The American Opportunity Credit

Effective only for 2009 and 2010, families can potentially add another tax credit to the list of college-eligible tax reduction options. The American Opportunity Credit replaces the existing Hope Credit to provide up to $2,500 in tax credit to eligible families. Here is a brief summary of how it works:

• Claim credit for 100% of the first $2,000 of qualified tuition, fees, and textbook costs, and an additional 25% of the second $2,000.
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• 40% of the credit is refundable, so even families who owe absolutely no taxes can get up to $1,000 per student.
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• Families with a modified adjusted gross income (MAGI) of $80,000 (single) or $160,000 (married) or less can access the full credit; families who make up to $180,000 can still receive a partial credit.

This temporary new education tax credit is good news for some families in higher tax brackets, because it provides eligibility for a broader range of families by increasing income limits above the previous maximum for either the Hope or Lifetime Learning education tax credits.

The American Opportunity Tax Credit can be claimed all four years of college, rather than only the first two as was the case with the Hope credit.

The Credit and Tax-Advantaged Savings Plans

Another benefit of the American Opportunity Tax Credit is that it expands the ways you can use tax-advantaged college savings plans. It allows families to withdraw funds from these plans for the purchase of computer equipment and internet access as a qualified education expense.

However, there are stipulations about how you can use the credit. Make sure you consult with your tax professional to determine if and how you can claim the credit for 2009 or 2010. For many parents with a student in college the next year or two, the American Opportunity Tax Credit will provide some much-appreciated income tax relief!

Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.

All the best,
Deborah Fox

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Understanding YOUR Estimated Cost

One of the first things most parents do when helping their child consider a school is to look at the projected cost of attendance the colleges provide. This gives you a list of potential costs, including tuition, fees, room and board, travel and other miscellaneous expenses.

While the colleges feel this is a reasonable average cost for the average student, there is no reason that the travel and other personal expenses need to add up to such a high number–in fact, this is one of the areas in which you and your child have the most control.

Wants and Needs

Most students out on their own for the first time have trouble distinguishing between “wants” and “needs.” Take the example reported by the Georgetown Voice blog, of a second year Georgetown student who decided he would run an ad to hire a personal assistant!

Preferring not to pick up his own dry cleaning or drive himself to work, this student set up a job listing on the school website requiring that a fellow student serve as his PA. Some of the actual job responsibilities include (and I quote):

• Organize closet
• make bed
• Drop off / pick up dry cleaning
• Drop me off / pick me up from work
• Do laundry
• Fill up gas tank
• bring car for servicing
• schedule appointment for haircut
• Pay parking tickets
• manage electronic accounts
• shopping and running errands

Obviously this is an extreme (but real!) example, but it illustrates my point of the want versus need discrepancy–the $12/hr spent on this student’s assistant could probably be redirected to cover other non-discretionary costs.

Building a Budget–Together

Building a successful, working budget with your student might seem challenging, but working together can save you both a lot of money and worry–and hopefully build some great adult rapport between you. Here are a few steps to get started.

• Write it Out. You may be able to crunch the numbers in your head, but your student needs to see just how quickly a daily coffee and weekly trips to the movies can add up. Make a line-item spreadsheet of the “need” and “want” costs–from rent, insurance, tuition, textbooks and groceries (needs) to the extras (wants) like eating out and downloading iTunes mp3s.
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  Don’t forget to figure in a monthly amount for bigger, less frequent expenses like car registration, trips home for holidays, and emergency purchases or costs such as car repair or buying a new computer when an old one dies.
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• Offer Incentive. One of the best ways to encourage your student to stick to the budget is to offer an incentive. This can be anything you feel will help encourage your student, and it doesn’t have to be in the form of money. You and your student will be able to come up with an idea together of how your child can keep motivated to save even when you aren’t around to deliver a reminder.
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• Pick and Choose. Go through your student’s typical spending as of this month, and discuss with him or her how to set a personal allowance for the “wants” category–the one where little expenses add up to big bills over time. Explain that he or she should keep monthly spending on “wants” within a predetermined amount, and discuss what each of you thinks is “reasonable.”
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• Divvy Up the Costs. You don’t need to foot the whole bill for college. In fact, it is probably better for your student if you don’t. Studies have shown that students who work part time (less than 15 hrs/week) while attending school tend to do better in their studies! Students who work learn time management, gain experience for their CV, and learn to feel the sense of satisfacation of being able to help support themselves. For those that would find it difficult to work while in school at this point, students can cover their portion of the costs by working during the summer. (My son is responsible for earning at least $3,000 during the summer for his spending money during the school year.)
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  (Bonus: Divvying up the costs also encourages students to work harder on their financial aid and scholarship applications if you count that money as part of their contribution to the budget.)
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  Talk to your student about how you will divide the budget. What will you pay for, and what will your student cover?

All the best,
Deborah Fox

Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.

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Sophomore Year, and Beyond?

The outpouring of assistance students get as high school seniors can be a little misleading. For most students, finding private aid for this year may seem like a no-brainer–after all, a wealth of private scholarships are offered to high school grads every year–and students are encouraged by counselors, financial aid officers, parents and the media to pursue these funds. But once in college, too many students give up on finding any more private scholarships simply because they don’t know how to look for it, and frankly, get too involved in the everyday thrill and work of college life to notice.

As parents, however, I think we are quite aware of the jaw-dropping price tags of yearly tuition, room and board, supplies, and all the extra costs that make up your child’s college experience. That should be more than enough reason to encourage your child to search out free money awards during his or her college and graduate school years.

Aid in Finding Aid!

To get you started on the right path, I want to share some helpful hints about how to assist your student with the hunt for financial aid even after they’ve donned a college sweatshirt and earned their first round of grades.

• Go to the Source. Every college or university has a financial aid office, and their only job (as their name implies) is to help attending students with financial aid. Your student should take the time to stop by and discuss your family’s situation with his or her aid officer. He or she may be able to offer your child help with applying for school-specific scholarships, or a list of other outside scholarships. Your aid officer can also make suggestions about finding other types of aid.
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  Remind your student that scanning the college’s website is not enough! If your child can build a good relationship with an aid officer, he or she will be more likely to put in an effort to helping your child succeed.
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• Up the Odds of Winning. Big scholarship search sites like www.FastWeb.com offer lots of national scholarships, but to have the best chances of winning, your student needs to narrow down the playing field. He or she should look for local scholarships offered only to students in his or her city, region, or state.
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  Your child should also search out scholarships that are specific to their traits, characteristics, hobbies, and skills, because this also means a smaller applicant pool (and a better likelihood of winning). Think about what makes your child unique–it can be anything from club involvement to overcoming an illness, a special hobby to a familial association with military or civic clubs. You can help your student search out scholarships and compile a list together.

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• Don’t Forget to Fill Out the FAFSA. I cannot emphasize enough how important it is that every family, regardless of whether or not you will qualify for “need-based” aid, should fill out the Free Application for Federal Student Aid (FAFSA). Aside from serving as an application for some school, state and federal grants and scholarships, it also gives your family access to the some of the lowest cost student and parent loans–the federal Perkins, Stafford and PLUS loans that you can use to fill in any funding gaps.

All the best,
Deborah Fox

Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.

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Current College Health Insurance

When the HIPPA law passed in 1996, it created a provision for colleges to offer low-cost insurance to their students. Since then, colleges have offered students the option of purchasing health insurance right along side with paying their tuition.

This has worked out well for many students, who have been able to take advantage of on-campus care by paying little or nothing out-of-pocket for prescriptions, x-rays and other medical care.

At most colleges, students who do not wish to participate in campus insurance coverage have the option of submitting an Insurance Waiver. These students could then continue with their own individual or family insurance plan, and in most cases they can still use the school medical center. In some other cases, however, students are forced to buy school health plans if they wante to use on-campus medical facilities.

A Disappearing Act

According to recent reports, the new healthcare reform bill only makes provisions for two types of health insurance–employer provided insurance, and individually purchased insurance. Because insurance provided by colleges does not fall into either category, it might disappear altogether.

Proponents of student healthcare have suggested two alternatives: First, that legislators re-word their unintended exclusion of student health insurance so it can be added to the bill, and second, that schools be encouraged to accept employer-provided insurance at their on-campus medical centers.

What You Can Do

As we wait for more news on the upcoming healthcare reform legislation, take some time to determine how your student’s current health insurance option is working out for your family.

• Compare Prices. Start by comparing prices and benefits between your family’s individual or employer-provided plan and the school plan, to discover which truly is the best option (both from a cost and benefit standpoint).
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• Assess Your Options. Find out if your student’s school medical center will accept non-school health insurance. If they don’t, decide whether you would prefer to keep your non-school insurance or have your student get access to be treated on campus.
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• Stay Eligible. If you decide to go with employer-provided insurance, read over your eligibility requirements carefully. Many insurance providers require your child to be at full-time (usually 12+ units) status in order to retain coverage through a parent or guardian.

All the best
Deborah Fox

Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.

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New and Improved Scams

We’ve seen several types of college scams over the years (I’ll cover some of them below), but the latest wave is even more creative. According to the Chronicle of Higher Education’s tech blog, one clever scam tried to use college students’ guilt–and fear of their parents–against them.

In September, hundreds of University of Bucknell students received letters from a legitimate collections agency, through which a scam artist had sent correspondence. The letters claimed that each of the 300 students had illegally downloaded material and requested credit card numbers to pay $500 that would allegedly settle their accounts.

The scammer, it seems, was hoping that students guilty of downloading illegal music, media and textbooks would cough up the money before the news got to their parents. Luckily many students became suspicious. Further investigation by the collections agency itself revealed that the company demanding payment was “out of business” and could provide no proof that any of the students had downloaded illegal content!

Oldies but Goodies

Even as new scams come on the radar, the old ones are still widely circulated. A few of the most popular college-student scams are as follows:

• Scholarship Scams. Fake scholarships pop up all the time, asking students for a small fee to process their application. Students willingly pay, hoping to get a great award. The scammers cash out and don’t award money to anyone.
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• Fake Seminars. Families get invited to a “seminar” that promises to help them figure out their college funding options. Instead they end up with an hour long sales pitch–and high pressure to purchase an expensive service that many times falls short of delivering what’s promised.
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• “Free” Grants. Students get a “free check” for a grant they never applied for–with instructions to cash it and send part of the money back as a “processing fee.” Needless to say, the scammer gets away with the “fees” students pay back, and the students lose their fake grants to check fraud.
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• Fake “Federal” Loans. This type of scam continues to make the rounds–private student loan lenders send out letters with official government-looking seals and official sounding company names that offer loans to students. Students enter into a loan agreement with the lender, thinking they are getting the low rate and terms of a federal loan, but instead end up with a less-competitive non-federal private loan.

Protecting Your Student

Education is the first step to protecting your child; here is what else you need to know.

1. Don’t Pay for Scholarships and Grants. Scholarships and grants are meant to help students pay for college with free funds that don’t need to be paid back. Steer clear of any scholarship or grant that asks for a “processing fee” or “holding fee”–even if they are legitimate, you can find dozens (or more) of scholarships that won’t cost a penny to apply.
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2. Be a Savvy Borrower. Federal student loans are available all year, and the Department of Education will never send you a letter pressuring you to borrow. If you need to borrow student loans, do your research first. Understand the types of loans available, and where to get them. Your student’s financial aid office is a great place to start if you have questions.
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3. Teach Your Child Identity Protection. It’s hard to know who to trust these days, especially online. Teach your student to be careful of giving out credit card information, drivers license numbers, social security information or any other information that would be personally identifiable. Talk about when this information might be required (getting a cell phone, signing a car loan, renting an apartment, etc.) and explain that your student should be wary if asked for this information in other situations.

All the best,
Deborah Fox

Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.

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Don’t worry–there’s a handy application for all of those.

SAT & ACT Prep

• Kaplan Portable SAT. Released by one of the best known test-prep companies, this SAT prep app features sample essays, information about the test and its structure, helpful tips and strategies, and of course, practice questions (and details explaining their answers).
  $5.99
  .
• SAT & ACT Vocabulary Builder - AcceaStudy. This free app offers flashcard-style learning on an iPhone or iPod Touch. With over 500 common SAT words, this is an easy (and free) way to help your child expand his or her vocabulary.
  Free
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• Watermelon Express’s SAT Prep. With over 100 pages of information, this SAT prep tool uses a combination of flashcards, explanations, examples, and exercises to help prepare students for the real deal.
  $2.99

There are dozens of other SAT prep apps available, too. Just head over to the App Store (you can see it in an iPhone or iPod Touch, or from iTunes on your computer) and search “SAT.”

Schoolwork & Organization
A good SAT score is great, but without good grades to back it up, it won’t mean much to colleges. These apps are intended to help students stay ahead of the game.

• iHomework. The modern answer to a day planner, iHomework lets students organize their homework assignments by day of the week, due date, or course. It also keeps track of teacher information and has handy reminder settings. It even includes a grade calculator!
  $0.99
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• Schmoop University’s Study Guides. If your student is struggling with any literary endeavor from The Canterbury Tales to The Lord of the Flies, Schmoop’s study guides could be a great study aid. With a long list of the regular high school English reads, it features strong analysis and a helpful post-study quiz.
  $0.99 per book guide
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• Mathemagics - Mental Math. If your student is lagging in math–or he or she struggles to finish the tests–this app might be helpful. Promising to help students learn to multiply double digits and squares quickly in their head, this app could also be helpful preparation for the SAT!
  $0.99 (on sale)
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• Gabor Nagy’s Graphing Calculator. Gone are the days of paying $100 for a graphing calculator–this app can do it for 99 cents!
  $0.99
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• Learn Smart Apps Free Flashcards. Compatible with an online flashcard creator, this app allows students to create flashcards online and then download them to their iPhone or iPod touch. It can both shuffle and remember which ones your student got wrong - and it’s much tidier than carrying loose cards around!
  Free

All the best,
Deborah Fox

In fact, you as a parent may be feeling overwhelmed by it as well. If this rings true for you, take a deep breath, pull out a calendar and a pad of paper, and jot down these 5 to-dos that will help your student better navigate the college application season.

1. Take a Trip

If you and your student didn’t have the chance to visit his or her top college choices over the summer, take some time now to visit the local or regional schools that are on your student’s list or similar to his or her picks. Visit schools that have a similar location, size, and learning/teaching style to the colleges your child thinks he or she wants to attend. Make sure you visit when school is in session. Take a campus tour, sit in on a couple classes, and talk to some of the students on campus–and don’t forget to jot down thoughts, impressions, and details.

2. Compare Notes

Once you’ve made your college visits, sit down with your student and discuss what you liked and disliked about each school. Choose what key components are most important to your student; these can be anything from choice of majors to tuition price or location of campus to class size. When your student has a good idea of what he or she wants, review your student’s dream college list and whittle it down to the 6 -12 colleges that your student will apply to. Your student can also begin ranking them; but keep in mind that the ranking is likely to change over the next few months as your student gathers more in depth information about each school. (My son began his senior year in high school adamant about not leaving California and then when the time came to make a college choice, he chose a university in Pennsylvania!)

3. Chart a Course

With your child’s college list finalized, create a calendar of to-do’s to help him or her get everything done well before each college’s deadline. This may include items such as sending SAT or ACT scores and transcripts, asking for letters of recommendation, and filling out the admissions application. A large wall calendar, electronic calendar or monthly and weekly file system can all work. Ask your student which system he or she prefers.

4. Refine a Resume

If your student has yet to create a resume–or has not updated it in a while–now is a great time to start. A professional, organized resume can be a very helpful tool when filling out college applications, and can also be a great addition to scholarship applications. Be sure you list items such as:

• Education (class rank, SAT/ACT scores, GPA, etc.)
• Employment experience,
• Volunteer work,
• Leadership roles (club presidency, ASB, etc.)
• Club involvement,
• Scholarship awards, and
• Non-monetary awards.

5. Brainstorm and Write the Essay

Most colleges and universities require an essay or “personal statement” in addition to the traditional application questions. In many cases, your student should be able to write one essay and make only minor edits to be able to use it for any of the colleges he or she will be applying to. Have your student read all the essay prompts from all of the college applications he or she will be submitting to find common themes that will make it possible to recycle written material.

A personal statement should not be repetition of the accomplishments listed on your child’s resume, but instead it should be an illustration of his or her character and core values. It should show a side of your student the admissions committee would not be able to discern from the application alone. The key is for your student to write so the readers feel they are truly getting to know your student and that your student has left a positive impression and will be remembered long after his or her application has been put down.

Start by brainstorming some topics and experiences that your child has found to be meaningful in his or her life. It can be helpful for a student to “get in the groove” by telling their story out loud to you or another family member. Don’t be tempted to do any of your student’s writing - this is a task your student needs to handle. It is important your student take on this responsibility alone and can thereafter fully experience the gratification of knowing that through his or her effort, a number of colleges offer an invitation to be part of their freshman class. Being responsible for filling out their own college applications is a very important piece of a high school student’s maturation process. CollegeBoard, by the way, has a helpful page of Do’s and Don’t for the College Essay.

All the best,
Deborah Fox

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Less than $3,000 Per Year!

Well known private lender Sallie Mae, in conjunction with the Gallup Organization, recently released the results of their college savings research. Their survey, which focused on 1,200 families with children ages 0-17, found that on average, U.S. families save only $2,676 per year for a total of only $14,000 by the time students reached college age.

Earn Less, Save More
One of the most surprising bits of information that came out of the survey was the rate of saving based on household income. Families who made more than $50,000 tended to save 3.6 percent of their annual household income for college expenses. However, families that made less than $50,000 saved double that–an average of 7.5% of their annual income!

Overestimating and Under-saving?

Back in 2007 I discussed the fear-factor involved in saving for college, and how overestimating the cost of college could actually discourage families from saving, because the projected numbers seemed so unattainable. As an example, I discussed a report from Upromise, which showed that the average family guessed that the cost of attending college was 2 to 4 times as much as the actual price.

According to the Upromise report, the average parent thought yearly public college tuition was $25,155 per year (real average cost at that time: $5,836) and expected to pay $46,712 for private schools (the actual average that year was only $22,218).

Taking Small Bites

Have you ever heard the phrase, “You can eat an elephant if you take small bites?” I think that concept definitely applies here! With those exaggerated numbers in our heads, it’s no wonder many parents don’t feel up to the task of saving. In fact, some parents of newborns may already be resigned to taking out loans to pay for their child’s education!

Just like any goal, however, I suggest you break down the big goal of funding college into smaller, “bite-sized” goals. Start by calculating a realistic estimate for your child’s education, then break it down into a yearly and then month-by-month saving plan. Consider setting up an automatic deduction from your checking account each month to make deposits into your college savings plan. Out of sight, out of mind!

Crunching the Numbers

Okay, now that you have that number ready, how do you feel? You’re probably wondering where all that money is supposed to come from! Isn’t your budget already maxed out? Maybe, but for most families this is not the case.

In fact, I work with clients every day to reassess their cash flow, making their money work for them.

You can try this for yourself on a smaller scale. Start by looking for areas where you can economize. Maybe you can shift a little of the annual vacation fund into college savings. Maybe you could call your cable or cell phone company and ask for a discounted rate, and then put the savings toward your child’s college fund. Perhaps you could move your savings into an account with a higher yield, and transfer the interest to your child’s college funds. There are probably hundreds of little things you could do, and together they could add up to a big increase in your child’s college funding plan!

All the best,
Deborah Fox

Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.

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• Review Your Homeowner’s Insurance. It probably seems like your student has taken half your household with him or her after the big move, so make sure all these goods are protected! Check with homeowner’s insurance policy to find out if your student’s belongings are still insured once they’re in the dorms. If your child is living off-campus, you might want to look in to renter’s insurance as well. If your homeowner’s policy doesn’t provide the coverage, you should be able to find inexpensive insurance for personal items at most colleges.

• Compare School and Personal Health Insurance. In some cases the school health plan can be a great deal, but it is important to review your current health plan and compare it to the one offered by your child’s school. Look at price points, deductibles, and coverage as a starting point. Also, if your child’s school is out of state, find out whether your family’s insurance will even cover him or her. If you decide to go with the school insurance, be sure to cancel your student’s coverage under the family policy. If you decide to stick with your family policy, don’t forget to sign the insurance waiver for school so you don’t get stuck with being charged for two insurance policies!
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  Important: School insurance policies are often in effect only during the school year, which means your child may need separate health coverage during summer months. Be sure to check your student’s plan to find out!
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• Reconfigure Your Car Insurance. Call your insurance company and discuss the following:
  • If your student is taking a car, discuss premium differences if the car stays on campus, and find out if they will still cover your child if his or her college is out-of-state.
  • If your student is not taking a car, see if you can lower your rate by removing him or her from your policy. If he or she will be driving the car during breaks, find out if your insurance provider will allow you to get coverage for only those times when your student will be home.
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• Consider Re-registering Your Child’s Car. If your son or daughter is taking a car out of state, check the car registration rates in his or her new home-state. Many states allow students to register their cars in their school’s state, and you may find that registration fees in another state are lower.
  .
• Re-Allocate Your Monthly Budget. As you track your usual monthly spending, you may be able to free up money be re-allocating funds that once went to buying groceries and household goods for your now out-of-the-nest student. For example, rather than continuing to spend the same on groceries even with one less mouth to feed at home, consider adjusting your grocery budget to reflect one less person, and putting the “extra” funds towards your child’s college expenses.

All the best,
Deborah Fox

Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.

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The problem?

None of these rankings has yet given a realistic picture of what schools really have to offer.

Grading the Schools

Yet another ranking system has popped out of the woodworks. This one, which wonders “What Will [Students] Learn” at any given college, was recently released by the American Council of Trustees and Alumni (ACTA), and it gave prestigious Yale an “F” grade.

So, how does the University of Arkansas outrank an Ivy League school? The ACTA results were based on a very simple formula; they simply looked at each school’s General Education (GE) requirements, and gave them points for each of the following:

• composition,
• literature,
• foreign languages,
• U.S. government or history,
• economics,
• mathematics, and
• natural or physical science

Then they graded the schools based on whether they felt each of these requirements was broad enough to truly introduce students to a wide spectrum of topics in each field.

Out of the 100 schools ranked in the What Will They Learn study, only 5 got A grades.

Reliable Unreliability

If there is one thing that rings true for almost every new college ranking, it is that none of them will work for every student–and most of them don’t have reliable ranking formulas that can perfectly gauge whether or not a college is the right fit for a student.

Already the ACTA formula is being questioned and criticized for its grading methods. A representative for the Association of American Colleges and Universities claims the What Will They Learn report did not dig deep enough into what schools are offering. She suggested that rather than simply looking at course offerings, ACTA should discern what skills each schools’ students are gaining at by the end of each course. That would certainly offer a better way to grade the schools–but, of course, gathering that kind of information is no easy task.

Choosing the Right School

Many students–and parents, for that matter–feel that finding the ideal college is very challenging. Next to the mountain of information available online and what’s pouring into our inboxes and mailboxes, it all can become daunting. But I urge you, don’t be tempted to choose your student’s college from the advice of a magazine or off a website! The true “best school” isn’t one that gets an A+ or a gold star from some faceless committee–it is the school that will be the best fit for your child academically, culturally and socially. And the only way you can find that out is by doing an in-depth college visit while school is in session.

Having trouble figuring out where to begin? Take a look at this article I wrote about how to choose the best school for your student; it will walk you through a checklist of items that will make a big difference to your student’s success and happiness at the schools on his or her list!

All the best,
Deborah Fox

Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.

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