Safari CollegePlanningWhitepaper 2015

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C O L L E G E P L A N N I N G W H I T E P A P E R
With the sticker prices of the most expensive colleges now reaching as high as $65,000 per year, even students whose
parents have annual incomes above $175,000 may qualify for a significant amount of college aid, even if they have
significant savings and investments. What’s more, parents are earnestly seeking out advice on how to best position their
finances to qualify for the maximum amount of aid while still being able to pay their share of the cost.
Many financial advisors know how to advise their clients on how to save for college. But only a very small percentage of advisors
have become well versed on how to counsel their clients who have a child in high school on how they can utilize a customized
late stage college funding plan to reduce their out-of-pocket college costs by potentially tens of thousands of dollars.
Calculating Aid Eligibility
The best advice on positioning clients’ assets for financial aid is based on
several factors. There are two types of college aid, need-based aid and
academic merit aid. Merit aid is straight forward, if you have the grade,
you get the aid. For example, a student might have a 3.75 GPA and an ACT
score of 30 and receive a $12,000 per year Dean’s Scholarship. That’s good
news for smart kids, and those that won’t qualify for need-based aid.
Need-based aid eligibility is based on the formula (Cost of attendance –
Expected Family Contribution (EFC) = Need). Expected family contribution
(EFC) is the minimum amount the family is expected to contribute toward
the cost of college, and is calculated using three different methods:
Federal Methodology (FM), Institutional Methodology (IM) and Consensus
Methodology (CM). All three EFC calculations are based on the income and
assets of the parents and student as reported on the two financial aid forms,
the FAFSA (FM) and the CSS Profile (IM and CM).
How Assets Are Counted In College Aid Formulas
Parents’ total reportable assets will vary depending upon the EFC methodology, and from that reportable asset value the
savings allowance of about $30,000 to $45,000 is subtracted to arrive at an available asset value. Parents are expected
to use up to 5.64% (Federal) and 5% (Institutional and Consensus), of those available assets each year on college. Small
businesses, home equity and nonqualified annuities are not counted in the FM, but they are counted in the IM and CM,
although, under the CM home equity is capped at 1.2 times the parent’s adjusted gross income.
StartPlanningforCollegeNow.
Best strategies on howto plan foryourchildren’s college education.
Year 2 Yr Public 4 Yr Public 4 Yr Private
2014 $18,619 $24,591 $50,179
2015 $19,737 $26,067 $53,189
2016 $20,921 $27,631 $56,381
2017 $22,176 $29,289 $59,764
2018 $23,507 $31,046 $63,349
2019 $24,917 $32,909 $67,150
2020 $26,412 $34,883 $71,179
2021 $27,997 $36,976 $75,450
2022 $29,677 $39,195 $79,977
2023 $31,457 $41,547 $84,776
2024 $33,345 $44,040 $89,862
2025 $35,345 $46,682 $95,254
2026 $37,466 $49,483 $100,969
The table projects those costs for future years assuming
a 6% annual increase in the total cost of attendance.

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Students must report the same types of assets as parents, but students do not have a savings allowance, so 100% of the
value of student-owned assets gets counted. Student-owned assets are counted at a rate of 20% (FM), 25% (IM) and 5%
(CM), but under the FM, 529 college savings accounts and Coverdell Education Savings Accounts (ESAs) are counted as
parent’s assets (5.64%) even though they are owned by the student. Life insurance cash values and personal assets like
cars do not count under any of the formulas.
As previously stated, retirement assets are not counted in the calculation of EFC, but assets that aren’t in retirement
accounts --- balances in checking, savings, CDs, money market, investment real estate, stocks, bonds, mutual funds, ETFs,
commodities, etc.---do get included in the EFC formulas.
Positioning Assets, How You Decide
This is how we arrive at our advice to clients on asset positioning and college aid. If the expected family contribution
based on parental income alone is higher than the cost of the college, the student won’t qualify for need-based aid.
Therefore, unless the parents can lower their income, neither the parent’s nor student’s assets impact aid eligibility.
However, if the income-only EFC is less than the college’s cost, then depending on family assets the student may qualify
for need-based aid. If the student has assets, they will impact aid eligibility, and if the parent’s reportable assets exceed
their savings allowance, their “excess” assets will impact eligibility too.
Since the cost of college has risen so dramatically, even students with parents who have income well over $150,000 may
qualify for some need-based aid at the most expensive colleges, especially if there are two children in college at the same
time. If a family doesn’t qualify for aid, focus on tax savings, merit aid and how they will pay the bill. Your advice should
not center on financial aid alone!
Eligible at One College, But Not at Another
A student’s eligibility for need-based aid is relative to the cost of attendance of each college the student is considering.
The student may qualify for need-based aid at one college and not at another. Using the example above, based solely on
the parent’s income alone, and forgetting all assets for the moment, parents earning $145,000 per year in income would
have an EFC of approximately $35,000 per year under the federal formula with one child in college.
At the private college costing $65,000 per year, the student would qualify for $30,000 per year in need-based student aid
because the student’s EFC is $30,000 less than the college’s cost of attendance. Conversely, at the state university costing
$25,000 per year, the student wouldn’t qualify for any need-based student aid because the student’s EFC is higher than
the cost of attendance.

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Expected Family Contribution (EFC)
This is what the family will be expected to pay toward the cost of college at the school selected before qualifying for
any need-based financial aid at that school. This is the all-important starting point for becoming an informed buyer of a
college education. By starting with the EFC, the family will have a much better idea which schools are REALLY affordable!
The EFC Formula
There are two different methods for determining EFC. The method used by the school being evaluated can make a big
difference in how much a family will be expected to pay at the school as well as strategies for increasing financial aid
eligibility at that school.
Comprehensive Financial Aid Analysis
This is a reasonable estimate of the amount and type of financial aid that can be expected at the school being evaluated
as well as how much will likely have to be paid out-of-pocket, after accounting for financial aid. It is based on school-
provided data. You’ll be amazed to learn that at many of the higher priced schools - particularly private colleges – actual
out-of-pocket costs will be less than many public schools with a lower sticker price. Many schools that you’d think are not
affordable may be very affordable to your client when you factor in financial aid! This information can be very helpful in
determining what school to apply to in the first place! The family shouldn’t give up on the school of their student’s dreams
just because they don’t think they can afford it. They may be delighted to learn they can!
Strategies for Increasing Financial Aid
This is a one of the most valuable aspects of the software-generated report. Drawing from CFS’ proprietary database of
hundreds of financial aid enhancing strategies, developed over the last decade with the help of top college-planning
experts, the report will include client-specific strategies that can be implemented to help maximize their financial aid
eligibility and minimize their out-of-pocket college costs.
Savings Strategies
From the myriad of options, the software-generated report will help you advise your client as to which savings option is best
suited for them. The options are rated based on critically important categories such as whether the option is favorable for
financial aid eligibility or disastrous, is it a good dual purpose option - for college and retirement savings, etc.
You’llbe amazed to learn that at manyofthe higherpriced schools -
particularlyprivate colleges – actualout-of-pocket costswillbe less than
manypublic schoolswith a lowerstickerprice.

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School-Specific Merit Scholarships
School-specific scholarships that the student qualifies for based on academic performance and how to obtain them can
be included in the software-generated reports. This actionable information, which cannot be easily obtained otherwise,
will help families reduce their out-of-pocket costs. It’s one more way that financial services professionals affiliated with
CFS can help families save on and not just save for the cost of college.
Funding Strategies for Covering Shortfalls
Most families will need loans to help cover the total cost of college. Knowing which options to choose - based on
circumstances - can be complicated and confusing. Choosing the wrong option can cost a family thousands of additional
dollars on out-of-pocket college costs! The report will include a client specific, rank ordered list of loan and other funding
strategies for covering any shortfalls not covered by family resources or financial aid.
Analysis
Based on the EFC, the cost of the college selected and the amount of lead time till the student begins college, the college-
planning software will provide practical recommendations for an overall game plan for planning for and paying college costs.
Planning and Funding Strategies
Many of these college planning strategies can help increase cash flow which can help pay education expenses (or be
reallocated) or reduce taxes. Every dollar saved on taxes through a college planning strategy is like a “scholarship”!
Areas covered include:
• Strategies for high income earners
• Strategies for business owners
• Strategies for grandparents
• Trust planning strategies
Strategic Use of 529 Savings Plan
There has been a lot of buzz about 529 plans over the years but the fact is they can be confusing and many families
don’t consider them because they don’t understand how they work and the benefits for their particular situation. CFS’
proprietary college savings and funding optimization model will help you assess the merits of using a 529 savings plan as
the cornerstone of your client’s college savings and funding plan. The model will yield:
• Practical strategies for maximizing 529 resources for college AND tax savings for the family.
• Complementary strategies that will multiply the benefits of using the 529 plan and maximize tax savings for the family.
• Projected college funding surpluses or shortages using this approach.
• The amount of tax benefit to the family - if any - of using their state’s 529 plan. This can help you and the family decide if
their state’s 529 plan is the best option or if another alternative should be considered.
• Coordinating 529 withdrawals with education tax credits (this can be tricky) so as to maximize tax savings.
• Estimated overall tax savings by using the 529 plan as well as the other suggested strategies.
• Estate planning strategies
• Education tax credit strategies
• Gifting strategies - for parents and grandparents

Safari CollegePlanningWhitepaper 2015

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Safari CollegePlanningWhitepaper 2015