– Rankings encourage cheating.

– Rankings encourage debt.


Over the past few years, researchers have made breakthroughs that can help families make better college selections. Two research powerhouses, Gallup and Purdue University, developed an index. The two institutions joined forces to “respond to increased accountability among higher education institutions… (to provide) insight in the relationship between the college experience and whether college graduates have great jobs and lives.”

After all, isn’t this what we really want for our children? As parents, in selecting a college, we lose the forest for the trees; we get bogged down by the “flash” of an institution and overemphasize unimportant characteristics such as the school’s reputation or sticker price (not to be confused with the price that families end up paying).

How did Purdue and Gallup help?

The Gallup-Purdue Index was the result of interviews of more than 30,000 college graduates from all over the nation. From research already completed by Gallup, we know that having a good job is an important factor in life (1-p1.), as it provides a mean of establishing one’s self-identity. The study focused on the well-being of the interviewees.

Well-being, according to Gallup, builds on five elements (1-p2.).

Purpose Well-Being: Liking what you do each day and being motivated to achieve your goals

Social Well-Being: Having strong and supportive relationships and love in your life

Financial Well-Being: Effectively managing your economic life to reduce stress and increase security

Community Well-Being: The sense of engagement you have with the areas where you live, liking where you live, and feeling safe and having pride in your community

Physical Well-Being: Having good health and enough energy to perform one’s daily tasks

As mentioned before, 30,000 college graduates from many types of colleges and universities were interviewed.

Factors in choosing a college

The study produced interesting findings. Whether a college was public or private, large or small, selective or not – none of these traits mattered more in terms of well-being or work life than the worker’s experience in college. Among the study’s other important aspects was the revelation of six factors that lead to increased well-being (1-p4.).

  1. When a student feels like a professor cares about them as a person.

  2. Having a professor who makes a student feel excited about learning.

  3. Having a professor who encourages students to follow their dreams.

  4. Having an internship or job where the student applies what they were learning in the classroom.

  5. Involvement in extracurricular activities and organizations.

  6. Working on projects that took a semester or more to complete.

The higher the number of these factors students experience in college, the greater their engagement and the likelihood that they maintain overall well-being.

Factors vs. traditional college selection

As you can see from the traditional way we select colleges versus the use of a factor-based approach, the student will likely end up in a better situation in the long run. The process for college selection evolves to become more objective or straightforward. However, a factor-based approach does not mean the student will graduate without debt or will not experience any of the questionable practices of a higher education institution.

Rather, using a factor-based approach helps a family and student identify the key characteristics to look for in a college as tours and research accumulate. The student should also start by answering the following questions: Do I want a small or large institution? Do I want an institution focusing on faculty research or undergrads? Are sports important me? How far away from home am I willing to go? Do I want a technical or liberal arts education? These questions will help narrow the focus and achieve the best fit for the student.

Where can I find information related to these factors?– Here you can find information about specific professors based on the student’s perspective. Here is a snapshot of Ball State University on the university level. Notice the clubs and opportunity ranking. This may help you make evaluations based on factors four, five, and six listed above.– This site also grades a university, according to the categories shown below. The professor rating helps with evaluating factors one and two. While not isolated, this still gives prospective students something to consider.– Hidden among the data is a section under the Students tab called “After Graduation.” Here, the viewer will see a percentage of graduates who have a job offer within six months of graduation. When looking at placement data, one should keep two items in mind. First, data can be manipulated. This was hinted at earlier in Lynn’s article, and the Hechinger Report covers this topic in more detail. ( Second, majors affect placement rates.


College-bound next steps

  1. Work on answering the questions posed about the type of institution first.
  2. Compose your list of schools.
  3. Use the resources listed here to help compare the universities based on the Gallup-Purdue Index.
  4. Find out how much you can afford to pay for college.

Do you like this article? Please share it with other families that might find it useful.

Want more? Subscribe to follow this blog or check out my YouTube channel:–A?view_as=subscriber


  1. 2014 Gallup-Purdue Index Report
  2. (access 1/12/15)


The last article focused on step two of the college funding process. It reviewed the types of student loans and broke them down into federal and private loans, as well as the subcategories of student and parent loans. Today, we continue by discussing student loans and the student loan crisis. Will there be a crisis or is it already here? What trends are taking place with student loans?

Funding College with Student Loans

Seven out of ten families will use some form of student loans to help pay for college. Many families accept this statistic as a normal part of sending a student to school. Some families see the current debt load of $1.4 trillion and focus on creating a lower or no-debt funding plan. The goal for later families is to help control early expense risk (increasing needed cash flow to duties that do not normally exist). With few or no student loans, young workers can save for retirement, a house, a baby, or other goals.

Problems do exist for students who have student loans and no degree. A worker with a college degree earns more over a lifetime than does a person without one. Imagine how much further behind a college drop will be when student loan payments enter the equation. Not only will this person earn less, but his or her expenses will increase.

Government Limiting Risk

As strange as it sounds, we can thank the government in some way for helping limit the expense risk that students face – specifically, those students who did not earn degrees. You may recall from the post Different Types of Student Loans that the federal government limits how much a student can borrow based on his or her year. Freshmen can borrow $5500, sophomores can borrow $6500, and juniors and seniors can borrow $7500. The caps limit risk by not letting underclassmen take out too much in federal student loans.

These limits make sense when one considers the high number of students who drop out of school. In risk management, this would be an example of risk reduction. The student’s risk of default does not go away but rather is limited to the lower amount of the Stafford loan. In terms of other types of student loans, this trend moves in the opposite direction. A quick review of the data below shows the point.

Notice the 25% growth in Parent PLUS loans and the almost doubling of the nonfederal loans? These are the loans that start getting families in trouble, which begs the question: How does this happen after more than a decade? After sitting by some of the families and helping them fill out their FAFSA forms this fall, I have no doubt that the process of going to college creates large amounts of stress for the student and the parent. Many feel that completing the FAFSA is not only harder but more stressful than completing their tax return.

When families receive their acceptance letters and aid packages, the sense of relief overcomes them and they pay little attention to the financial aid package. As consumers, we must keep in mind that these non-friendly loans become collateralized with Mom and Dad’s names or assets. Bankruptcy does not necessarily dismiss the debt, either.

Here we sit, in $1.4 trillion of student loan debt.

Student Loan Crisis

When do you call something a crisis? Is it after we push the ball off the cliff, or just before the tipping point of going over the cliff? Experts disagree on the answer, and some contend that a crisis does not exist. However, we cannot dispute the data. The following graph shows a different story (1.)

Nearly one-third of the federal education loan portfolio is in deferment, forbearance, or default. Not all delayed payments under these programs are negative. A student may qualify for a deferment for several reasons, like active duty, military service related to a war, a military operation, a national emergency, or enrollment in an approved rehabilitation training program for the disabled (2.). Other scenarios may qualify a person for deferment.

Simply looking at the default rate should make us uncomfortable. Mortgage delinquencies during the great recession topped out at 10.53% (3.). We are sitting at nearly the same rate on student loans. The public keeps sloughing off the concern. Major ramifications will likely result if the default rate continues increasing, which may drag on for some time. As mentioned before, student loans typically cannot be written off in a bankruptcy. Banks wrote off the bad mortgages from the Great Recession. For capital markets to work efficiently, this write-off process should be short. The markets then quickly adjusted to reprice the mortgage. The default of a student loan has the potential to go on for years or maybe decades as long as the borrower remains alive. Markets cannot be efficient with the current state of affairs, and inevitably delays the likely result of not recovering the principal amount of the loan.

Possible Crisis Scenarios

You know from my other posts that student loans have a negative effect on the individual. For example, when families have student loans, they save less for retirement and delay having children. Blow this effect up nationally and imagine how things change. The question to answer is: How do student loans with extended defaults affect spending and economic patterns?

What if it was easier to declare bankruptcy on student loans?

Perhaps the financial markets would be able to absorb the disruption more quickly than forcing a delay and extended process for dismissing the debt. Of course, the normal and negative side effects would accompany the dismissal. The family/individual would be able to move forward more quickly. Today, the issue is politicized, with no progress made in terms of reform or in the ability to dismiss the debt. The courts still use a standard – called the Brunner test – established in 1987 (4.).

Even debt holders using income-based-repayment plans face some economic challenges. By dragging out payments over 20 or 25 years, the worker pays more interest, which is not going toward other desired outcomes that contribute to current or future economic output. To put it another way, more dollars are spent on the past than on the present or future.

The current system has produced no significant changes. As mentioned before, debt has increased at a ridiculous rate. A rising interest rate environment creates a squeamish outlook for students who take out future loans and for those who hold variable rate loans.

Perhaps a different form of “forgiveness” should be reviewed, or we should let the markets help decide the fate of delinquent loans.

Next Step:

If your student is college bound, take the first step and create a college funding budget. Consider it the rudder on a ship; it will provide direction and prevent your student from facing the student loan crisis problems that this post has outlined. Second, create a smart lending strategy. This means knowing the rough starting salary of your career. The student should not graduate with more in debt than his or her first year’s salary. Shop for a school that meets the needs of your student socially, academically, and financially.

For those in school, take the time now to estimate the debt you will have accumulated upon graduation. Will you be eating ramen noodles or living the way you expect? If the former, make changes now to limit the damage. Take on a shift at a local business or at school. Do not borrow money for spring break trips. Take more credit hours or go to summer school so that you do not extend your academic career by another year or two.

Before your student heads off to college, make sure you know how much you can afford by using the free College Funding Snapshot Report.

Have questions? Call me at 317-805-0840 or email me at


  1. Trends in Higher Education Series. PowerPoint. 30, October 2017.


A great college funding plan considers the different types of student loans and has three steps. The first step sets up your resources and budget. The last blog post focused on this topic. We reviewed how to create a college funding budget and compared it to the pre-approval process of buying a home. Also, the post explored the different funding categories. Loans made up two of those categories – one for parents and one for students. The second step in your college funding plan creates a smart lending strategy so the student or parent does not create a future financial burden. The last step is to shop for college. We will study this topic in later posts.

Today, we focus on the second step by examining the different types of student loans. As mentioned in other works, there are two major categories of student loans: federal loans and private loans. Each category may break down further into student or parent loans. Student loans refer to debt that is in only the student’s name. Parent loans may be in the student’s name but the parent acts as a co-signer, or the loan may be in only the parent’s name.


Stafford loans are the most common type of federal student loan. These loans will be either subsidized or unsubsidized. Among the loans, three differences exist: 1. The government pays the interest on subsidized loans while the student attends college. 2. The eligible amounts for subsidized loans are lower than those for unsubsidized. 3. A student must qualify for the subsidized loan, while every undergrad student is eligible for the unsubsidized loan. The student qualifies for subsidized loans by demonstrating financial need. To put it in a simple math formula (1.):

Cost of Attendance – Expected Family Contribution = Demonstrated Need

As you saw in my other post about expected family contribution, calculating this number is anything but easy. However, from the formula above, you get the basic of idea of how to qualify for subsidized Stafford loans. The government manages the amount it will cover in loan interest by limiting the amount of the subsidized loan. Depending on the amounts, a student may borrow the following under a subsidized loan: $3,500 for freshmen, $4,500 for sophomores, and $5,500 for juniors and seniors.

As mentioned earlier, every student qualifies for unsubsidized loans. The dollar amount a student may borrow depends on the grade level: $5,500 for freshmen, $6,500 for sophomores, and $7,500 for juniors and seniors. With this type of loan, the interest starts accumulating at the loan’s origination.

The two types of loans may be used together but the amount borrowed in any one year should not exceed the higher limit of the unsubsidized loan. If a student qualifies for subsidized loans, this will be used to the maximum first; then an unsubsidized loan will be added to the amount and not exceed the limit. Interest rates are fixed for the life of the loan and reset for new loans every year.

Perkins loans are another type of student loan that may be used. They are low-interest loans for grad and undergrad students who demonstrate exceptional financial need. The school is the lender and payments are made to the school or its service provider. Not all schools participate in the Perkins loan program, and funds may be limited (2.) Students with a high need should check with the school’s financial aid department for participation details. This loan program is not as popular as Stafford loans.

Parent PLUS

Parents may help students pay for college using a Parent PLUS loan. Parents of PLUS loans may acquire loans for dependent undergraduate loans (3.) These loans are not accessible to other students, namely graduate and independent students. Divorced parents may both acquire loans, but the total between them cannot exceed the loan limits (3.)

The total amount that parents may borrow for any one year follows the formula below:

Full annual cost of attendance – other financial aid the student received = Potential PLUS loan

Parent PLUS loans require no debt-to-income ratios and are not dependent on the borrower’s credit score (3.) As a result, the interest rates on these loans are rather steep. The current interest rate for the 2017-2018 academic year is seven percent with a 4.264% origination fee, making the real first-year rate for the loan 11.264%. As you can see, this high rate can quickly put families in trouble. Now just imagine the problems faced by families that take out these loans year after year.

Repayment of the loans typically starts 60 days after the loans are fully dispersed (3.) However, loans after July 1, 2008, can be deferred while the student attends school at least half-time (3.) The standard repayment applies to a 10-year repayment schedule. Income-based repayment schedules typically cannot be used with Parent PLUS loans, but they are eligible for student loan forgiveness (3.) PLUS loan consolidation cannot be done with other federal loans in the student’s name.

To apply for PLUS loans, parents fill out the FAFSA, then request the loan through You can also contact the financial aid department of the student’s college or university.

Private Loans

Private student loans vary greatly in terms, payment provisions, and features. For the most part, private loans lack many of the common features of federal loans, like fixed interest rates and income-based repayment plans, and are not subsidized (if you qualify). Most private student loans are issued by banks, credit unions, state agencies, or even the schools themselves.

Many private loans require repayment while the student attends college. Some of these loans require an established credit history or a co-signer (often the parent). Student loans commonly use variable rates. If interest rates rise, the loans become more expensive. Additionally, the loan may not be consolidated into a Direct Consolidation Loan and it may not have forbearance or deferment options.

In general, private loans do not compete with the flexibility or features of most federal loans. However, private loans constitute one of the fastest growing types of loans. See the graph below.


As noted above, the federal government limits the amount a student may borrow in Stafford loans. The price of tuition continues to rise year after year. As a result, programs like Parent PLUS and private student loans experience large growth.


Many graduates to wonder how they will pay back their complicate and confusing student loans. As we saw, student loans divided into federal and private loans and further split into parent and student-only loans. Federal loans give the borrower attractive terms as compared to private loans in general.

Student loans are the focus of the second step in creating a smart college funding plan. The student and family should know how much they can afford if the college budget is established up front, thus reducing the number of surprises upon graduation.

Coming Up

The next post discusses paying back student loans. It starts with a smart lending strategy.




529 Accounts and Tax Reform

In this video, we talk about the recent tax reform, 529 accounts, and how it may not be as great over the short term as people hope.

1. Provision of the tax from allowing families to withdraw $10,000 for private tuition.
2. Tax treatment of 529 on the federal and state level.
3. States playing catch-up to the tax reform.

As always, check out for more information or email me at


Planning for College and Your Expected Family Contribution

Planning for college gives families the opportunity to send young adults into the world on the best footing. Not only do these young work warriors learn technical skills to follow a career with a livable income, they also learn social skills by interacting with a new set of people. When not carried out properly, students and parents often see the end of academic careers with debt and no diploma. Creating a better understanding of how college funding works and the choices that are available help parents in the process of saving for, shopping for, and saving on the cost of college. This post will act as an introduction to saving on the cost of college, with a review of the family’s expected contribution.

First, let’s take a step back and look at the landscape as it exists today.

Google “student loan debt” and a barrage of articles and statistics fill your search results. As most families with college-bound students know, total student loan debt is well over $1 trillion. In fact, the most recent numbers show total student loan debt at $1.4 trillion (1.). In 33 out of the last 35 years, the cost of college has risen faster than the pace of inflation (as of October 2016) (2.)

The result has been an inflation rate of roughly 5% for the past 10 years. Compare this to the cost of college in Singapore over approximately the same time frame and you will see an inflation rate of 3.22% (3.) – more in line with what one would expect. Free tuition may also be available in countries such as Germany, which originally abolished tuition fees in 1971 (although it made a comeback from 2006-2014) (4.). Still, a free university education is not always as glamorous as it seems. For example, in Sweden, the government provides tuition to students, but students loans do pile up, with 85% of Swedish students graduating with debt (4.), though that debt does not compare to the growth or amount of debt US students incur.

Take a look at the cost of college and the median US household income.

Notice the growth rate of college costs and lack of growth in median family income.

Part of the American Dream is slipping farther away from parents wanting to see their children do better and from students wanting to experience a respectable standard of living. The math is simple; when the rate of change for college costs increases faster than incomes rise, more borrowing takes place, totaling $1.4 trillion.

New Trends

I hope we start waking up to the current realities and start looking at the picture with a different set of assumptions and planning techniques. The students who recently graduated or who will be graduating soon must start looking at student loans in the same way Boomers have started looking at Social Security to maximize lifetime income. However, instead of looking for ways to increase lifetime income, graduates and parents with student loans must find ways to reduce lifetime expenses.
Students in high school or middle school, and their parents, should closely examine ways to fund college. Start with the basics. (Click here for a timeline associated with the last two years of high school.)

First step

We must look at the larger, more basic formula for college as outlined below.

Cost of Attendance – Expected Family Contribution = Student Financial Need

Most families have this basic formula down. If you have a high school student, how many conversations have you had with him or her about the cost of in-state versus out-of-state tuition and public versus private university costs? Most families try to keep the cost of attendance down without focusing on other aid that may make more expensive universities competitive, in terms of cost, with public in-state institutions.
For example, if private university tuition is $50,000 and a public school costs $25,000, the easy choice (on the surface) is a public university. However, when private schools see that a student has significant financial needs, those schools will likely offer more scholarships, grants, discounts, and money to the student (assuming the college is seeking the student’s attendance).
Only 11% of private school students pay full price for their education (6.). Private universities spend $0.42 of every tuition dollar and revenue on scholarships and grants (6.). Recent years have shown record scholarships and grants issued from private universities.
In the end, the net cost to parents and students matter not the sticker price.

Learning how the formula works for a family’s expected contribution should be the second step.

What is the Expected Family Contribution, or EFC?

It seems easy to not worry about how to pay for college until the bill comes.

In simple terms, this number is the amount of money the government feels your family can reasonably contribute to funding a college education. The formula, while more complicated, is listed below:

(Parent Income + Parent Assets)/# of Children in College + Student Income + Student Assets = EFC

Parent Income – Between 0-47% of total income may be expected minus all taxes and allowances.

Parent Assets – Up to 5.6% of qualifying assets may be counted, such as brokerage accounts, college savings, and savings accounts. Assets such as the family home, retirement plans, and an asset protection allowance do not affect the EFC calculation.

Number of Children in College – If you have more than one child in college, your Student Financial Need changes because assets will cover multiple individuals.

Student Income – 50% of income over the protection allowance counts toward the family’s EFC.

Student Assets – 20% of all assets, including custodial accounts and savings accounts. As with parents’ assets, the EFC calculation ignores family homes and retirement plans. As mentioned before, students also get an income protection allowance.
(Stay tuned for another blog post discussing income protection allowances.)

Now what?

As you can see from the formula, simplicity quickly gets lost and families start ignoring the EFC part of the college funding formula. Here are the next steps for parents and students.


1. Starting when your child is in middle school, project your income through high school and college to better understand cash flow and to examine ideal accounts to save college funds.
2. If you own a small business for which your student works, create a plan early for the student’s income to avoid a higher EFC.
3. Create a plan for the gifting of assets to the student while he or she is in college, or a few years before college. Remember that up to 20% of a child’s assets count for the EFC and that only 5.64% may be expected for a parent’s qualified assets. If Grandma and Grandpa gift stock to the kids, you may want to rethink this for a while, or Grandma and Grandpa may want to gift the stock to Mom and Dad instead. (Watch out for the annual gift exclusion amount. Talk to your tax advisor for specifics about your situation.)


1. If you work, project your income over the next few years before and while you’re in college. You may end up working more your sophomore year versus your junior and senior years. This accomplishes two items: A.) It gives you a longer timeframe for your money to compound, and B.) Because prior-year tax returns are used, a lower income will be reported on the FAFSA.
2. Be careful about receiving gifted assets. See #3 under “parents.”
3. As you plan for college, closely examine whether you will be a better candidate for merit-based or needs-based scholarships and grants.

As always, if you have any questions, use the “contact us” page to let us know what is on your mind or contact us at 317-805-0840.


1. “U.S. Student Loan Debt Statistics for 2017.” Student Loan Hero. N.p., 11 July 2017. Web. 01 Aug. 2017.
2. Clark, Kim. “College Costs Hit Record High in 2016 | Money.” Time. Time, 26 Oct. 2016. Web. 01 Aug. 2017. <>.
3. “College Access and Affordability: USA vs. the World.” Value Colleges. N.p., 01 Nov. 2016. Web. 01 Aug. 2017. <>.
4. Mithcell, Michael, and Michael Leachman. “Years of Cuts Threaten to Put College Out of Reach for More Students.” Center on Budget and Policy Priorities. N.p., 29 July 2015. Web. 01 Aug. 2017. <>.

The Current Reality of Paying for College

We want the best for our children, and we seek to lead them towards lives that are better than our

Pay for college is complicated and gets many families into trouble.

own. Culturally, we accept the pursuit of the “American Dream.” We measure success in terms of a house and white picket fence, a steady nine-to-five job, and a sizeable bank account. As parents, how do we put our children in a position to achieve this dream? What if our children want something other than this dream?

These questions lead me back to the current reality. To help our kids prepare for this next exciting phase of their lives, what should we as parents be doing now? For most families, “college” is the answer. However, the reality of achieving it remains a challenge. It’s like watching a crowd pay to stand in line for a box of goods and the promise of a great future, but not knowing how long the line is or what the box contains.

The American Dream

We hear about the goods in the box being the American dream – buying a home with a white picket fence, having two children, working at a nine-to-five job, and having a sizeable bank account. These traits are measures of success. The American Dream tells us that a pension awaits us when we reach the age of 65, and that our children will get college degrees, putting them on track to have better lives than ours. Yet somehow, in some way, the dream feels out of reach.

Consider Generation X. They bear the once-shared responsibility of creating a retirement pension while caring for elderly parents and helping pay the inflated cost of college – all on stagnant wages. The financial planning community tells this generation, “Save more, work more, save for your retirement first. Kids can borrow money for college; you cannot borrow for retirement.”

What is the result? A lack of retirement savings, student loan debt that both parents and children will be working to pay off for decades, and high levels of stress and anxiety. Where can we start building momentum that helps parents and acts as a springboard for our children and communities? College planning. Here, we can start with one of Gen X’s biggest concerns. First, we must gain perspective on the current landscape.

Student Loan Bubble

One of the most disturbing clocks is the student loan clock (found at Take a moment to venture over there and wait for a few seconds. It likely feels similar to watching the national debt clock. Consider the growth in student loan debt over time with just federal student loans outstanding (3.)

Or how about the increase in parent plus loans versus federal loans to undergraduates(4.)

Several studies have shown that parents tap into their retirement accounts to help pay for college. Even as parents sacrifice their own retirement over time, we sit with $1.4 trillion of student loan debt, on which one generally cannot file for bankruptcy. Experts state that the student loan bubble is coming.

Is it coming or is it already here? In a recent article, Forbes noted that the percentage of borrowers not paying on their federal student loans within three years of graduating college has increased to 11.5% (1.). Compare this to the mortgage delinquencies from the great recession, which topped out at 11.53% in the first quarter of 2010 (2.). How can the bubble be on the way? It is already here.

For several reasons, we should not be surprised by the lack of conversation on this topic:

– The Department of Education does not penalize universities until their student loan default rates exceed 40% in one year or 30% over three years. Remember how terrible things were during the Great Recession? Universities would need to become three to four times worse in terms of their default rates before the school has skin in the game.

– Think about the fact that you cannot easily declare bankruptcy to eliminate student loans. Why would the student loan industry care much about defaults? The interest will continue accruing; it only becomes a question of when they will collect. The longer it goes, the more compensation they will receive. The interest does not stop piling up.

– Let us not forget the standard advice of the financial planning industry: Prioritize saving for your retirement. “Kids can borrow money for college, but you cannot borrow money for retirement.” Think about how we pay for advice. Most advisors or financial salespeople receive compensation from commissions and/or the assets they manage. The larger this pool of assets, the more money they make. Why wouldn’t they prefer that you and your child take out student loans instead of paying for college from accumulated assets? While this does not apply to all financial professionals, based on my experience it is most often the case. This is not always a prudent financial move. In 2015, Mark Kantrowitz wrote an article that discusses situations in which putting your retirement first does not work best.

New Mindset

Does the world seem bleak, as though all is lost? There are new and developing trends. We must

Families need a new way to pay for college and pay off existing student loans.

understand both sides of the student loan issue.

The first is students who have already graduated and are working to pay off their loans. These individuals must look and plan for their student loans using the same mindset Boomers have toward Social Security planning. As you look back on retirement income planning, not much thought was given to maximizing Social Security to increase lifetime income. However, as Boomers aged, they explored the rules and started developing strategies like file and suspend, or restricted claim to help increase lifetime income. These strategies were innovating. They became so popular that Congress had to change the rules on Social Security. In a comparative way, new planning tactics must be developed for current holders of student loans. People like Heather Jarvis and younger financial planners are leading the way.

The flip side involves preventing student loans from being an issue. This means that as college education consumers, we must change the way we save for, shop for, and save on higher education. Most of the time, financial services will tell you to save for college (provided you have taken care of your retirement first), but it will not tell you how to save on the cost of college. Those individuals who talk about how to save on the cost focus on getting scholarships. However, there are other ways, like smart shopping, making the schools compete for your student’s attendance, and using the tax code to create “tax scholarships.”

Next Step with College Funding

– If you face the first scenario, study the innovators who specialize in student loans. If you are a do-it-yourselfer, check out Heather Jarvis’ site: For those who are delegates or validators, check out the screening tool on the XY Planning Network and look for advisors who specialize in student loans.

– If you are a parent of a high school student seeking some level of education beyond high school, look for advisors who specialize in the financing of college funding, not just the filing of the FAFSA or CSS and finding scholarships. I’m talking about using the tax code to create “scholarships,” having universities compete for your attendance, coordinating contributions from family members to avoid negative impacts on aid, helping coordinate distributions from accounts, developing a smart borrowing plan, and helping families explore ways to cover any college funding shortfall. To see what this process can look like, follow this blog over the next few months.

– Check out my other college funding articles.

Give me a call at 317-805-0840 or email me at to discuss you will pay for you student’s higher education.


  1. Friedman, Zack. “Student Loan Defaults Rise – What To Do Now.” Forbes, Forbes Magazine, 6 Oct. 2017,
  2. “Delinquency Rate on Single-Family Residential Mortgages, Booked in Domestic Offices, All Commercial Banks.” FRED, St. Louis Federal Reserve, 27 Nov. 2017,
  3. Eisenhart, Maddie. “Student Debt Is Going to Be A Huge Problem for Millennial Marriages | A Practical Wedding.” A Practical Wedding: We’re Your Wedding Planner. Wedding Ideas for Brides, Bridesmaids, Grooms, and More, 17 May 2016,
  4. Mitchell, Josh. “The U.S. Makes It Easy for Parents to Get College Loans-Repaying Them Is Another Story.” The Wall Street Journal, Dow Jones & Company, 24 Apr. 2017,

Important Dates for College Planning

College affects the daily lives of Gen X parents, either through children who have just graduated from college with student loan debt or through children who will soon be attending college. As their careers become settled and they earn higher incomes, parents with toddlers also focus on college. The idea of funding college moves up their list of goals.

As an industry, financial planning still has room to improve in terms of college planning. While financial services communicate the dates for retirement planning, the opposite seems true for college planning. Here, we discuss many of the dates and explain a few of the ideas associated with college planning.

FAFSA and Associated Timeline

FAFSA is an acronym for Free Application for Federal Student Aid. Parents and students complete this form every year to determine eligibility for financial aid. From the information listed on this form, an Expected Family Contribution is established to help fund the student’s education. For this article, students and parents should know that to file for the 2017-2018 academic year, the FAFSA must be filled out by June 30, 2018. However, the earlier you file, the better your chance of qualifying for grant, scholarship, and work-study money (1). Ideally, you would have filed on October 1, 2016, for the 2017-2018 school year.

Families should complete the FAFSA as close to October 1 of their senior year of high school.

States and colleges have their own deadlines for the FASFA filing (1). You can find the date by visiting (2). The dates will not necessarily agree with the federal deadline already discussed. For example, Indiana’s deadline for the 2017-2018 academic year was midnight on March 10, 2017

When checking your desired university’s deadline, make sure you define the deadline. Is it submission of the FASFA or the date when it has been processed (2)?

As you can see, the FAFSA-related dates complicate the situation. The simplest action is to file your FAFSA form as close to October 1 when the application opens for the academic year in the following calendar year. In other words, for the 2018-2019 academic year, file the FAFSA on October 1, 2017. Many states and universities give out money on a first-come, first-served basis.

College Application Deadlines

While families stress about the financial aid they may receive, it is easy for them to forget about the college application deadline. As with the FAFSA, a few deadlines may apply to you. The result of not applying on time may lead the university to not even look at your application (3).

First, understand that the college application can be an early application or regular application. Colleges divide early application into early action or single choice early action. For purposes of this article, send an early application to the university during the first semester of the student’s senior year of high school, typically October to mid-November (3, 4). Early acceptance announcements may occur from November to early February (5).

Universities typically accept regular applications between January 1 and February 1. Students who plan to fill out a regular application should have letters of recommendation and essays completed by mid-November. Students should receive acceptance letters by mid-March or April (4).

SAT and ACT Tests

The ACT and SAT tests cause strike fear in many high school students. A high score means getting into the student’s dream college … or so many think. Many colleges now take a holistic approach to admissions and look at civic engagement, secondary student activities, and work experience as factors influencing admissions. However, the ACT and SAT are still important factors in the admissions process.

As a best practice, students should take one or both tests a couple times starting their junior year of high school. Students can take test several times throughout the year. The best time to take the tests will depend on your needs; typically, a study time of at least 40 hours is recommended for ACT and SAT preparation (6). Depending on class load, extracurricular activities, and scheduling, a student may take one to four months to prepare. Some do not recommend starting too early because the student may forget some of the material.

For general planning purposes, start with two months of lead time for test preparation and then adjust your schedule as the date gets closer.

Parents and College Planning

For parents, college planning will involve time spent reviewing and analyzing assets, as well as cash flow for account contributions.

College Savings Accounts

Parents typically save money in one of three types of accounts for college.

Custodial account- Money placed in this account is the child’s  asset(s). A custodian, typically a parent, oversees and invests the money. Contributors do not face deadlines for but funds will be considered higher on the list for college funding. The account also has a greater effect on funding expectations versus, say, a 529. The upside to a custodial account remains the flexibility with which the funds may be taken out. The money must be used for the benefit of the student. On a side note, some states require that the money is turned over to the child (i.e., the custodian is removed) once the child reaches the age of majority – a situation some parents do not favor. No tax advantage may be realized in funding these types of accounts.

Coverdell Educational Savings Account- This type of account is also known as the Educational Savings Account, or ESA. It focuses mainly on college with a cap on the contribution limit of $2000 each year until the student reaches the age of 18. The contributions are not tax-deductible but grow tax-free as long as the money is used for qualified expenses. Contributions can be made until the due date of the contributors’ return (April 15) without extensions (7). Income limits apply to the account. Individuals may contribute if their modified adjusted gross income is below $110,000 ($220,000 for married filing jointly) (7).

529 College Savings Account- The most popular college savings account is the 529. The deadline for most 529 contributions is December 31. However, seven states allow contributions up to mid- to late April for the previous tax year. These seven states are Georgia, Iowa, Mississippi, Oklahoma, Oregon, South Carolina, and Wisconsin (8). Many states offer a deduction or credit for account contributions. Please see your advisor for details related to your specific state.

Tax Returns

As we know, April 15 remains a dreaded date for most Americans, as tax returns are normally due. The date does adjust every once in a while, when April 15 falls on a weekend and to accommodate Emancipation Day (normally on April 16), which celebrates the end of slavery in Washington, D.C.

Some parents do not complete their taxes on time and file an extension. When this happens, the taxpayer must complete the filing by October 15. Filing an extension affects the FAFSA. Parents need to send a copy of the 4868 (extension form) with the FAFSA. Often, the university wants copies of W-2’s and a signed draft of your tax return. The institution may offer a temporary extension on the financial aid award until the FAFSA has been updated and completed.

 Shifting Income

Strategic planning for recognizing income or shifting it from one year to another may have an effect on your capacity to receive aid. In the same way, parents may look at shifting income for other reasons; many of the same tactics apply.

Gifting appreciated stock is one example which shifts income from a parent in a high tax bracket to a child (who sells the security) in a lower tax bracket at a young age. Parents need to gauge how this income shift affects financial aid. The focus should be on the income allowance and trying not to exceed it.

Understand that your income from this year will not affect aid for two years. For example, in the new changes on the FAFSA filing, the form asks for the “prior prior year’s” tax information. A 2015 tax return will become the basis for the 2017-2018 academic year.

Avoid recognizing large amounts of income through retirement account distributions or exercising stock options or capital gains. Offset capital gains with losses.

All the activities listed above normally have a deadline of December 31 at the close of the tax year. Please see your tax advisor for specifics about your situation.

If you have questions or would like to talk more about your student’s college funding, use the “contact us” section to let us know what you would like to discuss and when you are available.


  1. Nykiel, Teddy. “When Is My FAFSA Deadline.” NerdWallet. N.p., 13 Sept. 2016. Web. 19 June 2017. <>.
  2. “Student Aid Deadlines.” Student Aid Deadlines – FAFSA on the Web – Federal Student Aid. N.p., n.d. Web. 19 June 2017. <>.
  3. Services, University Language. “College Application Deadlines at US Colleges and Universities.” The Campus Commons. N.p., n.d. Web. 19 June 2017. <>.
  4. Services, University Language. “Early Application: Applying to US universities early or regular decision.” The Campus Commons. N.p., n.d. Web. 19 June 2017. <>.
  5. Blank
  6. Zhang, Dr. Fred. “SAT / ACT Prep Online Guides and Tips.” How long before the SAT should you study and prep?: 3 Factors that Affect the Hours. N.p., n.d. Web. 19 June 2017. <>.
  7. “Coverdell ESA Contribution Limits & Deadlines.” 2016 and 2017 Coverdell (ESA) contribution limits and deadlines. N.p., n.d. Web. 19 June 2017. <>.
  8. Flynn, Kathryn. “7 States Where You Can Still Claim a Prior-year 529 Plan Tax Deduction.” N.p., 21 Feb. 2017. Web. 19 June 2017. <>.
  9. “Office of Student Financial Aid.” IRS Tax Transcript FAQ | Office of Student Financial Aid – University of Wisconsin–Madison. N.p., n.d. Web. 19 June 2017. <>.


As we slide into the last two weeks of the year, many people begin their tax planning. This often includes setting goals for the new year.  The end of 2015 brings with it changes to college funding that are substantially different from previous years.  President Obama recently announced changes for the Free Application for Federal Student Aid, aka FAFSA. While the announcement came late, there is still time to look make adjustments lessening the impact of the new direction.


Two changes start with the 2016-2017 FAFSA.  Firstly, the form will no longer share the list of colleges that students place on the application. On a recent teleconference call, Mark Kantrowitz discussed the unspoken practice of colleges reviewing the list of colleges placed on a student’s FAFSA form.  The reviewing institution prefers to see their name listed in the top 3. Students typically list colleges on the form in order of preference (1.)

The second and larger change deals with the timing and tax returns used for FAFSA filing.  First, please note there are NO CHANGES for the 2016-2017 filing for parents and students (2).  However, starting with the 2017-2018 school year FAFSA,  parents and students will no longer be using the prior year tax returns and they may submit the form as early as October  1st.  The information from tax returns from two years ago will be used for the application.  See the table below (2).

Fasfa changes

After reviewing the table,  note the 2015 tax return will be used for two years and the submission date is earlier. Earliest submission is recommended by financial aid advisors because colleges can choose to decrease the amount of funds available as the application period progresses.


The Federal Student Aid office uses personal and family income as an important determinant of the amount of funding  a student may receive.  Better understanding of that formula helps parents and students  develop strategies that  increase the amount awarded. Kids and Money

The funding formula may require zero to 47% of a parent’s income  (minus taxes and allowances) to fund a college education plus  5.6% of reportable assets (not including the family home, retirement accounts, small family businesses, or assets
up the protected amounts (1.)) The number of children in college adjusts the amount of expected family contribution.  Students should be ready to use half of their income over the income protection allowance plus 20% of all reportable assets (typically UGMA/UTMA, and other savings accounts (1.))


  1. As noted above, 2015 will play in important role in college planning for the next two years. Since the calendar year closes soon, here are a few items to consider for reducing your income.
  2. If you have large realized capital gains, consider selling your losers to reduce income.
  3. Contribute as much as you can to tax deferred accounts (IRAs, 401ks.)
  4. Consider placing your dividend and interest paying investments in your tax-deferred and Roth accounts. Consider the potential gains paid out by mutual funds.
  5. Make two years of charitable contributions in 2015 (up to the allowable limits.)
  6. Make your January house payment at the end of December to claim the extra interest on your 2015 taxes.
  7. If you itemize deductions,  pay your state taxes by year-end.
  8. Some states allow deductions for contributions to your state sponsored 529.  Here is a link for more information.


As you head into the end of 2015 and examine the story you tell the IRS, keep in mind the potential impact on your college funding for the next two years.  Any income deferred may help increase the chances of receiving aid. Please check with your financial or tax professional for additional information and questions about your situation.


  1. 10/20/15 Teleconference  with Mark Kantrowitz.  The Fundamentals of FAFSA & College Planning
  2. Information accessed 10/22/15