Scholarships

Prepay Way (Pre-“Pei Wei”)

moneyman

So I like Asian food. Specifically, I think my umami taste buds are well-developed and there are times I just crave a sushi roll dipped in soy sauce, or a teriyaki flavored dish, or just some good pan-Asian cuisine.

Which makes the current restaurant environment in Florida very interesting.

I’m getting hungry!

In Florida, we tend to have a few distinct types of Asian restaurants — the American style upscale (like P.F. Changs), the all-you-can eat buffets, the sushi restaurants, and a few hole-in-the-wall take-out places.

Which makes Pei Wei an interesting choice. Billed as “fast casual” but customizable, it offers fresh cooked-to-order food at a reasonable (?) price. So why haven’t I tried it? Good question, guess I am stuck in a pre-Pei Wei world. Have you been? What am I missing? It is worth my trying it?

Now while I haven’t been to Pei Wei, I have used a prepay tuition plan (see what I did there?) for my children’s education expense, and these are great programs!

Really referred to as 529 Plans, these tax-advantaged plans come in two flavors: College Savings Plans and Prepaid Tuition Plans. Let’s talk about the differences between them:

  1. College Savings Plans are tax-protected ways to save for college. You make an investment and the money you put into the program is used to purchase stock or other investments (depending upon your risk tolerance and timeframe). The money you earn from your investment is not subject to Federal or State tax as long as you use the amount of your total program to pay for college expenses. This can be a great way to save money if you aren’t sure where a student will go to college as these programs tend to be generic and allow enrollment anywhere.
  2. Prepaid Tuition Plans are programs where you can pre-purchase a fixed percentage of tuition amounts using today’s cost. These programs usually then guarantee that you will then receive whatever that percentage is of tuition when you attend college, no matter how much tuition has grown in the meantime. These programs tend to be limited to a set of colleges (maybe by state or by type), so if you choose to go to some other school not in the list you can get your money back, but it may not be at the same investment rate that you might have had under another program.

Essentially the choice between these two types of programs boils down to two factors: do you think costs of tuition will rise faster than the amount you can get if you invest, and do you know where you will be going to college (or are you willing to limit your choice to a specific list).

College tuition rates historically have increased higher than inflation (and certainly higher than investment rates). There are some exceptions to this. Most public institutions of higher education in Florida (including both state colleges and state universities), for example, haven’t had a tuition increase since 2013-14 (over 7 years ago). This means that if you bought into the Florida Prepaid Tuition plan 7 years ago, your investment would still be worth the same amount today as it was then. This is part of the reason that prices have dropped for the program and Florida Prepaid returned $1.3 billion to current customers.

All of this said, making an investment in one of the programs is a great choice for college savings. A huge benefit of the program is that the amount of the program that you have saved is not counted as a scholarship for financial aid purposes; instead the amount is simply reported as an asset (like any cash, savings or stock account) by the person who owns the account. The important part there is the name of the owner; usually this is a parent or guardian who owns the account, not the student. The student is listed as the beneficiary of the account, but since the investment is not in her / his name, there is no need to list this as a student asset (or scholarship).

For my Take Stock in Children / Take Stock in College readers, this is REALLY important. Since Take Stock purchases the Florida Prepaid program and names you as the beneficiary, the account is not owned by you, and therefore does not need to be listed either as a scholarship or as an asset you own on your FAFSA. While Take Stock calls the program a “scholarship”, it is a unique one because it does not reduce your amount of financial aid eligibility (like an overaward does).

This exception also exists if someone other than a parent purchases the 529 plan (say a grandparent). There are some wrinkles to consider here (namely related to student income and tax status of the investment) so research carefully before making a decision.

So welcome to the prepay way! These programs serve as a wonderful way to fund your education. I need to run; it’s time to have some lunch – maybe Pei Wei?

HELP! I’ve been displaced!

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So you’ve searched for scholarships, you’ve researched the ones for which you qualify, you’ve written an amazing essay, and you are lucky enough to receive a scholarship, only to find out that the college or university you are attending has reduced some of your other financial aid as a result. WHAT HAPPENED?

Some of my friends who work for community organizations providing scholarships call this phenomenon “scholarship displacement”. In the financial aid office, we refer to this as fixing an “overaward”. But what does it all mean for you?

To begin to understand why a college might take other money away if you receive a scholarship we need to go back to a concept I talked about in an earlier blog post: COA – EFC = Need. Remember that COA is cost of attendance (how much your education for that award year will cost you including both direct and indirect costs). Your EFC (or Expected Family Contribution) is a measure of how much you and your family can afford to pay towards those costs. And your Need is the difference between these two figures.

Let’s see how this works in an example:

The Financial Aid Barrel

In the picture above you see a school that costs $55,000 (chances are, your school costs a lot less, but for this example we will use the higher figure). This family’s EFC is $10,000 which leaves them with $45,000 worth of Need.

The college or university has offered this student a combination of grants and scholarships of $38,000, loan of $3,500 and a work study allocation of $1,500. The total financial aid offered is $43,000 leaving this student with an unmet need of $2,000.

So let’s say this student goes out and receives a $2,000 private scholarship. What happens to that money? Where does it go?

Well, according to the Federal government, any scholarship awarded by an agency or foundation outside of the college has to be considered a satisfying the need of a student, and if necessary, other financial aid has to be adjusted to make room for this scholarship.

In our example, though, there is room for a $2,000 scholarship (replacing the unmet need) so no change in the financial aid offer would be required. Imagine, however, that the student wins another scholarship for $5,000 bringing their total outside scholarship to $7,000. What now?

In this case the college is most likely to remove the work and loan funds to make room for the total amount of the scholarship. By replacing the unmet need, the student loan, and the work award, the college would make room for the $7,000 scholarship award.

What happens next? What if the student earns more in outside scholarships? If this is the case, most institutions will next reduce their own need-based scholarships or grants before the student will see an impact on the EFC.

So how do you avoid this problem and maximize your own scholarships? First, you need to understand your own financial aid offer. What is your COA? What is your EFC? What is your unmet need? By knowing your unmet need you will have a better sense of how much in outside scholarship you can receive before this becomes an issue for you.

You may also want to ask your school if it is possible to increase your COA. Some colleges will consider the purchase of a laptop computer, or higher than usual expenses (room, transportation, books, etc) and – with documentation – may be willing to make an adjustment to your COA therefore leaving you with more unmet need that can be filled by your scholarship.

Another option, especially if you receive a large outside scholarship, is to ask if you can use the scholarship for a future year (or perhaps summer enrollment). Often scholarship providers will let you defer some portion of your award, especially if you can show them that by doing so you can keep more of your other financial aid.

Just know we don’t want to displace your funds, but we are required to resolve these overawards. Be in touch with your financial aid officer to see what can be done to ensure you receive the benefit of this money you have worked so hard to earn.

For my Take Stock friends (or anyone with a Florida Prepaid plan or other 529 plan), keep in mind that a 529 plan is not considered a scholarship for these purposes. Next time we are going to dig into how the Florida Prepaid account you have received is handled by financial aid. Stay tuned!

How do you spell “essay”? “P-O-E-M”

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If you take a look at private foundation scholarship applications, you will quickly notice something pretty common about their application process — many of them require an essay.

As an example take a look at Valencia College’s Scholarship Bulletin Board. A quick glance at some of the scholarships listed shows a series of essays required to apply:

  1. “Please tell us a bit about yourself and how you plan to make a positive impact on the world through your career after college.”
  2. “How you have used your creative talents to achieve at your college or university so far?”
  3. “What person, event, or activity in your life thus far has most prepared you for your future? How has this person, event or activity impacted your life?”

So maybe you aren’t an essay writer, or you aren’t even sure where to begin. That’s where moneyman (that’s me) comes in to help!

Time to get writing!!

What you may notice about the essay questions above (and, in fact, almost every essay question asked for scholarships) is that they ask you to say something about your passions; scholarship providers want to get to know you, and your 500 – 1000 word essay is their chance to do that.

So how do you decide what to write about? My advice is to begin by discovering your POEM. The word “POEM” is an acronym to help you focus your essay writing, and it is a great practice to discover your essay topic. Here’s what it means:

  • P stands for Passion. What are you passionate about? Maybe it’s theater, or biology, or football, or video games. Whatever your passion is, this is the perfect place to begin. Scholarship providers want to get to know you, and exploring the things that get you excited is a great way to share your story (and make the essay writing process fun). But your passion is only the beginning. Let’s move on to…
  • O stands for Opportunity. When have you had the chance to explore your passion? What specific chance have you taken to look deeply into the subject you are passionate about? Has this been a class on biology, a theater camp, a video game con? What was a time when you really got “into” your passion?
  • E stands for Experience. Now that you have identified the Opportunity, what one Experience stands out for you? Was it a project in your class, or a game that your team played where you were the underdog? Was it a role that you had a chance to perform in a play, or a time at your job where you had the opportunity to try something new that you have always dreamed about? Finding that experience helps bring you nearer to the final part of this winnowing process, and that is our final letter…
  • M stands for Moment. Find the one moment which was part of your experience that best tells your story. Maybe it was the time your forgot your line on stage in the middle of act two and had to rely on your cast mates to get you through it. Perhaps it was the seconds right before your final project presentation in class when you and your co-presenters had that nervous excitement about how your faculty and classmates would react to your creative style. Maybe it was the time when you didn’t succeed in making the goal (or completing the pass, or hitting a run), and you knew that even in losing in that moment, your passion for your sport would carry you through. Whatever your moment is, THIS is what carries your essay. Through your moment, you can connect back to your passion and an essay reviewer will see you!

So when you write your essay, write about your moment. Find a way to connect your moment to the theme, and you will have an essay that stands out.

Having this already written also helps when you start looking at scholarships. All you need to do then is add an opening and closing paragraph that connect to the particular theme and you have a finished essay you can use in applying to scholarships.

Have you tried writing scholarship essays? Have they been a challenge for you? Moneyman is here to help!!! Feel free to leave your questions or comments below!

I’m doing fine; how ’bout flu?

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Hello everyone. Sorry that I have been away from the blog for a few weeks. I have been severely under the weather with the flu and I am just now beginning to feel human again.

Sneezing and coughing and fever, oh my!

Needless to say, my priority has been sleep, sleep, oh – and more sleep, so the blog has slipped by me. My theme for February is scholarships so I didn’t want to waste any more time before diving into our subject of the month, so here we go.

Much of your financial aid award is outside of your control (you either qualify for a Pell Grant, or you don’t based on your EFC), and while you can apply early to increase your chances of getting other kinds of aid, there are a limited number of funds your college offers.

The sky’s the limit, though, when it comes to scholarships.

Private or outside scholarships are funds available to you that are offered by private foundations or community organizations which are not (usually) affiliated with your college or university. Some examples include the Gates Millennium Scholarship, the Coca-Cola Scholarship, and the Sarasota Education Foundation.

Annually, over $17B is given out in private scholarships to students every year. This is more in total nationwide than is given out in state scholarships ($12.6B), so your chances of qualifying for a private scholarship are reasonable.

How do you do it?

First, you need to understand that looking for and applying for private scholarships takes time and effort. This isn’t a streamlined or “once and done” process. You will need to be organized and manage your time well if you want to pursue this.

Second, you should understand what benefit you might receive from an outside scholarship. If you have already received a full need financial aid package, adding a private scholarship means something needs to be removed from your financial aid total to make room for this new fund (usually what is removed are loans or work awards). If you do not have a full financial aid package (or you have no financial aid or just a Pell Grant), then outside or private scholarships can prove a large benefit for you.

The most important thing to do is to research what kinds of programs might be available to you. Start with the monster of all search engines for private educational scholarships, FastWeb. With FastWeb you can set up an account, search for matching scholarships, and even apply for some through the webpage.

While FastWeb has a lot of scholarship listings, it isn’t your only resource. I also strongly suggest checking with your college to see if they have a scholarship service through their web page (or if their community foundation offers scholarships for which you might be considered).

Remember though that no matter what scholarship search engine you use, identifying the scholarship is only the first step. Next we’re going to talk about how to apply for the scholarship!

Is my scholarship taxable (and other financial aid tax questions)?

moneyman

As we come to the end of January, I thought we could finish the month with some short Qs and As about financial aid tax-related questions. If you have some I didn’t cover, feel free to post them in the comments section. Keep in mind as I begin that I am not an accountant so please understand this is general advice (and not tax advice). You always want to check with an accountant if you have specific questions about your own situation.

Answers to your questions
  1. Is my scholarship taxable?
    1. I am so glad you asked that question! Generally scholarships are not taxable as long as you are using the proceeds to pay for recognized educational expenses (like tuition, fees, books and supplies). Any amounts above those expenses that are provided by your scholarship (like amounts for room and board, travel, and other expenses) may be taxable income in the year you receive them. If you have questions or want to know more, take a look at the IRS guidance on scholarships.
  2. Do I have to pay taxes on my Work Study earnings?
    1. Work study earnings are just like any other earnings from work. If you earn more than the minimum amount required to file a tax return (including your work study earnings), then you must file a Federal Tax Return. A benefit of work study earnings, however, is that they will be subtracted from the income you earn when you file the FAFSA and you use as your base income the year in which you earned this income; this way you are not doubly penalized for this income.
  3. Can I claim a tax credit for the tuition I’ve paid this year?
    1. Maybe. There are two tax credits which you might qualify for if you paid any expenses for education: the American Opportunity Credit and the Lifetime Learning Credit. The rules and specifics for these credits vary based on your income (and there are income levels where these benefits phase out), but for many families, these credits can either reduce the amount you owe the IRS by lowering your AGI or might increase the amount of your refund. In order to receive one of these credits, you will need to collect the Form 1098-T issued by your college or university (which you will use to complete the required Form 8863). The American Opportunity Credit can give you as much as a $2500 credit per student, while the Lifetime Learning Credit can give a $2000 credit per household. Lots more information at the IRS page for these programs.
  4. Can I claim the interest I paid on my student loans as a deduction against my income?
    1. Again, depends. There are income cut-offs but generally students can claim up to $2500 (or the actual amount of interest paid, whichever is lower) as a deduction against their taxable income. This deduction means you can possibly reduce the amount of taxes you owe if you already paid student (or parent) loan interest in 2019. Again, much more information on the IRS page.
  5. Is there one place I can get all of the information on tax issues pertaining to higher education?
    1. I am so glad you asked. The IRS has a publication for you! Called IRS Publication 970 (Tax Benefits for Education), this 93 page document has all of the information you would ever want about the topic (and more than I have room to cover here).

So there are some key Questions and Answers. And this closes out our tax review for January 2020! Next month our topic is maximizing your scholarship opportunities and exploring the benefits of the Florida prepaid program! Talk more then!

Free Money (but it does take some work)!

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Can anyone really go to college for free? Is such a thing even possible? We’ve all heard the story of students who have gotten a “free ride” at X, Y or Z college or university, but is that really the case? Can you get a free ride anywhere?

The scholarship search begins…

I’ve been reading Ben Kaplan’s How to go to college almost for free: the secrets of winning scholarship money (for those few of you who are not amazon fans, my apologies for the sales link). Ben does a fairly good job of describing the aid system, although most of the information is available for free on-line. What I find interesting about Ben’s story is how much money and how many different awards he received from other sources to attend school. Ben does a very good job of describing his scholarship discovery, targeting and application process in his book, and explains how others can benefit from his methods. Let me be very clear: Ben won many talent competitions and other scholarship awards and he invested a great deal of time in the process. But it paid off for him.

Can it pay off for you? Well, first of all realize that the last thing that a scholarship from another source will impact is your family’s contribution toward your college expenses. We will talk about this in another post later on the blog, but keep in mind that if you receive a scholarship or grant from another source, most colleges will start by reducing your unmet financial need, then they will reduce loan and work before they touch any grant or scholarship awards (although each institution may do something different).

But given this, any money you bring in from outside scholarship or grant programs can certainly help.

So when do you need to start the application process? NOW!!! I would advise that anyone who is interested in looking to other sources for scholarship or grant should be looking on-line now to see if there are any programs with which you match. You can do this for free by creating an account at FastWeb, as well as some other scholarship sites. By entering some basic biographical information, these search engines will try to match you with scholarship programs you may be able to apply for, and provide deadlines and application processes for them. NOW is absolutely the right time to do this. Many of these programs have early deadlines, so time is of the essence.

Now, will you be able to go to school for free? For most of you, even if you are awarded one, two, three or no scholarships from other sources, the answer to this question will be no. I will say that if you are from a low-income family, your Financial Aid Officer will do everything she can to make the cost of college affordable for you, even if that means no contribution from you or your parents, but the reality is that most of you will have to contribute something to make your dream of a college education a reality.

But even so, that doesn’t mean you shouldn’t try; how’s that for a double negative?

Good luck in your search process and look here for more updates!