Avoid 5 Common Mistakes and Pay for College in 2020

If you are the parent of a student starting their Senior year of high school in Chicago, you may be panicking about how to pay for college in 2020. One of the questions parents ask more often now than in the past is, “Will my personal student debt affect my child’s ability to get student loans?” On the upside, the short answer is typically “No.”

On the downside, if you are struggling with loan payments while still making ends meet, you may need some help of your own. Contact the team at Benjamin Brand, LLP Attorneys at Law to learn more about how we can provide options that make dealing with your federal student loan debt in Chicago easier.

While the status of your student loans does not affect your child’s eligibility for student financial aid, other issues affect your ability to pay for his or her college tuition. Here are five tips to help you avoid some of the most common mistakes parents make when helping their students plan for college.

Mistake 1: Savings account for college in the student’s name instead of yours

If the account is in your child’s name, it will be reported as a student asset on the FAFSA. This reduces eligibility for need-based aid by 20% of the account’s net worth. Depending on the type of account, you may be sheltered by the financial aid formula which can help you pay for college in 2020.

Mistake 2: Failing to file the Free Application for Federal Student Aid to Pay for College in 2020

You may assume that your student will not qualify for need-based aid. That is not necessarily true. The financial aid formulas are complex and virtually impossible to predict. They take into consideration numerous factors, including whether you have another child in college. Retirement plans and net home equity are omitted from the process.

Mistake 3: Waiting to file the FAFSA

Students who submit their applications in January, February and March often receive considerably more aid than those who file later in the year. As much as double the amount. Some schools and states have very early deadlines and award grants on a first-come, first-served basis until they are out of money. Don’t wait to file tax returns or the admission letter. Apply as soon as possible. You can update all other information later.

Mistake 4: Disregarding scholarships

Most families wait until the last half of the student’s senior year to start the hunt for scholarship funds. By then, many of the application deadlines have passed. There are also scholarships awarded when students are in lower grades. The sooner you start searching for money to pay for school, the more likely you are to make it an integral part to help pay for college in 2020 and keep federal student loan debt to a minimum.

Mistake 5: Choosing a school based on the aid amount vs. net price

To get the net price of college, subtract the total of all gift aid (i.e., grants, tuition waivers, scholarships and other aid that does not need to be repaid) from the total college costs. This is the amount that the family will have to contribute to cover college costs. For example, your student is looking out of state, and the school costs $50,000 per year. They offer a merit-based scholarship for $5,000. The net price is $45,000. There are many Chicago schools which may offer equivalent scholarships, and you would be able to take advantage of in-state tuition. This could bring the net price down significantly.

The general rule of thumb is that the student loan amount shouldn’t be more than a single year’s salary. Although that may not be practical in your situation, it is a place to start planning. When looking at schools, don’t completely disregard the costs because your student has his or her heart set on going there. If it drains all the family’s resources, or they drop out of school because they can’t come up with enough money, they will carry the debt for years, possibly decades.

Contact Us Today

Is your federal student loan debt in Chicago making it difficult to buy a home, go on vacation or finance a new car? Contact us today or call 312-853-3100. Located in the West Loop, we are easily accessed from I-90/I-290. The Benjamin Brand, LLP office is close to the University of Illinois at Chicago as well as the UIC-Halstead and Racine Metro stations. If you live or work in Little Italy, Greektown or the Near West Side, our office is nearby.

 

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