Friday, September 25, 2009

Tips on Paying for College

Tips on Paying for College

Here are some helpful hints for parents in panic mode this fall about how to finance their children's college plans.

For some, saving money for a child's or grandchild's college education seems nearly impossible. Before you give up the battle, however, consider this: A high school graduate will earn an average annual income of $26,416. A college graduate will earn an average annual income of $34,000 to $74,000. For someone who works 40 years, that can add up to an additional $320,000 to $1.92 million in earnings. That's quite a return on an investment in a college education!

Saving for college may seem like a monumental task, but you don't need to save the entire amount overnight, and, chances are, you won't need to finance the entire expense yourself. Today, there are a multitude of loans, work programs, tax credits, and so forth designed to help put college within the grasp of nearly everyone. With a little homework, you can find all the options available to you.

Here are five sources of college funding to consider:

Grants and Scholarships: Grants and scholarships are awarded on a number of criteria, including grades, talent, heritage, race, and gender. Grants and scholarships can be offered locally, statewide, nationwide, and by particular colleges and universities. The internet, school counselors, and the financial aid offices of colleges and universities can provide a wealth of information on this topic. Grants and scholarships typically supplement college costs rather than cover total expenses. Therefore, it's important you take an active role in saving for your child's educational future.

Investments: Through the years, parents and grandparents have used savings bonds, zero coupon bonds, and growth-and-income mutual funds to help with educational expenses. All are excellent ways to save for a college education. In more recent years, however, several new tools to help save for or offset college expenses have been introduced. All make financing a college education easier than ever before.

Section 529 Plans: When you set up a Section 529 savings plan, you put money in specific investments, which are managed by the plan administrator. 529 plans can be established for a child or grandchild. When establishing a 529 plan, you choose from two options: (1) Prepaid tuition programs, where you buy future tuition credit--at today's prices --that's generally used at an in-state school; and (2) Savings plans, where your earnings are not taxed as they accumulate, and qualified withdrawals are free from federal income tax. Savings plans are the more popular of the two plans because they generally don't restrict students to certain colleges in specific states. Your plan contribution limits are high, and your withdrawals are free from federal income taxes, as long as the money is used for qualified college or graduate school expenses. (Section 529 tax benefits are only effective through 2010, unless extended by Congress. Also, a Section 529 plan could reduce your child's or grandchild's ability to qualify for financial aid. Because tax issues for 529 plans can be complicated, please consult your tax advisor.)

Coverdell Education Savings Account: Depending on your income level, you can contribute up to $2,000 annually to a Coverdell Education Savings Account. Your Coverdell earnings and withdrawals will be tax-free, provided you use the money for qualified education expenses (tuition, fees, tutoring, special-needs services, books, supplies, computer equipment, room and board, uniforms, and transportation). You can fund your Coverdell Education Savings Account with virtually any investment you choose--stocks, bonds, certificates of deposit, etc. Once a Coverdell education savings account is established, anyone--a family member, friend, or the child--can contribute to the account as long as he or she meets the adjusted gross income limits. And you can contribute to a Coverdell Account in the same year that you put money into a Section 529 plan.

Tax Credits: Even if you already have a child enrolled in college, help still may be available. The Hope Scholarship Credit and the Lifetime Learning Credit are tax credits that can be used to offset college tuition and fees. The exact amount that can be claimed depends on your family's income, the amount of qualified tuition and fees paid and the amount of certain scholarships and allowances subtracted from tuition.

"Last-Minute" Options

If you have a college-bound senior in your house and you haven't saved as much as you would have liked, don't despair. Even at this late date, you can take some steps to help pay those college bills. Here are a few ideas to consider:

Remember, you don't have to pay the full year's tuition, room and board up front. You will likely be billed in installments that may correspond to the school's quarter or semester system. This payment system doesn't lessen your overall costs, of course, but it does give you a bit of time to come up with additional funding sources. For example, if you have a bond coming due in the middle of the college calendar, you can use the proceeds to help pay for school.

Liquidate assets in timely manner. If you've earmarked certain investments for college, try not to liquidate them until it's absolutely time to write out a check. The longer you can keep your investments growing, the better off you'll be.

Look at a Roth IRA. If you have a Roth IRA, you can withdraw contributions, tax- and penalty-free, to help pay for your child's education. Certain conditions apply to penalty-free withdrawals, so you should talk to your tax advisor for more information. And keep in mind, if you start withdrawing earnings, you'll have to pay taxes on them unless you meet certain conditions.

Putting together a good college-funding plan--either at the last minute or years in advance--can test your resources and ingenuity. But by diligently exploring all your options, it's a test you should be able to "pass."

Provided by: Lauren Kahn, M.A. from Lone Star Ed Consulting.
Written by: Randy Loren ( He has more than two decades of experience in many areas of business and finance, and is currently a financial advisor for Edward Jones and a sought-after motivational speaker who educates high school students on the value of financial literacy and sound money and work practices. He is author of a new book, Climbing the Money Mountain: The Young Adult's Guide to Reaching Your Financial Peak (FN Publications, $19.95).

Monday, September 21, 2009

Is Your SAT or ACT Score Good Enough?

When it comes to standardized test scores, “good” and “bad” are relative terms, depending on where you’re applying. Remember, the SAT is broken down into three parts; each with a maximum score of 800, amounting to a total possible score of 2400. The ACT is broken down into four core sections, plus a writing section. Colleges are most concerned about the ACT composite score. ACT score range is 1-36. When you are considering whether or not to take the SAT or ACT an additional time, you need to consider a variety of factors. You can see the SAT norms for all the schools on your current roster at the College View website, under the “Admissions” tab. There, you will find test score ranges (the mid 50 percent) and you can see if your 630 math score (example) falls within that range. For instance, if you look up “TCU,” you’ll find their middle range for math is 520-640. Therefore, your 630 would be considered a “very good” score there. On the other hand, if you look up Duke University, their median range is 680 – 790 for math. Therefore, your 630 in math is not considered a “good” score by Duke’s standards. It is ultimately up to you whether or not you take the SAT or ACT another time.

FREE TIP from Lone Star Ed Consulting ( Most colleges put more weight on test scores than their admission officials are willing to admit. However, don’t assess your admission chances strictly by the numbers. If your test results are below a college median, ask yourself if you have other traits that will be attractive to that school (e.g., Are you a recruited athlete? An underrepresented minority? Are you a 1st generation college applicant or have a very unusual background? Do you have any unique talents?) If you answered “No” to these questions with test results at the low end of the range as well, then your admission odds may not be that great. (Therefore, it is even more essential to have excellent essays and have them reviewed by an expert.) However, if you responded affirmatively, you may still be in the running, even when your SAT scores aren’t especially “good.”

If you're a senior, it is not too late to get crucial college admission guidance. If you are a junior, it is time to move forward with the college planning process. Contact Lone Star Ed Consulting at 512-294-6608 to speak with our lead educational consultant, Lauren Kahn. Ms. Kahn received her B.A. from Emory University (‘98) and her M.A. in Education and Human Development from George Washington University (’04). She is a member of both NACAC and IECA. She has guided dozens of students through the college application process and has students enrolled at Rice University, U of Texas (Austin), Middlebury College, Georgia Tech, and many other top 50 ranked public and private universities. 

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Top 8% Auto Admit... What Will the Impact Be?

In the educational community, many of us have been waiting for change in the way U of Texas - Austin admits their freshman class for quite some time. Last week, the University of Texas at Austin announced they will automatically admit all eligible 2011 summer/fall freshman applicants who rank only within the top 8 percent of their high school graduating classes, with remaining spaces to be filled through holistic review. They will admit automatically enough students to fill 75 percent of available spaces set aside for Texas residents in an entering freshman class. I have to ask the question, "Will the new Top 8% auto admit law really satisfy our desire for a truly diverse, talented pool, full of students who perhaps bloomed later in life?" I am not convinced that the Texas legislature went far enough to ensure a different student body than we currently have. The current class of 2013 is comprised nearly entirely of students from the top 10%; 86% is the number I have seen quoted in The Daily Texan.

I find it absurd that a student possibly could be accepted to Rice (A Top 20 Ranked Private University), but be denied to the largest public university in Texas. Believe it or not, this has happened and will continue to occur under the new law. I propose that we eliminate the concept of "auto-admit" for all students, but set a minimum level of standardized test scores or AP scores for the top 10% to gain a conditional auto admit status. University of Texas' standardized test averages would most certainly rise and the calibur of the students would as well. I find it unjust that a student at Westlake HS (Eanes School District) who is ranked in the 48th % of their class with a 92 average and 1200 SATs (CR and Math) has literally less than a 5% chance of admission to U of Texas at Austin as a freshman, while a student at LBJ (Austin School District)with a 2.9 GPA, less than 900 SATs (CR and Math) and a 9% ranking will automatically be accepted to UT. This is way too large of a discrepancy in academic standards and reducing the auto admit law from top 10% to top 8% will not eliminate these types of examples.

Background: William Powers Jr., president of the university, said that automatically admitting students in the top 8 percent of their high school graduating class to the 2011 entering freshman class would fill 75 percent of available spaces. A new state law, Senate Bill 175, passed by the 81st Legislature, modified the university's admissions program, which previously had been required to automatically admit students in the top 10 percent of their high school class. The top 10% went into effect in 1997, originally intended to increase diversity in regards to ethnicity, SES, and geographics. The Top 10% Law (originally styled “Texas House Bill 588”) was passed in 1997 and went into effect the following year. The law was a response to the Hopwood decision, in which the U.S.Court of Appeals for the Fifth Circuit prohibited public universities from using a student’s racial or ethnic background as a consideration in admissions decisions.

While Top 10% students on average earn slightly higher grades at UT than non-Top 10% students, the performance is not uniform throughout the Top 10%. Those students in the 6th through the 10th percentile of their high school graduating class earn on average a grade point average equal to students in the 11th through the 20th percentile. (Source: The Top 10% Law and its impact on The University of Texas at Austin from

Posted by: Lauren Kahn,M.A. College Educational Consultant

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