How to Negotiate Financial Aid Offers

by Gerri Willis

One of the dirty little secrets of paying for college is that the price tag is negotiable. Although financial aid officers don’t like to admit it, negotiating prices has become commonplace. And, that’s good news because today’s price tags at $18,943 for in-state public schools, $32,762 out-of-state schools and $42,419 for private schools are simply unaffordable.

College tuition isn’t a tab most of us think can be haggled like a used car price, but declining enrollments mean that the nation’s 4,500 degree-granting institutions are fighting each other for the privilege of educating the nation’s brightest students. Truth is, universities have spent the past couple of decades beefing up their offerings, building elaborate gyms, dorms and student centers just as tuition-paying enrollees have dropped by 930,000 students in four years. In short, they’ve spent a lot to attract a declining clientele.

For that reason, Mom and Dad are finally getting a little leverage. To best take advantage of your better negotiating position, you’ll want to plan ahead, says Kal Chany, author of “Paying for College Without Going Broke,” and founder and president of Campus Consultants. First off, before you do anything else, get all your offers in hand. The standard procedure is that admission offices send out admission letters followed by financial aid offers (by letter or online) over the next six weeks. Chances are good that you will be mystified by the aid offer. That’s okay. The letters are typically loaded with jargon and even misleading information. Contact the aid office to make sure you understand every sentence. Then, compare your offers from different schools on an apples to apples basis to determine which school is giving you the most free money vis a vis the all-in price. It’s possible you can put one school against another to get more aid out of your top choice.

Next, Chany says ask the aid office for the procedure you should use to “appeal” your aid offer. Don’t use the word “negotiate,” or even “bargain.” Financial aid officers consider that presumptuous. Your best bet for success is if you’ve had a major change to your families’ finances. If one parent lost a job or has an expensive health problem, schools are likely to take that into consideration. You’ll need to send them detailed information to document your case, such as letters of dismissal or even medical bills.

Likewise if your household has grown or if your parents are responsible for another college student, a re-look is warranted. However, many schools are now also willing to match or beat offers from other schools. The flexibility of the student aid officer varies from school to school. But some private schools admit to granting appeals to as much as a third of their entering class.

One thing to keep in mind as you work to reduce your college bill: The student aid officer isn’t your friend. In fact, their job is to get your son or daughter to enroll with the smallest financial aid package possible. So, get ready to haggle. And, don’t miss that May 1 deadline for making the big decision where your child will attend college.

Join us tonight 5pm ET on The Willis Report as we help you and your family get the aid you deserve

A Guide to Federal Loans

by Gerri Willis

A free ride to college is a rare thing these days. If you are awaiting financial aid offers, you’re hoping for a grant windfall, but the reality is you will have to beef up your package with loans. Here’s a list of the federal loans, their details and annual award limits.

Federal Perkins loans: These loans are available for undergraduate and graduate students. Eligibility depends on financial need and the availability of funds at the college. The college is the lender and payment is owed to the college that makes the loan. Undergraduates can get up to $5,500, while graduate students can get up to $8,000. Total amounts cannot exceed $27,500 for undergrads and $60,000 for graduate students.

Direct subsidized loans: These loans are for undergraduate students who are enrolled at least halftime and have demonstrated financial need. Interest isn’t charged while the student is in school. The U.S. Department of Education is the lender and payment is owed to DOE. Annual awards are $3,500 to $5,500.

Direct unsubsidized loans: These loans are for undergraduate and graduate students who are enrolled at least halftime. Financial need is not required. The student is responsible for paying interest throughout the life of the loan. Payment is owed to the Department of Education.

Direct PLUS loans: These loans are for parents of dependent undergraduate students and for graduate or professional students. Financial need is not required. Students must be enrolled at least half-time and must be either a dependent undergrad for whom a parent is taking out a Direct PLUS loan or a graduate or professional student who is receiving Direct Plus loans. The borrower cannot have a negative credit history and is responsible for paying interest in all periods. Again, the Department of Education is the lender. The maximum award is the cost of attendance minus any other financial aid the student receives.

Join us tonight 5pm ET on The Willis Report as we help you and your family get the aid you deserve. 

User's Guide to Paying for College

by Gerri Willis

     Over the next six weeks, millions of high school seniors will get word whether the colleges they have applied to are offering them admission for this coming fall.  More than three and a half million applications will be filed, but only about two million will be accepted. Nobody, however, will be watching the mailbox more closely than Mom and Dad. That’s because acceptance letters are followed in short order by financial aid offers.

With the price of college rising 3 to 4 percent faster than inflation each year, anxiety about college aid is no surprise.  Average tuition, fees, room and board for students enrolled at in-state public schools for the 2014-15 school year will total $18,943. All-in costs for students attending public universities out-of-state will be $32,762. Opt for a private school, and you’re looking at a tab of $42,419 – for one year! Prices are so out of control that states as diverse as California and Michigan are offering educational aid to middle class families earning more than six figures. Frankly, the price hikes are nothing new.  Many families have grown accustomed to the fact that the average grad hitting the jobs market will be burdened by a $33,000 college debt load. Strangely, people balk at paying $4 for a gallon of milk, but when it comes to footing a $150,000 tab for four years of university, parents just grin and bear it.

Fortunately, there are ways to reduce this debt burden even after you’ve received the financial aid offer. All next week on The Willis Report, we’ll help you decode these aid letters and negotiate a better deal.  We’ll start by helping you understand the confusing jargon used by admission officers, and show you how to determine the real out-of-pocket costs. Beware of student loans masquerading as gift aid! It’s possible the letter won’t even include the full cost of sending Junior to school. Chances are things like books, transportation, even living expenses may be left out. If you have multiple offers, you’ll want to compare them, and use them as leverage to get more aid.

Don’t stop there. One of the dirty little secrets of applying for the financial aid package is that you can appeal the school’s decision. Thirty to 50 percent of families that ask for additional money get it. All next week, we’ll show you how to squeeze financial aid officers for the best aid package you can get.

Bottom line, keep an open mind. Some of the most expensive schools in the country offer the highest levels of free money, or financial aid. Sticker prices for college, like the ones on a car lot, are just a starting point in the negotiations. And, with enrollment numbers shrinking, many schools are eager to fill classrooms.

Join us starting March 2nd on The Willis Report as we help you and your family get the aid you deserve.

Budgeting Made Simple

by Gerri Willis

It seems to me nothing is harder than following a monthly budget. Costs vary month to month and sticking to a rigid plan for spending and saving can be impossible. Apologies to you Quicken and Mint budgeting pros! I admire you, but can’t muster the discipline to do what you do!

And, I’m not alone.  Long-time personal finance guru and Edelman Financial Services Vice Chairman David Bach, author of “The Millionaire Next Door,” says budgets don’t work. “People rarely really build them, and it’s even harder to stick to them.” 

Fortunately, there is a way to get the benefits of the budget without spending your weekends slaving over an Excel spreadsheet. The real advantage of a budget is that it gives you parameters on what to spend on individual categories. Think of it as a pie. According to Bach, you’re best off spending just 35 percent of your monthly income on housing costs. That means mortgage or rent, repairs, taxes, utilities and insurance. Truth is, housing costs have been increasing handily. To find out whether it is cheaper to rent or buy, go to Trulia.com.

Another tough category is debt. Bach recommends that just 15 percent of income should be snagged by student loan payments, credit cards and personal loan payments. Transportation, car payments, insurance and gas, should comprise just 15 percent of your budget while other living expenses like eating out and vacationing should be 25 percent.

The big nut to crack is savings. Bach says saving 10 percent of your income is a good rule of thumb, but you may want to spend more if you are behind on retirement goals.

The bottom line is this: By understanding the proportion of your income that should go to each category of spending, you put yourself in a better position to budget without a real budget.  Hitting your goals can be as simple as paying yourself first. By automating your savings dollars and locking in low housing costs, you’ll go a long way towards making your budget (or unbudget) work!

Your Year-End Portfolio To-Do List

by Gerri Willis

The holidays are a good time to take a long, hard look at your retirement portfolio and make sure you are on track for a successful retirement. “The key question to ask yourself is, ‘In relation to my personal financial goals, is my portfolio helping me achieve them?’ Most investors say they want the most money they can (get). But, ultimately, what matters is if your money helps you get what you want and lets you sleep at night,” says Derrick Kinney, president, Derrick Kinney and Associates. 

  • Step No. 1, says Chris Cordaro, a certified financial planner, is to rebalance your portfolio to make sure that the run in stocks hasn’t inadvertently left you with a higher stock allocation than you planned. He advises rebalancing anytime your balances are 20 percent from your target allocation. He says emerging markets offer the most opportunity as the most undervalued asset class currently.
  •  As you evaluate actively managed mutual funds, watch for managers that “window dress” their portfolios, or change holdings to improve the appearance of the portfolio by selling losers and buying winners. Problem is, says Cordaro, window dressing hurts returns and tax efficiency.
  • Now is also a great time to make sure you’ve contributed the max to your 401(K). Limits for 2014 are $17,500 and $18,000 for 2015. If you are 50 or over, you can add catch up contributions of $5,500. If you are aged 70 and ½ or older, you are required to take minimum distributions from your IRA. Financial advisors say one of the most common mistakes retirees make is forgetting to take distributions or taking too little. If you just hit this milestone, you can delay taking the payment until April 1 of the following year. The end of the year is also a good time to review the beneficiary designations of your retirement plans and make sure everything is as you want it.

 Taking some time and reviewing your retirement accounts isn’t just good planning, it’s also peace of mind. 

Getting The Most From Your Charitable Giving

by Gerri Willis

If you’re like me, most of your charitable contributions are made online moments before the ball drops on New Year’s Eve. And, to be sure, giving before year-end pays benefits come April 15 because donations to qualified organizations are deductible from your taxable income.

Having said that, making contributions that qualify may be more difficult than it appears at first. For example, you can’t deduct contributions to individuals or non-qualified organizations, like country clubs or chambers of commerce. Likewise, appraisal fees are not deductible.

However, there are plenty of donations you can deduct to reduce your tax bill next year, says Clare Levison, a CPA and the author of, “Frugal Isn’t Cheap: Spend Less, Save More and Live Better.” Even plain old cash can be tricky unless you keep a copy of your bank record or get a receipt from the charity. You’re best off contributing money by cash, check, electronic funds transfer, debit card, credit card or even payroll deduction.

You can also give household goods like clothing. Just be sure the clothes are in decent condition. Cars, boats and airplanes can be deducted for the smaller of the gross proceeds from their sale by the organization or their fair market value when they are contributed. Follow the letter of the law, though, because the IRS sees auto contributions as a red flag.

Stocks, bonds, jewelry and coin or stamp collections can also be contributed. Typically for tax purposes, you deduct the fair market value of the property. Giving stock or real estate can be tricky. Consult a tax pro to make sure you get it right.

About 70 percent of Americans will contribute this year, and most of them will be doing it this month. Stretch your charitable dollars by giving to philanthropies that have good management. Check out www.charitynavigator.org to find the best run charitable organizations. 

Medicare Open Enrollment: What You Need To Know

by Gerri Willis

Medicare Open Enrollment is on and there are big changes underway recipients need to know. Bottom line: Many seniors will see higher costs and fewer options. For example, according to the Kaiser Family Foundation, there are fewer Medicare Advantage plans for 2015. In fact, 320,000 enrollees are enrolled in plans that are exiting the market.

What’s more, enrollees in six of the 10 most popular plans this year will experience double-digit premium increases if they stay in the same plan for 2015.

The good news is this: The Part D “donut hole,” that is the coverage gap for prescription drug plans continues to shrink. Those who enter the coverage gap in 2015 will get a 55 percent discount on brand-name drugs and a 35 percent federal subsidy for generic drugs.

If you are considering keeping the same plan you have right now, be sure to check whether there are any changes in your plan. You may find a drug you need isn’t covered or not to the level you expect. Don't miss our User's Guide to Choosing the Best Health Insurance 5pmET on FOX Business.

Health Insurance: Workplace Enrollment

by Gerri Willis

It’s that time of year again. Companies are opening enrollment in health insurance plans, and if you haven’t gotten a peak at the 2015 changes, be advised, you may get sticker shock when you do. Deductibles will rise 7 percent this year as companies forecast higher healthcare costs.

Premiums and copays are likely to rise as well. If you work for a small company, watch out because your prices may rise even more than that 7 percent average.

The changes are more of the same. According to Kaiser, worker contributions to health care coverage have nearly doubled since 2003, from $2,412 to $4,565. Deductibles have jumped from $584 a decade ago to $1,217 today.

As you begin to compare plans, don’t assume your plan from last year is the same this time around. Plans are converging and looking more and more like each other. While HMOs, or health maintenance organizations, originated the co-pay, now PPOs or Preferred Provider Organizations are charging them as well.  Given that, you’ll want to think about what services you’ve used in the past and are likely to use again as you shop.

And, remember that premiums aren’t the sum total of everything that you will pay. Check out deductibles, co-pays, and whether you have to pay co-insurance even after paying your deductible.  If you are not a big user of health care, you might want to think about a high-deductible plan which will give you lower premiums. If you choose this route, consider setting aside money in a health savings account to cover your costs.

Don’t miss our User’s Guide to Choosing the Best Health Insurance tonight 5pmET on FOX Business

Ready or Not, Here Comes Round No. 2 of Obamacare

by Gerri Willis

Ready or not, here comes Round No. 2 of Obamacare. And, as much as I’d like to start this blog with an analysis of costs, details such as premiums for Obamacare 2015 policies won’t be made public until open enrollment starts Nov. 15, conveniently after the election. So forget getting your arms around price tags. At least for now.

To be sure, though, some details are already out. First off, there is a new website where you’ll go to enroll for the first time. Given the original healthcare.gov website’s glitch-plagued rollout a year ago, this could be a good thing. But, again, we don’t know because this website is still being tested. (Want to know how the testing is going? Again, forget it. That information isn’t being shared.) To their credit, the website designers have managed to shorten the number of screens in the online application from 76 on the original site to just 16 on the new site.

Unfortunately, if you bought Obamacare coverage last year, you’re stuck with the old website which is famously unreliable. Some of our sources maintain the backend of the website still isn’t complete a year after launch. And, re-enrollers will face a time crunch. They’ll have just one month – until Dec. 15 – to get on the site and update their financial information – a move that is required to have coverage beginning Jan. 1, 2015. You’ll want to have handy a 14-character identifier number to keep any current insurance policy. If you don’t re-enroll, you may be reassigned to your old plan, but you’ll also get this year’s subsidy amount, which may be smaller than they would be entitled to for 2015.

On top of all of this, it’s possible that several hundred thousand people across the country may face cancelled health insurance policies because those policies are not in compliance with Obamacare. Initially these policies were granted a reprieve, but break time is over. Thirteen states and the District of Columbia plan to cancel policies that don’t offer the level of services required by the Affordable Care Act. Federal law requires a 60-day notice of plan changes, so if you’re getting bad news in the mail, it will probably come no later than Nov. 1 (right before midterm elections.) 

So, truth be told, Obamacare Year 2 remains a mystery, though Health and Human Services Secretary Sylvia Burwell has already said that it won’t be perfect. That’s reassuring.

Don’t miss our User’s Guide to Choosing the Best Health Insurance all next week 5pmET on FOX Business         

 

Taking Advantage of Tax Deductions

by Gerri Willis

If ever there was a year to look for deductions to your tax bill, this is it. The reason? Millions of Americans will be paying more because of higher tax levels imposed by Obamacare and the ironically named American Taxpayer Relief Act of 2012. But even if you aren't subject to the higher rates, it still pays to get all the breaks you can.

  • PRIVATE MORTGAGE INSURANCE. The home mortgage interest deduction is a perennial favorite of homeowners and while that deduction is now on a phase out schedule for high earners, others may benefit from the private mortgage interest deduction. PMI is an insurance policy that lenders require if you can't make a 20 percent downpayment on a home. And, 2013 is the last year you'll be able to claim the deduction unless Congress changes its mind.

You'll find the amount of PMI you paid on your bank's mortgage interest form 1098. The break is available to homeowners who took out their mortgage after Jan. 1, 2007.

And, like a lot of deductions, this one has income phase outs too. The sweet spot for this break is an adjusted gross income below $109,000.

  • CARING FOR A DEPENDENT PARENT. This is more complicated than it sounds, but if you can claim a parent as a dependent, you can save on taxes. Your parent must live with you and get more than half of his or her support from you. Keep in mind the parent's earnings must be less than the tax exemption level. The devil is in the details with this one, and you should consult a tax professional. But if you meet the requirements, you'll be able to claim an added personal exemption on your income tax return.

An added plus, any medical expenses you pay for that parent can contribute to the threshold for deducting medical costs. To meet that threshold, you have to spend 10 percent or more of your adjusted gross income on medical expenses. (That threshold increased from 7.5 percent last year.

  • COLLEGE LOAN INTEREST. Parents struggling with the high cost of education will find they can deduct up to $2,500 of annual interest on loans to pay for college. Income phase outs exist, naturally, so high earners might want to consider taking out a home-equity loan instead, which in most cases, will allow you to deduct interest.
  • HOME EQUITY LOAN INTEREST. You probably know that mortgage interest is deductible. Interest on mortgage debt up to $1 million is deductible, but phases out at higher income levels. Interest on home-equity loans totaling up to $100,000 also is deductible, no matter what you do with the money.
  • JOB SEARCH. If you were looking for a job last year as millions of Americans were, the costs of that job search is deductible. File them under miscellaneous expenses. You don't have to be successful to claim the deductions. If you do land a new gig, you can also claim relocation expenses for the new job. Consult a pro to determine exactly what you can deduct. 

There are more deductions -- many more -- but you should be aware that some of them are IRS audit bait. Here are a few of the deductions that might get you a second look, if not an audit:

  • Home office deductions. This one draws attention especially if you claim a salaried income.
  • Non-cash charitable donations, especially if you donate a car to a charity.
  • Earned income tax credit. This benefit for low-wage earners is often abused and the IRS will take a close look.

When it comes to deductions, one of the things IRS auditors keep in mind is just how you stack up with other taxpayers. CCH Inc. recently calculated average deductions, and while you shouldn't use these as a hard and fast guide to your own tax return, it makes sense to have a general idea of what people in your income bracket pay. For example, folks with an income range of $50,000 to $100,000, claim medical expenses of $7,312 interest of $9,320 and charitable contributions of $2,815. These households pay federal taxes of $6,111.

So the point, here, isn't to discourage you from the taking all the breaks that are due to you. In fact, I say take absolutely everything you are eligible for. The IRS expects nothing less. 

 

Don’t miss The Willis Report starting 5pmET on FOX Business

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