The Money Tree

I remember back in the 80’s when Reebok came out with their new “pump” style sneakers.  The shoe had a rubber ball shaped pump at the top of the tongue, and when you squeezed it, the sneakers would inflate around your heels.  If I was ever going to dunk the basketball, the Reebok Pumps were my ticket.  Of course when I presented the situation to my parents, I got the same response I always got when I asked for money…”do you think money grows on trees?”  I was 11 or 12 at the time, and pretty sure that money didn’t in fact grow on trees.  So.. my dreams of playing professional basketball were shattered.  I never got the shoes, thus my 3′11″ body never got to dunk the ball.

Now that I’m taller, and a financial aid director, I’m starting to believe that money does in fact grow on trees.  It’s becoming painfully obvious that for almost every student out there, there are funds somewhere to help that student pay for college.  I talk with countless foundation directors and secretaries and they all tell me the same thing.  “We have millions of dollars in funding to help students and a large shortage of applicants.”

Today, Federal Reserve Chairman Ben S. Bernanke reported that the U.S. is experiencing a recession.  I don’t think this surprises anyone, but it provides a great point about our economy.   If our GDP is not growing as fast, or is even shrinking, it affects our economy.  Basically, lots of people lose jobs because the companies they work for aren’t producing the same level of products or services, and the companies can’t afford to keep them employed.  If people are losing jobs, they aren’t making any money, and if they’re not making any money, their not buying products and services..and the cycle continues.

Our education system is an essential tool for a strong economy.  Turning out quality graduates that are able to go into the workforce, either with a company or on their own, and use their education, benefits the economy and the country as a whole.  That’s why it’s so important for people to understand that just because they are not eligible for any federal or state grants, it doesn’t mean money’s not available.

The money tree is real, and it’s getting bigger every day.

The Golden Rule

Last week I got a call from a local parent concerned about financial aid for their daughter.  The parent is pretty frustrated because they feel their daughter is not getting the quality service from the financial aid department that she deserves.  It bothered me to hear the parent make these comments because so much of what I see is parents and students who come in with a demanding attitude, and they leave mad because they aren’t satisfied with the information or level of service.

No matter what college or university a student attends, the financial aid department is put in place to process a students information and help them as much as possible get the aid they need, when they need it, so the student can focus on doing what they signed up to do..learn and get a degree.  Students and parents also have a responsibility though, to make sure they understand the process and get the financial aid folks the information they need to process the students package.  When that breakdown occurs, that’s usually when I get the mean phone calls

At the end of the day though, it’s all about customer service.

Ethics and Student Loans

The student loan industry has been viewed with much skepticism over the past few years due to the fact that the percentage of loans over grants and scholarships has increased drastically.  This is bad news by itself because many students will not graduate and find a job that enables them to pay off the loans, leaving them to either default or reduce their standard of living.  Some schools default rates are so high that federal loans are being removed from the financial aid package entirely.

I thought that default rates and ability to pay the loans back were the only issues.

A couple weeks ago a parent came into the financial aid office to show me a letter the person received from a bank.  It was a disclosure letter meant to inform the person of the $20,000.00 student loan they cosigned for.  The problem is that the person didn’t cosign for any loans.  Apparently, one of their children signed up for this loan, didn’t have the credit worthiness, and then forged the parents name on as a cosigner.  I’m not bashing the bank exclusively here because the child obviously has some ethical issues, but I do believe the bank should have controls in place to prevent children, or anyone for that matter, from randomly putting someones name on there to guarantee the loan.

Luckily, the parent called the bank in time and the check was never sent to the child.  If for some reason the parent never caught this fraudulent act, they would be liable for $260 a month for the next 20 years.

How’s that for someone on social security.

529 Plans

I know there are plenty of parents out there that are saving to pay for the college education of their children.  First of all, I think that is a noble and honorable thing to do and I applaud parents who are doing it.  Your children will be better off because of your intuitive thinking and fiscal intelligence.

For the parents who are currently saving, or for the many that are considering it, I wanted to bring your attention to 529 Qualified State Tuition Plans.  Defined by the Securities and Exchange Commission, 529 plans are a tax-advantaged savings plan that is designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.

There are two types of 529 plans: pre-paid tuition plans and college savings plans. All fifty states and the District of Columbia sponsor at least one type of 529 plan. In addition, a group of private colleges and universities sponsor a pre-paid tuition plan.

Robert Shipley Jr. over at 529 Solutions,  has made the process easy for those who want to learn more, or are ready to open an account in their state.  Just select the link below or go directly to the website found here.

Obtain Information

Ask Questions

Rank and Compare 529 plans

Open an Account

Search for a Scholarship program or loan

AMT Relief

Congress finally passed AMT relief for the 21 million tax payers that were likely to be affected next year.  This is good news, as President Bush reported that he will sign the measure.  Kay Bell does a great job of digesting the situation and offers more details here in her blog “Don’t Mess With Taxes”.

The IRS systems update remains a wild card at this point.  If the IRS doesn’t get their systems updated in time, tax payers and financial aid recipients could still be negatively affected due to late filings.  “Our people will do everything they can to quickly update our systems for this major change and  make this filing season as smooth as possible for everyone,” said IRS Acting Commissioner Linda Stiff.

Ask Me

To make this site as efficient and useful as possible, I have added an instant messaging feature to the right of the postings so that users can get instant answers to any questions they may have. I will always write about many different aspects of financial aid, scholarships, grants, and other forms of free money for college, but there is bound to be something I don’t cover in my posts.

Ask Me should help to narrow that gap of information.

Tuition-Free Colleges

Business week had an excellent article on tuition-free colleges that you can find here. The article documents 14 different colleges and academies from across the country where students can go to school basically for free to study music, engineering, physics, and a host of other interests. As expected, the acceptance ratio is small compared to the majority of colleges and universities. To make it easy, I’ve listed the organizations below with links.

Alice Lloyd College- Kentucky

Berea College- Kentucky

City University of New York’s Teacher Academy- New York

College of the Ozarks- Missouri

Cooper Union- New York

Curtis Institute of Music- Pennsylvania

Deep Springs College- California

Franklin W. Olin College of Engineering- Massachusetts

U.S. Military Academy- New York

U.S. Air Force Academy- Colorado

U.S. Naval Academy- Maryland

U.S. Coast Guard Academy- Connecticut

U.S. Merchant Marine Academy- New York

Webb Institute- New York

Good things coming from Sallie Mae

In keeping with my initiative to help as many people as possible pay for college, I wanted to draw some attention to the Sallie Mae Fund. To ensure that funding is not a barrier to higher education for students and their families, The Sallie Mae Fund provides roughly $2.5 million in college scholarships each year to low-income and minority students. Since 2001, The Sallie Mae Fund has awarded $10 million in scholarships to help over 4,000 students enroll in college.To watch a video of the very popular “paying for college bus tour” click here.

Scholarships range from $250- $5,000. For more specific advice on how to apply for a scholarship, click here.

AMT and FAFSA

The Alternative Minimum Tax (AMT) is an extra tax some people have to pay on top of the regular income tax. The original idea behind this tax was to prevent people with very high incomes from using special tax benefits to pay little or no tax. When AMT was designed in 1969 it was developed to tax only 200 of the nation’s wealthiest families, but for various reasons the AMT reaches more people each year. In 2006, AMT was imposed on 4 million tax payers, and this year the tax is slated to incorporate an additional 21-25 million tax payers, each with an additional tax bill of $2,000.

Basic math skills will reveal that the government is set to reel in an additional $50 billion dollars in tax revenue next year, which has caused a considerable stir among tax payers, the same tax payers that will be voting in the upcoming elections. Congress is attempting to fix the problem long enough to “deal with it another day”, but the timing couldn’t be worse, and the President has threatened to veto any solutions that involve raising taxes elsewhere.

What does this mean for college students who depend on financial aid? Students are required to fill out the Free Application for Federal Student Aid (FAFSA) every year with tax information from the prior year, but it isn’t necessary to use the exact information from the 1040. FAFSA allows estimates to be used, but should the official information differ in any way, an update will need to be made. Depending on the state, students run the risk of losing out on state and institutional funding should they wait too long.