General Questions

A financial planner focused on educating parents and students on the college-funding dilemma. The objective should be to show you how pay for ‘all’ of your children(s) college without disturbing your lifestyle or negatively affecting your retirement, and to truly become an “informed” buyer of college.

Most of our families qualify for little or no “need-based” financial aid. We help these families by creating a plan that involves a combination of academic student positioning (free merit aid) and tax-efficient (tax-saving) strategies. It is important for these families not to ‘assume’ they won’t qualify before evaluating all of the circumstances surrounding their qualifications. Many clients are surprised that they qualify because they have multiple children in expensive colleges at the same time. When, and if, that happens, they need to be in a position to maximize that aid.

No, we are not a lending institution or a scholarship fund. Our job, depending on your situation, is to recommend the best financial tools available to solve the funding problem.

Yes. We focus our efforts on the biggest pool of money, endowments from the college itself. This is where the ‘real money’ ($5,000 to $55,000 a year) comes from. We help identify those schools that can provide this type of free money for your child, either on a need or merit basis. However, we are NOT a ‘scholarship search’ company.

Typically the answer is no. There are a small percentage of financial advisors or CPA’s who are trained in the late stage college funding arena. For instance, a physician who is a general practitioner would not think of trying to perform heart surgery on a patient. That procedure would be referred to a specialist. It is similar in our specialty. Most advisors and CPA’s are unfamiliar with this type of planning. We receive regular referrals from other advisors and CPA’s who appreciate our specialization and client services in college planning. They believe our services add a lot of value to the services they are providing for their clients.

Hopefully to save you thousands of dollars on your college costs. We can make you aware of planning tips and strategies most people don’t even know exist. Most of these are designed to benefit your family’s pocketbook. The services that we provide are set up to relieve you from the stress and anxiety that is typically associated with the thought of paying for college. It is extremely valuable to have an advisor working on your behalf. It assures that you will not ‘over spend’ on college.

College is the second highest expenditure for many families, next to the purchase of their home.  Have you ever purchased real estate without seeking the advice of a professional?  Of course you didn’t.  Paying for college at $100,000 to $900,000 shouldn’t be any different.  There is crucial information you need to know about the college funding process before you begin. 


This is the form that every student must fill out if they want to receive financial aid. Once it is filled out it is returned to the Department of Education. They will process it and return a SAR (Student Aid Report) with your estimated family contribution (EFC).

SAR or Student Aid Report is what the Department of Education will send the parent’s after the FAFSA has been turned in. This should arrive in the spring and will let you know what your EFC is for that year. These will be sent to all of the schools you listed on your FAFSA.

The FAFSA cannot be turned in any earlier than October 1st of your son/daughter’s senior year. Ideally you would like to turn it in sometime in January because financial aid is given on a first come first serve basis.

You will need to file for aid for each student, for each year that they attend college. This is not a one-time deal, because things change every year the schools want to make sure that they get their fare share each year, as well as if your financial situation changes, you may be in need of more aid.

The College Scholarship Service (CSS) Profile is an additional questionnaire to the FAFSA that some private schools require. This form is much more difficult to fill out than the FAFSA, and all of the information has to correlate between the two or it can be bumped back. It would be wise to consult your accountant or a firm like ours before attempting to fill out this form. This form is not free either so be prepared to have your credit card ready when applying for this form. Your high school counselors can tell you if the college you are considering is a “profile” school and needs this form.

How to calculate your EFC

EFC is calculated using a very complex calculation that involves: parent income, student income, parent assets, student assets, parent’s age, number of children in college, and number of children younger than college. Unfortunately the Department of Education does not publish a formula that enables parents to understand how it is calculated. American College Funding has acquired very sophisticated software that enables us to determine how this is done and what affect certain areas of your financial data have on the formula. Once you have filled out our data sheets, we can tell you what your EFC will be and what effect you might have on it.

Once your EFC has been determined by the Department of Education, it is sent, via the SAR, to all of the colleges you requested. Each college has its own cost of attendance figure that is issued to determine aid. They take their COA and subtract your EFC. If the COA is greater than your EFC, you are entitled to the difference in aid (i.e., COA of $25,000 – EFC of $10,000 = need of $15,000).

The only debts that are considered under the financial aid formulas are debts against specific assets listed on the aid forms. You do NOT get credit for: unsecured loans, personal loans, educational loans, outstanding credit card balances, or auto loans. You DO get credit for: margin loans, passbook loans, as well as home equity loans, first mortgages, and second mortgages on ‘other real estate.’ You will only get credit for debts on your primary residence, if the college has decided to look at your home value.

Cash, checking and savings accounts, money market accounts, CD’s, U.S. Savings Bonds, Educational IRA’s, stocks, other bonds, mutual funds, trusts, ownership interests in businesses, and the current market value of real estate holdings other than your home. Assets in insurance policies and retirement provisions such as IRA’s, Keoghs, annuities, and 401(k)’s don’t have to be listed on the standardized forms. Cars are also excluded from the formula and don’t have to be listed on the form. The colleges want to know the value of your assets on the day you fill out the form.

Yes. If your EFC comes out to $20,000 then that means when two students are in school each student will be around 60% of the total parents’ contribution. Meaning you will have an EFC around $12,000 for each child, not $20,000 for each child. If three are in school at the same time it drops to 45%, and down to 35% for four or more.

How to determine your Aid

If your student can answer yes to any of these questions then he/she would be considered an independent (for 2012-13 FAFSA):

  • Were you born before January 1, 1989?
  • On the day you submitted your FAFSA, were you married?
  • At the beginning of the 2012-2013 school year, will you be working on a master’s or doctorate program (such as an MA, MBA, MD, JD, PhD, EdD, or graduate certificate, etc.)?
  • Do you have children who will receive more than half of their support from you between July 1, 2012 and June 30, 2013?
  • Do you have dependents (other than your children or spouse) who live with you and who receive more than half of their support from you, now and through June 30, 2013?
  • Are you currently serving on active duty in the U.S. Armed Forces for purposes other than training?
  • Are you a veteran of the U.S. Armed Forces?
  • At any time since you turned age 13, were both your parents deceased, were you in foster care or were you a dependent or ward of the court?
  • As determined by a court in your state of legal residence, are you or were you an emancipated minor?
  • As determined by a court in your state of legal residence, are you or were you in legal guardianship?
  • On or after July 1, 2011, were you homeless or were you at risk of being homeless?
  • At any time on or after July 1, 2011, did your high school or school district homeless liaison determine that you were an unaccompanied youth who was homeless?
  • At any time on or after July 1, 2011, did the director of an emergency shelter or transitional housing program funded by the U.S. Department of Housing and Urban Development determine that you were an unaccompanied youth who was homeless?
  • At any time on or after July 1, 2011, did the director of a runaway or homeless youth basic center or transitional living program determine that you were an unaccompanied youth who was homeless or were self-supporting and at risk of being homeless?

The father is considered to be your son/daughter?s stepfather, and you would be considered the mother. The student?s father and mother are determined by whom they live with for more than half of the year prior to filing for aid. It does not matter who is the biological mother or father.

It would definitely be a wise decision to point this out to the financial aid officer (FAO). Many schools use what is called ?professional judgment? to increase aid for the child of a recently unemployed worker. Instead of using the base income year, they will use a projected income for the next year. The college will most likely want to see some documentation, so be prepared to provide that information.

You will benefit by the more schools that your student applies too. First, you want to make sure that they are able to get into at least one school that they want. For financial aid purposes if the college knows that you applied to only one school they will be under no pressure to come up with a good aid package. Students who need financial aid should always apply to a variety of colleges.

The federal methodology is the main formula used, which is used for the FAFSA form. For this formula the first $4,000 in student’s after-tax income is sheltered for a dependent student, there is no minimum contribution from income, and the asset assessment rate is 20% for the student. The institutional methodology is used for the high-end private colleges (eg. Northwestern & Harvard) and the forms are much more intrusive. For this formula there is no income protection allowance, the minimum contribution from student’s income is $1,150, the student?s asset assessment rate is 25%, home equity is counted against you, and untaxed social security benefits paid directly to the student excluded from income.

No. As a tax reduction strategy, this is good advice, since your child is almost certainly in a lower bracket than you are. Parental assets assessed by the colleges at a top rate of 5.65% each year, after subtracting your protection allowance. Your child’s assets, on the other hand, will be hit up for 25% each year, and your child has NO protection allowance.

COA stands for Cost of Attendance. It is important to remember that you cannot have any effect on what the college says their COA is, you can only affect your own EFC. It is also important to remember that COA does not just include tuition, but the colleges must also account for: room and board, taxes, other fees, books, travel, etc.

No, race has nothing to do with financial aid. It is purely based upon income, assets, age, and number of children.

Yes, you can negotiate your financial package with the college, if you know what that college normally provides. If you know that the college your student is going to attend normally meets 100% of the need, and 60% of that is free money and the other 40% is in self-help. If that college does not meet those requirements then you would have a reason to negotiate a better offer. If you do not know theses numbers than you really have no basis to negotiate. This is one of the many services that we are able to provide.

We have a database of over 2,500 colleges in the United States, which can provide this information.

No, this would be like asking the IRS to help you fill out your tax return. They want to get as much money out of you as possible and are most likely not going to tell you the ways to help lower your EFC and out of pocket costs. You really need someone like us to consult with before filling out your forms to make sure you don’t leave any extra money on the table. Even beware of accountants who offer to help unless they know exactly how the financial aid process works, as well as how the Department of Education determines the EFC.

Yes and no. Your son/daughter’s grades do NOT affect your EFC in any way. Despite this, the amount of aid that your son/daughter will receive at the school they choose will depend somewhat on their grades. If they are able to fit in the top 25% of the incoming class then they have a very good chance of receiving the amount of aid that that particular school normally gives.

We have a database of over 2,500 colleges in the United States, which can provide this information.

That all depends on what kind of trust that your parents set up for them. If it does we would suggest liquidating during the first year to pay for school. If you leave it in their name for four years during school, it could end up costing you more than the value of the actual trust! An example of this would be if your son Johnny had a $10,000 trust, which was set up so that he could not touch the money until he was 25. Because the money is in his name, for freshman year it will be assessed at 25% or $2,500 against him in financial aid. This will go on for the next three years ending up costing him $10,000 in aid for a $10,000 trust. This is one reason why trusts can be disastrous for financial aid.

Grants, Loans, and Scholarships

Illinois Student Assistance Commission 847-948-8500 or at

As of 2012, the subsidized interest rate for the Stafford Loan is 0%. If the Stafford Loan is unsubsidized, the interest rate is 6.8%. The Perkins Loan is also a subsidized loan that carries a 0% interest rate. The Parent Loan for Undergraduate Students (PLUS) carries a 7.9% interest rate if the loan is paid back during college, or 8.25% if it is deferred until after graduation. All of these rates are fixed until the child graduates.

Click here for more information on student loans

These can vary. You need to check with each lender to determine their rates at the time.

How much money you will receive under the Federal Pell Grant program is based on your need, the cost of attendance at your school, whether you are a part-time or full-time student, and whether you attend school for a full academic year or less.

For the SEOG you can get between $100 and $4,000 a year, depending on when you apply, your level of need and the funding level of the school you’re attending. You may be eligible for more if you’re enrolled in a study-abroad program.

Unlike the Federal Pell Grant program, there’s no guarantee every eligible student at a school will be able to receive a SEOG. Students at each school are paid based on the availability of funds.

No. You can only use Illinois grants in the state of Illinois. That goes for all states.

If you attended our workshop you would know that we do not believe in searching out scholarships for your student. This would not be the case if you had the next Tiger Woods or Albert Einstein on your hands. Unfortunately, that is most likely not the case. Scholarships only make up 3% of the total financial aid, and we believe there are better ways to utilize your time to receiving aid than through scholarships. When private scholarships are granted you must inform the Financial Aid Officer at the college. If you are deserving of financial aid, this amount is deducted from the scholarship. It is deducted out of what the college is supposed to pay you in aid, NOT your EFC.

Click here to see information on Merit Scholarships

This is a program where your student could earn money through the college that can be used to help cover their costs. The jobs are typically on campus and paid at an hourly rate. The money is received by the student like any other job, but the earnings will not effect their financial aid the following year. The earnings will be taxed like any other job according to the State and IRS.

529 Plans

Prepaid tuition plans are college savings plans that are guaranteed to increase in value at the same rate as college tuition. For example, if a family purchases shares worth half a year’s tuition at a state college, these shares will always be worth half a year’s tuition — even 10 years later, when tuition rates may have doubled.

The main benefit of these plans is that they allow a student’s parents to lock in tuition at current rates, offering peace of mind. The plans’ simplicity is also attractive and most offer a better rate of return on an investment than bank savings accounts and certificates of deposit. The plans also involve no risk to principal, and often are guaranteed by the full faith and credit of the state.

Currently, state governments operate prepaid tuition plans, with the tuition guarantee based on an enrollment-weighted average of in-state public college tuition rates. A few have separate plans for two and four year colleges and for room and board. If the student attends an in-state public college, the plan pays the tuition and required fees. If the student decides to attend a private or out-of-state college, the plans typically pay the average of in-state public college tuition. The family will be responsible for the difference, if any.

Section 529 college savings plans are tax-exempt college savings vehicles with a low impact on need-based financial aid eligibility. Unlike prepaid tuition plans, there is no lock on tuition rates and no guarantee. Investments are subject to market conditions, and the savings may not be sufficient to cover all college costs. However, with this added risk comes to opportunity for potentially earning greater returns.

Most 529 college savings plans offer an adaptive asset allocation strategy based on the age of the child or the number of years until enrollment. These plans start off aggressively when the child is younger, and gradually switch to more conservative investments as college approaches. Typically they will use four or five age ranges, such as newborn-6, 7-9, 10-12, 13-15, and 16-18+.

Most 529 college savings plans also offer a variety of risk-based asset allocation portfolios, ranging from aggressive 100% equity funds to more conservative balanced funds and money market funds.

Some 529 college savings plans offer a fund that protects the principal against inflation and guarantees a minimum fixed rate of return (typically 3%).

The disadvantages common to section 529 prepaid tuition plans and section 529 college savings plans are as follows:

  • The earnings portion of non-qualified withdrawals is taxed as ordinary income at the account owner’s rates, plus a 10% tax penalty. If the beneficiary dies, becomes totally and permanently disabled, the 10% tax penalty is waived. If the beneficiary receives a scholarship, the 10% tax penalty is waived on distributions up to the amount of the scholarship. States may also assess their own penalties in addition to income tax on the earnings portion of the distribution.
  • Section 529 plan accounts are not necessarily protected from creditors of the account owner or beneficiary. Such protections vary from state to state. For example, Medicaid might be able to use the funds if the account owner needs nursing home care and has no other funds available. (Federal legislation to eliminate this problem is currently pending.)
  • The sun setting of some aspects of the plans on December 31, 2010 adds a degree of regulatory uncertainty to the plans.
  • Both types of plans have been around for just a few years, so it is difficult to evaluate their long-term investment performance.
  • Less disclosure is required for the managers of section 529 plans than for other types of investments.
  • Many families find it difficult to find the money to fund a section 529 plan.

The disadvantages of section 529 prepaid tuition plans are as follows:

  • Prepaid tuition plans have a very high impact on financial aid eligibility, because they are considered a resource. Distributions from a prepaid tuition plan reduce need-based financial aid dollar for dollar. (This may change in the future.)
  • Prepaid tuition plans may offer a return on investment that is not as good as other investments. A family with financial savvy might be better off investing the funds on their own through a section 529-college savings plan.
  • Your investment in a prepaid tuition plan may not meet the full cost of private or out-of-state colleges. In most states the plans are geared toward in-state public colleges.
  • The enrollment period may be limited.
  • There may be penalties and/or reductions in investment returns for non-qualified withdrawals or account cancellation.
  • Many state prepaid tuition plans are limited to tuition and fees, and do not include savings for room and board. So the family may need to plan separately for these additional costs.
  • In many states the account owner or the beneficiary must be a state resident when the account is opened.
  • Maximum contributions are much lower than for section 529 college savings plans.

Many prepaid tuition plans include a 10-year time limit from the date of expected college entrance or high school graduation. Another less common limit is a requirement that the funds be used by the time the beneficiary reaches age 30.

For more information of 529 Plans read this Wall Street Journal Article