Color of Money Live (Oct. 1)

Oct 01, 2015

Join Washington Post nationally syndicated personal finance columnist Michelle Singletary for an online discussion.

Joining us is Mark Kantrowitz, senior vice president and publisher of Edvisors.com. He writes extensively on student financial aid policy and regularly testifies to Congress about student aid. He just recently launched a book about the issue, "Twisdoms about Paying for College."

Send your money questions in early.
Read Michelle's recent columns

So excited to have the paying for college guru Mark Kantrowitz as my guest today. His new book "Twisdoms about Paying for College" was the Color of Money Book Club selection for Sept. 

Anyway let's get started.

Mark and Michelle hello and thanks. Our son in the Midwest has top ACT scores and class scores and is being wooed by tons of colleges. My husband thinks our son should find the schools that really want top students and offer an attractive discount rate. This is the thing though: we've lived modestly (my car has 366,000 miles and is still going); we've saved mightily and aggressively. Our net worth exceeds $2.5 million and thus the net price calculator online pegs our contribution at $40k+. And you know what? It could be. We CAN afford to pay $250 TODAY for college. Amazing and gratifying and I KNOW how rare this is. BUT- My husband thinks it's "outrageous" for my son to even consider a school that will not offer any aid. His university professor friends encourage us to 'find the school that gives the most on merit." After saving for so long, my husband just doesn't want to part with any dime more than necessary. He said he'd give the same amount as he did for our eldest, an indifferent student who graduated from a state school. And to be sure - I see a point somewhat, in that graduate school is highly likely too for our senior. Your thoughts? And do we need to fill out the financial aid forms for merit evaluation? Thanks again.

On the Free Application for Federal Student Aid (FAFSA), money in qualified retirement plans is ignored, as is the net worth of the family home and any small businesses owned and controlled by the family. Also, if the parents' income is less than $50,000 a year and they were eligible to file an IRS Form 1040A or 1040EZ (or someone in the household received certain means-tested federal benefits), the Simplified Needs Test will cause assets to be disregarded. When using a net price calculator, be sure to use only the reportable assets. 

Your son can get an excellent education at an in-state public college at much lower cost than a high-priced private non-profit college.

More than 200 colleges offer full-tuition academic scholarships to attract talented students. See https://www.edvisors.com/scholarships/win-scholarships/free-scholarships/academic-scholarships/ for a list. 

Some colleges will require students who are seeking merit scholarships to still file financial aid application forms, to ensure that the student gets all of the money to which he or she is entitled.

Look I get it. I have some smart kids. My oldest did so well on the AP exams she entered college with a semester worth of credits. And we thought she should get a lot of merit aid too. And she did get some money. But I'll say this to you.

If you saved for your son, spend the money for the college that best suits him. You got it like that. So many others don't.

I was sad to see that you fell prey to the spin on the latest Gallup poll about whether college is "worth it." You reported the 50% who "strongly agreed" that college was worth it, but omitted the 27% who "agreed." And since only 4% "strongly disagreed" that college was worth it, you could properly have said that agreers outnumbered disagreers 12 to 1. I agree with you that families need to be careful about how much they borrow, and not to let status anxiety lead them to overdo it. But since the federal government has shifted the bulk of its funds from loans to grants, it's almost impossible NOT to borrow. And college is definitely worth it when you consider how low the wages are for people who don't finish college. By all means, advise families to restrain their borrowing. But please don't use shoddy statistics and scare tactics to do it.

First, I didn't fall for anything. And correction gov't has shifted from grants to loans. 

And did you read to the end of the column? I definitely said college is worth it BUT not at the cost that so many are incurring because they are taking on so much in loans. 

My point and the point of the index is to get people away from the thinking that college is worth it "at any cost." 

When my mother passed last year, she left money for the grandchildren and their education. Our children, ages 5 and 9, were among the recipients. I opened up 529 accounts and deposited the funds for them, to grow towards college. Starting out with $10 K a piece, if I just leave it alone and let it grow in this "aggressive" plan, do you feel they will have enough to cover college in 9-13 years? They will also be receiving additional funds in another 1-2 years (not sure of the amount, just know that it will be forthcoming). If you don't think it's enough, what is the next step that we, as their parents, should take? Thank you!

Use an age-based asset allocation, instead of keeping the money in an aggressive plan. While the nominal return on investment in an aggressive plan is about double the average return in an age-based asset allocation, so too is the risk. The stock market will drop at least 10% at least 2-3 times during any 17-year period. For example, the S&P 500 dropped by almost 40% in 2008, wiping out all the earnings for people who were in too aggressive an asset allocation.

While the $10,000 will help pay for college, it is not enough to pay for the full cost of college. Assuming a 5% average annual return on investment with no further contributions, in 13 years the $10,000 will have grown to about $19,000. You need to supplement it with additional savings, at least $250 a month if the child will enroll in an in-state public college.

It is cheaper to save than to borrow. Every dollar you save is a dollar less you'll have to borrow. Every dollar you borrow will cost about two dollars by the time you repay the debt.

We hear so many times that students are searching for scholarships and no having any luck. Even though we're researching on our own and proposing specific ones for them to apply for, so many only award between 1-10/year. How can we motivate students when there are so many scholarships in low quantities?

By telling them every dollar helps. Every. Single. One.

My daughter got $5,000 a year from the university. It's a lot and it isn't. But I tell you when her bill comes every semester and $2,500 has been knocked off for her scholarship ($5000 per year), I'm jumping for joy!! 

Do the new credit cards both swipe and dip? I've had the new chipped cards for about 6 months and it seems to be different at different stores. I find myself at the check out using both methods trying to find the right one to get the card to work. Thanks

Depends on what machine the merchant purchased. But I know what you mean. Took me some time to figure out to dip my card at one store while at another I just swiped as usual. But small annoyance if it helps credit card fraud.

Hi Michelle, It's been a rough year financially. We purchased a house in November - definitely within our budget, comfortable mortgage payment. In January husband's car needed $1500 in repairs. In March my car was totaled (everyone was okay) and my parents graciously offered to purchase a used car for us that we are paying back with 0 interest. The loan to my parents is about 50% paid off now. Basically our Life Happens fund is empty. The AC in our house died in June, and was about $5000 to replace. We qualified for 18 months 0% financing and have been paying off about $400/month. At that rate we will be done in August next year (well before any interest charges would begin). My concern is that since we've starting paying this we have not been able to put any money in our Emergency Fund. We have about 2 months worth in our Emergency Fund. It is better to pay off the AC now since we have the money in the Emergency fund (and then start putting the $400/month back in savings) or keep making the monthly payment? Right now we make enough money to cover all our bills but not to put anything away. I just feel nervous not having been able to save anything for the last few months! Thanks!

I love that you are really thinking this through. And I so get the piling expenses thing. Been having a lot of home improvement repairs come up too.

So here's the thing. You have a good cushion. For now, don't worry about adding to it while you are paying off the loans you have. You can go back to saving once those are paid off.

I will add, that see if you can shave something from your budget to have a "life happens fund" in case of another car repair etc. Just try to put $500 to $1,000 in there little by little ($20 here, $30 there). This will help avoid tapping into the serious emergency fund.

I have a full time job with a good salary and benefits. On the side, I'm the owner of a small business which is doing well this year and provides a yearly payout. Historically I've used the business income to help with living expenses during school, contribute to the 20% downpayment on my house and most recently to boost my savings to a full 6 month's salary. I'm expecting my first baby in January. I'll be a single parent and I'm currently plowing the cost of daycare into savings so that I'm living within what will be my new budget (or I will be once I stop outgrowing my work clothes and all my shoes every two weeks). Here's the question: What should I do with this year's business income? I would have devoted it to a modest kitchen remodel or a vacation, but with the baby coming I'm having trouble convincing myself to use it for a non-essential indulgence (or to start ripping up my house, or to take vacation days ahead of needing them for maternity leave). I'm leaning towards boosting my retirement contributions but then it would be relatively inaccessible if needed later. Just stick it in savings? Baby's college fund? can I set up a fund before the baby is even born, I would think I'd need an SSN . . . I'm spinning my wheels a little and I'm open to ideas.

You can start saving for college before your baby is born. I did. 

There are two main ways of doing this. One is to set up a 529 college savings plan in your name and to change the beneficiary to the baby after the baby is born. (You are correct that the child need to have a Social Security Number to be named as a beneficiary on a 529 plan.) The other way is to save the money in a taxable account and later transfer it to a 529 college savings plan after the baby is born.

The last thing you need is to deal with the dust of a remodel while you're expecting or soon after birth. Likewise, a vacation will be uncomfortable. Better to save the money for future needs, such as diapers, daycare and college.  

Totally agree with Mark. No vacation. No home improvement. Because whatever you think it will cost for the baby, it will be more!

Turns out, we underpaid our taxes a couple of years ago. Did not mean to, but apparently forgot to note something. No biggie. We heard from the IRS and we have made arrangements to pay the amount due. However, there is a second issue, college loans (Federal) in the amount of $15,000 that also need to be paid. While I was between jobs, my wife was the sole support/income for our family of 5, so we paid the "four walls & medications" and little else (no vacations, eating out, drove the old hooptie, etc.) So, the college loans fell behind while we lived minimally. Now, we are being hounded to pay them back too. Will we be expected to repay both the back taxes and the college loans AT THE SAME TIME??? Or, can one be paid off, followed by the other? We do have to live on something. What do we do? Right now, it is just letters and being told CONTACT US and PAY UP. I appreciate your advice.

If the college loans are federal loans, they are considered to be in default after 360 days of non-payment. (For private student loans, default occurs after 120 days of delinquency.) 

If the loans are not yet in default, you need to bring them current, as the penalties for default are severe.

As much as 20% of every payment will go to collection charges after a federal loan goes into default. The federal government can garnish up to 15% of the borrower's wages and intercept federal and state income tax refunds (and lottery winnings) to repay a defaulted loan. 

Given that you are struggling financially, you may wish to consider the income-based repayment plan, which bases the monthly payment on a percentage of your discretionary income, not the amount you owe. Talk to the lenders; ignoring the problem only makes it worse.

What financial aid is available for families that have high incomes, but relatively low savings to help students pay for college?

All students who satisfy the citizenship requirements and are enrolled at least half-time are eligible for the unsubsidized Federal Stafford loan. The Federal Parent PLUS loan also has a modest credit check, looking for current serious delinquencies or past derogatory events (bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment). Also you have to file the Free Application for Federal Student Aid (FAFSA) to obtain these loans, you can get them even if you are wealthy.

There are also several education tax benefits that may be available to you, such as the American Opportunity Tax Credit and the Student Loan Interest Deduction. See www.edvisors.com/taxes/.

Also, families have a tendency to underestimate eligibility for need-based aid, so apply for financial aid even if you think you won't qualify. Financial aid is based on financial need, which is the difference between the cost of attendance (COA) and the expected family contribution (EFC). Thus, financial aid will be greater not just if the family has a lower EFC, but also if the child is enrolled at a higher cost college.

Also, the number of children in college at the same time has a big impact on aid eligibility, so a family that does not qualify for need-based aid with one child in college might qualify for some aid with two children in college. 

And might I add, you may need to manage your child's expectation for what college you can afford without going into debt or a lot of debt. Can your child go to community college for 2 years and then transfer to the university of his or her choice? Can he or she commute rather than live on campus, especially if you have to borrow to pay for room and board?

 

I have 3 529's in my name for the benefit of 3 grandchildren. Recommendations say that that money should not be used until the grandchildrens' final years of college. Why?

If the account owner of a 529 plan is a dependent student's custodial parent, the 529 plan is reported as a parent asset on the Free Application for Federal Student Aid (FAFSA) and distributions are ignored. This has a minimal impact on eligibility for need-based aid.

But, if the account owner is anyone other than the student or the dependent student's custodial parent(s), such as a grandparent, aunt or uncle, it isn't reported as an asset on the FAFSA, but distributions count as untaxed income to the student on the FAFSA. This reduces eligibility for need-based aid by as much as half of the distribution amount.

There are a few workarounds. One is to change the account owner from the grandparent to the parent. Another is to wait until the child's senior year in college to take a distribution, since there will be no subsequent year's FAFSA to be affected by the untaxed income (assuming that the child isn't immediately going on to grad school). One could also set up a parent-owned 529 plan in the same state and roll over a portion of the grandparent-owned 529 plan to the parent-owned 529 plan each year, after the FAFSA is filed, and spent it before the next FAFSA is filed. That way it isn't reported as an asset and the distributions don't count as untaxed income.

Note that with the change to prior-prior year starting with the 2017-18 FAFSA, FAFSAs will be based on two-year-old income data instead of one-year-old data. This will allow one to take distributions during the junior year in addition to the senior year, but increases the necessary gap between undergraduate and graduate school from one year to two years.

I have an VA 529 for my oldest son who is now 29 and it has reached it's 10 year limit. He finished his AA degree but then he has been active duty air force for the last 8 years and mostly deployed so he didn't have time to keep up with college. Since he has education benefits through the military would it be best to cash in the $12,000 remaining and just give it to him to use in conjunction with his GI benefits or should I ask for the 3 year extension for him to use for college expenses? He is currently active reserves but has 8 years of active duty. Thank you.

The Virginia 529 plan is one of the few state 529 plans to have a time limit on when the funds may be used. Depending on the plan, it may be 10 to 30 years from high school graduation if the plan was established when the student is an adult. The federal statute at 26 USC 529 does not have such a restriction.

So, one solution is to roll the VA 529 plan money over into a different state 529 plan that doesn't have such a restriction. Another is to ask for the 3-year extension. Another is to take a non-qualified distribution, but then he will have to pay ordinary income taxes on the earnings portion of the distribution, plus a 10% tax penalty.

Keep in mind that GI Bill benefits also have time limits. So, I would recommend having him use his GI Bill benefits and either get the 3-year extension or move the money into a different state 529 plan so that he can use the money to supplement the GI Bill benefits.

A few weeks ago your newsletter included a question about maternity leave policies. Did you ever follow up with the responses you received? I'd be interested to know what people think, since it's a topic in the news all the time now. Thanks!

I did follow up. At least I think I did. Too many senior moments these days. You can go online and check the newsletter archive. I put the responses from folks at the bottom of the next week's eletter. But generally people thought it was a good idea to help men and women take off time to care for their children.

I have four children. I run a small daycare. I homeschool. I'm also in college at night. My money is tight and tied into all of the above. I'm paying out of pocket to go each semester. How can I cut the cost down? I don't want to take out a loan and look like Grumpy. Are there grants for adults that I'm missing out on? My major is Nurse Practitioner.

First, apply for financial aid by filing the Free Application for Federal Student Aid (FAFSA). You might qualify for some grants to help pay for college, which will help reduce the financial burden of paying for college. Also, search for scholarships using the same tools that 17-year-old students do. Most do not have age restrictions, just restrictions on already having a Bachelor's degree.

I would recommend taking advantage of the low-cost federal student loans. In particular, nurses are in such demand that many employers will provide a loan forgiveness or loan repayment assistance program to try to attract nurses.

So folks in case you don't know Grumpy is my monkey who looks mean. I use it in my periscope videos to illustrate how people feel about carrying loans. 

Do all of what Mark said. Look for money. Try not to take out loans unless you have an employer lined up who will help pay. And remember employers often have benefits -- like paying for college -- that they yank away in hard times. So while it's good when it's there it can be gone. My employer used to have a higher education benefit. Poof!! It's gone. Just saying.

Michelle, I'm a freelancer who got dinged last year for not paying estimated quarterly taxes. But I have no idea how to calculate these because my income is so unpredictable. I called Annapolis several times and got into lengthy phone trees and unhelpful bureaucrats who couldn't answer a question. They hung up on me and referred me to bad links. Finally gave up. Now I'm going to be fined again! What can I do?

I know right. So my dear it's really time for you to hire a tax person. He or she can help you figure out your estimated payments. 

Mark what is the best way to seek scholarship money? There are many websites that detail scholarship options- are they accurate and can they be trusted? When is the best time to apply (now?) if our daughter will attend college in the fall ?

Only use free scholarship matching services. If you have to pay money to get money, it's probably a scam. Never invest more than a postage stamp to get information about scholarships or to apply for a scholarship.

I list several of the reputable free scholarship matching services at https://www.edvisors.com/scholarships/win-scholarships/matching-services/. These services are generally supported by advertising, so consider carefully whether you want to opt in for the advertising. About two thirds of the students find it helpful, since the advertising is from companies and colleges that are trying to reach current and prospective college students. 

I suggest using two of the scholarship matching services. This will show you that there is a very high degree of overlap in the results, so you'll be less likely to get fooled by a paid matching service that claims they have more or better results.

When using a scholarship matching service, answer the optional questions for more matches. Students who answer the optional questions tend to match about twice as many scholarships as students who answer just the required questions. This is because the optional questions are asked to trigger the inclusion of specific scholarships.

Start searching for scholarships ASAP. Otherwise, you'll miss the deadlines. There are scholarships students can win in younger grades (see www.edvisors.com/age13) and scholarships that are available only to students enrolled in college, not just high school seniors. Apply to every scholarship for which you are eligible to increase your chances of winning a scholarship.

Leave the $$ in savings for now. Even with putting away what you think daycare will costs, babies can be expensive. With daycare, you may need to provide duplicates of what you have at home (we have to send a new crib sheet every day), some do and some don't provide formula if you aren't breastfeeding, you will get so sick of washing bottles that you will buy several days' worth, co-pays for doctor's visits that are every frequent in the beginning, etc. Put the $$ away. If you have it left when you're in the parent groove, then decide what to do with it.

Amen!

Great advice. Thanks.

And shoot still paying for my babies and they are 20, 17 and 15. Like today, got to buy drinks for my 15--year old's volleyball team. Band stuff for my son. Coming up study aboard fees for my 20 year old.

They better take care of me when I'm old. 

I am so with your husband. I find it utterly appalling that universities now think it is okay to charge families $200K or more for 4 years of education. That buys a house in some parts of this country, or it is a least a very healthy down payment on one. It angers me because these fees per year exceed what many of these kids can even make per year upon graduation. (See the recent Post article about how many recent college grads are making $25k a year or less.) While the Ivy Leagues will always get to charge whatever tuition they like, I hope some of the other universities out there get hit hard by families refusing to apply and therefore their admission class sizes decrease drastically. We will be withholding applications from ridiculously priced universities and concentrating on state schools.

Amen. Amen. Amen.

Told our kids they can apply to any school. But if they don't get enough free money to add to the money we've saved to go to that "any school" they are staying state-side or commuting or going to community college then 4-year. We won't go into debt nor allow them to go into debt. And they still can get a good education.

Aren't they based on what you have earned so far this year? You might not know what you will make in December, but you should know what you made January to September.

Very true. But still just to be sure get some professional help. There are a lot of tax folks with affordable fees who can easily help you.

Michelle, I have accumulated approx. $7500 in credit card debt and just can't seem to get ahead of the game due partly to my Chase Card that charges me more than $50 a month in finance charges and interest....Can you reccommend a card that I may be able to transfer this balance to with my credit score being at an all time low.

So stop applying for or don't apply for any cards. If your score is already low, applying for new credit can bring it down further.

I suggest you go back thu your budget and cut, cut, cut. If you can't cut any more can you get a part-time job? Can you get a roommate? With a combination of cutting expenses and increasing income you can aggressively attack that debt with playing credit card shuffle.

You can do this!

For real.

I'm not trying to be self-promotional but to help you see that you may have more money in your budget to attack this debt get "The 21 Day Financial Fast." Follow the daily plan, which involves your not spending money on anything that is not a necessary and you can't use plastic. (By the way, hopefully you have put that card away, freeze it). The book is faith-based but don't let that stop you. Follow the plan to see that you may have more than you think to get that debt monkey off your back so you aren't Grumpy anymore.

Oh yes and moving on - to elementary and middle school, you have to pay for extended day camp, school's out camp, summer camp! Keep saving those dollars!

For real. For real!!!

Agree no holiday/no remodel but it might be both physically and psychologically a good idea to invest a few hundred dollars in pre natal and post natal massage *with someone qualified*. Your body will change hugely and no-one talks about after baby comes, yet it's still a new body for you. This is a nice gift to you and your baby that will help you feel 'pampered' as well as health benefits but not cost a huge amount.

Ok, I'll allow this expense.

Agreed. 

Going to get me a massage tomorrow! 

Hi Michelle and Mark! Thank you for doing this live chat. My fiancé and I lived above our means for a couple years and are now working on paying down credit card debt and student loans. Our situation is much better now than it was and we are looking into buying a home to get out of paying rent but are unsure if it makes sense to own a home at this time. Paying down CC debt and trying to build an emergency fund is not easy and we've had setbacks. What would you say is the best plan of attack? Cheers!

If you are struggling to repay the credit cards and student loans, the last thing you need is to pile on more debt by buying a home. Not only does a home involve a monthly mortgage payment and property taxes, but also utilities and maintenance, which can be expensive (e.g., needing a new roof, replacing a furnace, etc.). 

Instead, continue making the required payments on your credit cards and student loans while you build a 6 month emergency fund. Then, target the loan with the highest interest rate (usually credit cards) for quicker repayment by making payments beyond the required monthly payment. After that debt is paid off (and don't use it as an opportunity to run up the credit card debt again; cut up the credit card if you need to in order to avoid the temptation), accelerate repayment of the loan with the next highest interest rate. Continue doing this until all of your loans are paid off.

Ditto.

No house for you!

For now.

Now my debt payment plan is different than the one Mark suggested (I say start with the ones with the lowest balance to give you a sense of accomplishment). But really, any plan is better than no plan. 

 

Last year I withdrew some money from an IRA to pay off some debt. This was considered income and was reported as such on my 2014 taxes. Now, my 17-year-old is applying to college and I'm concerned that this skewed amount (it sent my reported annual income much higher than it would have been) will count against me when I file for financial aid. Do I need to contact financial aid offices to explain this (because my reported income for 2015 will be a good deal lower)?

Yes, distributions from retirement plans (including a tax-free return of contributions from a Roth IRA) count as income on financial aid applications. 

A high school senior applying for admission in fall 2016 will file the 2016-2017 Free Application for Federal Student Aid (FAFSA) to apply for need-based aid. This FAFSA is based on the student and parent's income and taxes as reported on their 2015 federal income tax returns, not the 2014 tax returns. So, it is possible that the IRA distribution won't affect aid eligibility.

But, if there is a one-time event like a retirement plan distribution that artificially inflated income, call the schools after the FAFSA is filed and ask for a professional judgment review. Argue that the retirement plan distribution is a one-time event that is not reflective of ability to pay during the academic year. Also mention any other unusual financial circumstances, such as high unreimbursed medical and dental expenses, income reductions, job loss, high dependent care costs for a special needs child or elderly parent, etc.

YES - hire a tax person pronto, they don't have to be expensive. As around for reccs with people in your line of work or similar. That's how I found my wonderful tax guy.

Thanks.

My son is a high school Junior. He wants to go to a 4 year college when he graduates in 2017, possibly in New York State, the state in which we currently live. About how much can we expect to pay for a 4 year college, both private and public? We've saved some money in a 529 plan, our income is over $100,000, about how much will we be expected cover, and will my son be able to receive financial aid?

The least expensive option for most families is to enroll in an in-state public college. In New York, that includes the SUNY and CUNY schools, which provide an excellent quality education. 

The College Board publishes average cost figures each year in their Trends in College Pricing report. The average cost of tuition, fees, room and board in 2014-2015 was $18,943 for an in-state public 4-year college, $32,762 for an out-of-state public 4-year college and $42,419 for a private non-profit 4-year college. But individual colleges do vary from these averages, so use a tool like CollegeNavigator.gov to get information about the costs at individual colleges. You can also visit the college's web sites for current costs. Use each college's net price calculator to get a personalized estimate of your costs after gift aid (grants and scholarships) are subtracted from total college costs. 

Hello! I am curious if there are types of scholarships, grants, credits or aid available to families with high incomes and significant savings already in education accounts like 529's. What are some ways to keep expenses down as our 3 children (ages 15, 11, & 8) begin to attend college?

According to my analysis of data from the 2011-12 National Postsecondary Student Aid Study (NPSAS), the most recent data available, 14.3% of students pursuing a Bachelor's degree with family AGI over $100,000 won private scholarships, compared with 11.3% of students with family AGI under $50,000 and 15.6% of students with family AGI between $50,000 and $100,000. So, have the student search for scholarships with a free scholarship matching service and apply for every scholarship for which he or she is eligible.

Other ways to cut on college costs include enrolling at an in-state public college (or one of the six dozen colleges with no-loans financial aid policies), buying used textbooks (or selling them back to the bookstore at the end of the semester), minimizing the number of trips home from school and generally economizing on living expenses. Live like a student while you are in school so you don't have to live like a student after you graduate. 

Since your children are mostly separated in ages by 4 years, you're unlikely to have more than a year of overlap in college. If one child is able to skip a year or the eldest child wants a gap year, doing so might increase the overlap. Increasing the number of children in college at the same time can have a big impact on eligibility for need-based financial aid. 

One thing we did with our daughter is have her use her summer income to pay for her books so that we didn't have to tap so much from her 529 plan. 

Hi Michelle, We have 2 mortgages on 2 houses (had to move for work, first house hasn't sold) and spent almost all our savings on this situation in the last 6 months. My colleague suggested I contact the lender and see if I can get a mortgage modification to lower my payment. Does this affect my credit, and how likely would a lender be to do this? Anecdotally, I hear that they won't consider this until you have missed a payment. We can pay both mortgages ($6K/mo), but with daycare, medical bills, utilities, etc we have less than $100 leftover for anything else... Ideas?

I suggest you talk to a HUD-approved housing counselor. You may be able to get a modification on your current primary residence but I'm not sure about the first house, which would now be considered an investment property. But that's the kind of thing you need to get with the agency.

And hey, it never hurts to ask. If they agree to a modification and in a way rewrite you terms it should not impact your credit score.

my question is do you know if anyone receive scholarships from Fastweb, niches, cappex. my daughter check out scholarships book from the library to see what she can find.

The free scholarship matching services do publish testimonials from students who won scholarships. Students who use these services do win scholarships, often at higher than the national average (probably due to self selection, since students who actively search for scholarships and apply for them are more likely to win). 

At Edvisors, we have two scholarship sites. One is StudentScholarshipSearch.com, a free scholarship matching service. The other is ScholarshipPoints.com, a free service where students earn points by completing surveys and other activities. The points are used to enter random drawings for scholarships. We've given away more than $750,000 in scholarships through ScholarshipPoints.

When using scholarship listing books, first check the copyright date. If the copyright date is more than a year or two old, it is too old to be useful, as about 10% of scholarships change in some material way each year (e.g., a change in address, selection criteria, etc.). 

my niece opted for the honors program at a state school after the $23k private school scholarship she won would still have left her with $27k/year - and lots of debt. She made the choice after lots of scholarship deadlines, and one of the scholarships she did get wasn't renewed. Her dad also reduced what he said he could pay. She worked her butt off this summer to try to make up for the scholarship that wasn't renewed. She didn't spend anything on herself or take any vacation - and she was burnt out by the end of the summer. any ideas for scholarships after the first year - or words of wisdom and encouragement for her?

Even with generous scholarships, many private colleges have a higher net price than an in-state public college with no financial aid. But families are lured by the idea that the college wants the student so much that they are giving the student a scholarship. In fact, at some colleges almost every student wins a "merit" scholarship. Also, some of these scholarships are for one year only. It is better to enroll at an in-state public college, where the student can get almost as good an education, and graduate with much less debt. (Students who graduate from undergraduate school with no debt are twice as likely to go on to graduate school as students who graduate with some debt.)

Continue searching for scholarships with the free scholarship matching services. There are some scholarships that are available only to students who are already enrolled in college. 

Hi, I'm learning a lot from this discussion and copious taking notes. We live in Northern VA. My husband and I have a senior this year and right behind her is her sister, who's a junior. Honestly, we haven't saved enough money for college but have some money that can get them through at least two years without incurring any debt. We've had a heart to heart convo with the girls about the reality and have said that in state schools and/or community college for 2 years are the options, unless they get scholarships to cover the tuition, etc. And, we've told them to apply for as many scholarships as possible. But, within the last week, we've had friends that have said they had to take out Parent Plus loans, which we don't want to do. I'm almost afraid to ask this question, but what is your opinion on those loans?

Borrowing from a Federal Parent PLUS loan or a private student loan may be a sign of overborrowing. If you have no choice, try shopping around. Some private student loans and private parent loans may offer fixed interest rates that are less expensive than the Federal Parent PLUS loan. Either way, the interest rate will be low for an unsecured loan.

Like the old haunted house movies, I'll say. "Stay away."

In Va. you should be able to put together a great college going plan for your girls without taking on Parent loans. 

I put my two kids through college (community college & in-state schools) while earning less than $50k per year. They finished with minimum loans. It really irritates me to read the questions from people with high incomes and a lot of saved money looking for maximum financial aid.

Unfortunately, college costs continue to increase, so even middle and high-income families are struggling to pay for college costs. Everybody struggles to pay for college, but low-income students struggle more than middle-income students, who struggle more than high-income students. 

Right. It's all in your perspective. And please folks, don't always think when one gets, it's taken from another.

We are all in this together. Do what you can. Don't borrow or if you have to, make it as little as possible. 

Hey, got to go. But great, great discussion. Didn't I tell you Mark was the man!!!!

Thank you for joining me today. And stay dry. 

In This Chat
Michelle Singletary
Michelle Singletary writes the nationally syndicated personal finance column, "The Color of Money," which appears in The Post on Thursday and Sunday and is carried in more than 120 newspapers.

Recent columns
Subscribe to Michelle's newsletter
Color of Money Q&A Archive
Mark Kantrowitz
Mark Kantrowitz is a nationally-recognized expert on student financial aid, scholarships and student loans. He is Senior Vice President and Publisher of Edvisors.com. His mission is to deliver practical information, advice and tools to students and their families so they can make informed decisions about planning and paying for college.
Recent Chats
  • Next: