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Can Saving for Education Affect Financial Aid?
Did you know that only one student out of every 300 will receive a full scholarship to college? Here are some additional financial aid fast facts.
Most aid comes in the form of student grants and loans.
• Federal grants don't need to be repaid but are typically designed for low-income families. So many students don't qualify.
• Student loans, which are much more common, have to be repaid within a certain time frame and incur interest - with interest rates that are reset each year according to Treasury rates.
Financial aid eligibility
While you can't control how much financial aid your child may be awarded or what the interest rate on a student loan will be, you are in control of how much you contribute to your education savings strategy.
Some families worry that contributing to a 529 plan or other savings plans may hurt their chances of receiving financial aid. In reality, up to 5.64% of parent-owned assets - excluding qualified retirement assets, your primary residence and insurance policies - are considered in financial aid calculation, according to the U.S. Department of Education.
Your financial advisor can show you different ways to save for education and will explain how different ways of saving may impact financial aid eligibility. Don't worry if you have a lot of questions. Ask away. We'll take as much time as you need to make sure you understand how it all works.
Federal financial aid is need-based and determined by one equation:
Examining financial need
Cost of Attendance (COA) - Expected Family Contribution (EFC) = Financial Need
All families applying for financial aid must complete the Free Application for Federal Student Aid (FAFSA) (http://www.fafsa.ed.gov/
The COA is the total cost of attending a particular school for one year. It includes tuition and fees, room and board, books and supplies, and transportation to and from school.
How we can help
Remember, while loans, scholarships and grants can help, what they can offer may be beyond your control. The more money you save and invest for education, the more control you and your child will have over how to pay for college. Talk to your financial advisor today for more information.
1 Secrets of Winning a Scholarship. Mark Kantrowitz, 2013.
Edward Jones, its employees and financial advisors do not give tax or financial aid advice. This is a highly specialized field, and specific questions should be directed to a qualified financial aid expert. This material is offered for broad, informational purposes only. Many important details of the federal financial aid system are not mentioned or fully described. The information provided is a simplified explanation of the federal financial aid system and how savings vehicles fit into it.
This information discusses federal financial aid only. Information on aid from schools and states and on private scholastic and athletic scholarships is not provided.
Edward Jones - Matt McDonald: Financial Advisor