Experts on the topic to speak at Alameda Library Nov. 14

College loan debt is ranked second in all consumer debt, behind mortgages. The outstanding student loan debt is nearly $1.3 trillion and continues to grow. Some seven million borrowers are currently in default of their student loans. Knowing these figures helps motivate parents and students to learn proactive strategies they can employ in their own college planning. 

For more than a dozen years, Bay College Planners has been teaching parents that in choosing a best-fit college for their children, “everything is related to everything.”

This mantra means the academic merit of the student will determine the possible admission to a school. This in turn, will determine the possibility of scholarship consideration, which will determine the final gap in the cost a parent will need to pay to send their student to that school.

The most important piece in solving the cost-for-college puzzle is to “know your number.”  Parents can use multiple resources in determining what their number is. “Know your number” refers to a family’s expected family contribution (EFC) which is a dollar index the government imposes based on the income and asset valuations of the family household. 

The number is determined by a myriad of variables ranging from number of family members in the household, age of the oldest parent, adjusted gross income, number of members already enrolled in college and much more. Many college websites have calculators parents can use to determine what their expected family contribution is at that school.

It’s also imperative to know what methodology the college uses in computing a family’s EFC. For example, more than 2,000 universities subscribe to the federal methodology which assesses more income, less assets. On the other hand, just about 400 universities subscribe to the institutional methodology which assesses more assets, less income. 

A family’s financial profile has a huge impact on what schools they should consider, since many times it’s less expensive to go to a $65,000 private university than a $20,000 public university.

A bar napkin example in computing an EFC is relatively simple. For every dollar of adjusted gross income, 20 to 25 percent is assessed in computing the EFC. For every dollar of non-retirement assets above any asset protection allowance, 5.64 percent is added on top of your income index. Know your number and reduce the overall cost of college!