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College Planning 101



Over the last couple of months, as we've publicly shared the College Planning side of Merit Advisors LLC, I've received this question multiple times:


What Can a Financial Advisor do for College Planning?


To answer that question, I'll share some wisdom from my associate, Anthony.


Anthony states, "One of my clients inadvertently listed his 401k balance on the FAFSA instead of just his annual 401k contribution. This error cost him dearly for a year until he could resubmit the form again the next year. He sent a letter to the school admitting the mistake but they didn’t change the amount of aid his child received.

Another client listed his business net worth not realizing that in the fine print it says it only has to be listed if there are more than 100 employees.


Finally, I watched another family keep all of their child’s income from a high school job in a savings account which hurts much more than if the assets are listed in the parents’ name."


Anthony was watching clients struggle with finances due to the process of sending their children to college. The were confused about what had happened and because Anthony truly cares about his clients, he wanted to find ways to support them as well as prepare himself for when his own children enter college (which is now less than two years away).


During his deep-dive research into the finances surrounding the college journey, Anthony found he was helping clients address potential pitfalls before they even filled out their first form.


What are the top two items Anthony feels families should understand before anything else?


The first is the FAFSA and the second is the EFC.


FAFSA stands for “Free Application for Federal Student Aid.”


There are actually a lot of misconceptions about the FAFSA. A lot of people think that the form is only for people who are low income and need federal aid scholarships. This is not true at all.


What is true about the FAFSA?

  • When your child is a senior they're able to fill out this form on October 1st.

  • The deadline to file is March 2nd every year.

  • The FAFSA information is based off of your taxes that you filed 2 years prior (they call it prior/prior). If your son or daughter is a high school senior now, in 2021, and will start college in fall of 2022, the FAFSA will look at your family’s tax return for 2020. It is always 2 years prior to the college start-date.


If your child is a freshman or sophomore in high school today, you're in the best position to begin strategizing because you can put some things in place before the 2022 or 2023 tax years start to get into the best position for the FAFSA information.


Every school in the United States will require the FAFSA form – that is the bare minimum requirement to apply for scholarships, grants, and financial aid. Even if you want merit money based on grades, you still need to fill out the FAFSA.


There are some common mistakes that parents make when they're filling out the FAFSA:

  1. Make sure you do not put your net worth information in the wrong spot.

  2. There is a difference between Gross Income and the Adjusted Gross income on your tax returns, make sure you understand the difference and exactly what you are supposed to enter.

  3. DON’T LIST HOME EQUITY ON THE FAFSA but you do have to list your home value for private schools on the CSS Profile forms.

  4. The “You” mistake: When you fill out a financial aid form it will ask what’s your income? That’s asking for the student income not yours – you are filling this out for your child so PLEASE MAKE SURE YOU DON’T LIST YOUR INCOME UNDER YOUR STUDENTS.

  5. Asset mistakes are one of the biggest mistakes I see people make. Make sure you understand how to categorize assets on the FAFSA

The second important abbreviation is the EFC.


EFC stands for Expected Family Contribution – it’s what the government thinks you can afford to pay for college.


There are 74 factors that are used to determine your EFC – things like: Parent’s income and assets, student income and assets, number of people in the household, number of people in college, etc.

  • EFC is different for every family. There are also different ways to lower it, so it’s a lot like tax planning.

  • EFC is the same for every college that you apply to for that year.

  • Every year after, your EFC can change because your income and assets can go up.

  • The EFC is given about halfway through the senior year.

The system is designed so that the later you know about your EFC and what affects it, the less you can strategize so the less you can strategize the more you have to pay the college.

Remember, college is a business and the more you have to pay them, the more you have to take on in student loans (and the more money they make).


Anthony is holding a free Webinar tonight at 6:30pm Eastern time (registration found here) to give you more information about how to pay for college without going broke.


He's also running a live interview for our Merit Moment this Thursday at 3pm with one of the mentors he met during his research, Al Hoffman. You can watch that here.




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