Posted On: 2005-10-04Length: 30:22
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Good morning and welcome. It is Tuesday, October 4th, 2005. This is episode 83 of the Financial Aid Podcast. My name is Christopher Penn. I'll be hosting today. I host everyday. Welcome again to all the new listeners from the Daily Source Code. I know Adam did our promo on Daily Source Code number 252, so thank you Adam as always and welcome aboard. We have a great show today. We're going to cover a lot of stuff regarding the facets of news, a little bit of mail call and of course, some Podsafe Music. So, let's get started right away with the news.
In the news today, a pretty awful article on CNN Dot Com. The CNN financial aspect, actually, talking about maximizing your federal financial aid and your financial aid chances. The article's headline, of course is "Maximizing Your Federal Financial Aid Chances: Attention Mom and Dad, Here's Steps You Can Take Now That Could Literally Pay Off at College Time." And, the article goes on to talk a little bit about your FAFSA and how to file your FAFSA; says here for example, the FAFSA deadline is June 30, 2006 and the FAFSA forms required by all public and private schools, you can get from your guidance counselor, the financial aid office of your college, your library, online or by a telephone. Talks a little bit about the FAFSA calculations, some savings and stuff like that. But, by and large, the article's not great. And the reason it's not great is because it's, it's not aggressive enough when it comes to financial aid calculations. One of the, one of the most important things and we're going to talk about this a little later on in the show, but one of the most important things about financial aid and the search for paying for college, is that you have to be very, very, very aggressive when it comes to everything from when you fill out your paperwork, how you manage your finances, how you do your taxes; all of these things are very, very important things, and they are critical. It's critical that you be aggressive because you're competing with so many other people for federal financial aid. It is, unfortunately, it is, you know, a limited amount of money is in the federal budget for financial aid. I think it's on the order of around 80 billion dollars or so, for the Department of Education as a whole, and I think 60 billion for higher education. Now, 60 billion sounds like a lot until you realize that that is divided up among 6,000 schools, and from that it's divided up into, like, you know, anywhere from one to 10,000 students. So, you're really talking about small shares of financial aid. And, so you have to be very, very aggressive in, in competing for it. The same is true for scholarships. A lot of places say, "Yeah, you know, it's OK to go out and hunt for some scholarships." Not really. It's, it's OK, but it's not encouraged that you should be out there hunting for scholarships, out there you know, scholarship hunting. If you are in school and you're not working, you're not, you know at a full-time job or even a part-time job because I know work study sometimes has a limit of 20 hours per week of work. But, if you don't have a job, scholarship hunting should be your job until your education is completely paid for by other people's money, as opposed to taking out loans and things; which sounds weird coming from, you know, a podcast by the Student Loan Network. But, the truth of the matter is that if you're not aggressive then you will have to resort to students loans and that's where we come in. So, this article by CNN, we're going to cover some FAFSA secrets a little later on in this podcast because I kinda want to dispel some stuff around that. Of course, the best FAFSA information that we've put together, is on our, our website: www.FAFSAOnline.com. That's F-A-F-S-A Online Dot Com. And, we'll cover some more FAFSA secrets. Alright, let's start off the, let's start off the music portion of the show with a new piece of Podsafe Music called, it's called "Setting Sun" by Melissa Schuman, it's via the Podsafe Music Network.
Great new Podsafe Music there from Melissa Schuman via the Podsafe Music Network. Alright, let's tackle a couple of items in the mail call. One of our longtime listeners, Brian Person, noted that the music shows had something of an echo to them and that's because they were actually recorded in a, an Internet Café and that's why they had some echo. Back in the studio now, problem is solved. The other question was from, came in by the Google mail account and it is from Nancy Hoon who asked, "We have an 18-year-old female living with us who's no relation who's going to college. Her parents have disowned her and they've taken her car away. She's applied for a Stafford Loan, but it's only in the amount of $2625---so obviously she's a freshman---and not nearly enough to cover college. She's right now living on campus and she filled out papers for a self loan, but her parents would not sign it so her grandmother did, but the loan came back denied. He young lady's had a very difficult childhood and is now living with us. We're not wealthy people. We do have heart and allowed Christian to have a soft place to fall. With the denial of her self loan and no one to co-sign for her, Christian is thinking about dropping out of school. What can she do?" OK. Two acts to be taken immediately. The first is with alternative student loans, with private student loans, you can, you do not have to be a relative of the person that you're, in order to co-sign on their loan. That's a very important distinction that's lost a lot of times. And so, you don't have to be a parent or a grandparent or a sibling or anything like that. You can be, you know, that's certainly OK, but as long as you know the person and you're willing to extend them, it's actually your credit, you can co-sign on their loan. You can do so. Act Education Loans are available through the Student Loan Network. You can get them either by going to our website: Act Education Loans Dot Com or calling 866-229-8900. The second thing is that she and possibly you, but she definitely needs to be doing some scholarship hunting. Because scholarships are probably going to be the most advantageous form of financing for her. Especially if she is, you know, disadvantaged and she doesn't have a lot of money or any, you know, family backing. Scholarship hunting, you know, it doesn't require a lot of money. It basically requires, you know, access to the Internet and, that's about it. And, you know, hunt down, if you have a public library with Internet access, that's a great place to start. Just start hunting down scholarships and applying for them, applying for them, applying for them. Best thing to do if you're not subscribed to the podcast, get subscribed because the Scholarships Secret E-Book PDF, the ten-page book, is embedded, excuse me, in our RSS feed. You can download a copy of that and read through it. It goes through a whole bunch of tips about how to find scholarships with having to put any money down. So, definitely subscribe to the podcast that's by the RSS feed. Alright, that's going to cover the mailbag. And, we're going to do one more piece of Podsafe Music and then let's get on to those FAFSA secrets.
New Podsafe Music from Rebecca Lobe. Hey, I got the name right this time. It's called, "There Tonight". Find her at the Podsafe Music Network. Rebecca's sound, it's really, really it's, she's got such strong vocals. It's really nice to hear. Alright, let's talk FAFSA stuff. Finally something that, like again, like the tag line on the show goes, "Less boring than it sounds". There are nine things about the FAFSA you need to know in order to maximize the amount of financial aid you can get. #1: Adjusted Gross Income. Your FAFSA financial aid is a function, is in adversely proportional to your adjusted growth income. What the heck does that mean? Alright. On your IRS tax return, your adjusted gross income is the amount of money you make per year after standard deductions and adjustments. Adjusted growth income is basically computed by saying it's income minus deductions. Really, really simple. The goal in FAFSA secret #1 is to reduce your adjusted gross income. There's good ways and bad ways to do that. Bad ways, you know, losing your job, losing all your sources of income, that's all bad. Good ways include making the maximum contributions to your IRAs and your retirement plans. You know, shovel as much money as you can into those. Pay down any debts you have. If you have debts, especially consumer debt, you know credit card debt and stuff like that, pay it down and get rid of your cash. If you think about it, this is something that I thought was a good point in the CNN article earlier that is worth mentioning. Someone who has $20,000 in cash and $10,000 in credit card debt, is seen as having more financial resources than someone who has $10,000 cash and no debt. Essential, they still have the same amount of money when you think about it, but they don't from a financial aid perspective. The person with $20,000 in cash has twice the assets of the person who has $10,000 in cash, but no debts. So, pay it down. Donate as much as possible to charity, consolidate your student loans; that's a very important point. Interest paid on student loans is deducted from your gross income. Consolidation, initially like all student loans, like all loans of any kind, has you paying more interest up from than principle so consolidation reduces your adjusted gross income more than unconsolidated student loans. If you've moved, moving expenses are deductible. Health savings accounts like flex spending; these are deducted from your adjusted gross income. If your employer offers them, take advantage of them. He best advice, even though it costs some money, use professional tax preparation specialists. Especially if you've got, anything resembling complicated taxes. Basically, if you couldn't do your taxes on a post card saying, "I made this much" and you know, signing your name, then you should definitely be using a professional tax preparation specialist. It doesn't matter who. You know this, you'll see the ads, you know, come tax time, but you wanna use somebody who can help you find new and creative and legal ways of reducing your adjusted gross income. Remember that some tax preparers don't charge, don't charge you until your taxes are completed and ready to be filed. So, if you want to give them a try, see how they do, you know, you can use them. And if it turns out that they don't do such a hot job, then you don't have to pay them, so, any extra tip. This could actually go on awhile, so I think we might actually split this up into two podcasts. #2: Cash. Let's talk about cash. The more cash and cash equivalents you have on hand, the less aid you'll be qualified for. So, how do you dump cash quickly? We just talked about things like, you know, contributions to retirement accounts and IRAs and stuff like that. Also buying, you're, paying down debt. Two, two or three more tips; one which is kind of a gray area. Number one, definitely not a gray area: Buy stuff. You know that you're going to college, or if you're a parent, you know that your child is going off to college. The time to buy their supplies like computers, books, supplies of any kind is before filing you FAFSA. Basically, you just have less cash in hand. And, that's a good thing. If you're gonna make, thinking about making home improvements, you know, that's a good time to do it. You know, taking cash and getting it out of your hands means that you reduce the amount of perceived assets that you have. Number two: Pay a lot at once. If you can and it's possible in your financial circumstances, try and pay your bills at the beginning of the year and take a massive cash hit. For example, my, my insurance company, my home owner's insurance company allows me to pay the entire year's bill all at once. Actually as a bonus, they give me 5% off for doing so, so check with your providers. If they offer, you know, a pay up front discount. It's worth doing. In doing so, the bill's taken care of for the entire year; don't have to worry about it, don't have to think about it. And, it empties out the checking account, which again, if you're trying to reduce your cash flow file, that's the way to do it. If you have a mortgage, dump your cash into a huge payment towards a principle. This gets rid of cash as a liquid asset, but keeps it in your pocket as equity in your home. #3 is the gray area one. It's one you hear people discussing. It can get messy. It's called shifting assets. What, what some people do and some people recommend is that you take all of your money and give it to someone else to hold on to for awhile. Usually a relative like a grandparent, or an uncle or something like that. Basically, the grandparents, anyone other than the child and the parent, those two incomes are taken into account when it comes to the FAFSA filing and computing your eligible financial aid. Anybody else besides that is not taken into consideration, so grandparents are invisible. Uncles are invisible. The catch is your friend or relative, you have to be 100%, you know, sure of them. You have to be 100% trusting of them because you're giving them a lot of cash and, you know, there's always the potential for misuse, unfortunately. So, that's one way of doing it. Another way is to, you know, give them all of the cash and instead of, you know, instead of giving it back when the FAFSA filing stuff is done, actually give it to them to hold on to it; maybe even invest it in something very safe like bonds. And then, at the end of graduation, have, use that money, plus the proceeds, to, interest proceeds to pay off student loans that you've taken out. So, that would be secret number two. And let's do secret number three. We've got a set of nine. We'll do three today, three tomorrow and then three the next time. #3: Cover Your Butt. And, this sounds funny. You've heard insurance companies talk about how whole life insurance is a great investment and for the most part, they're wrong. The reason why is it takes so long for those investments to turn around. If you've got forty or fifty years for your investment to turn around, yeah, it may be something that you want to start thinking about, but even then, you know, in that same time period, other investments will perform much, much better. It's, it's just, you know, such a terrible rate of returns; it's like two or three percent at the most There is one area where whole life insurance is better than other investments and that's on the FAFSA. Line 44 of the FAFSA asks you to detail the worth of your investment. It excludes, however, the mortgage on your principle resident, retirement plans, IRAs, pre-paid tuition plans and the value of life insurance. So, a whole life insurance plan is essentially invisible to the whole federal financial aid process. The downside: it's expensive and it provides a very modest return in the long-term. It does give you coverage in case bad things happen, so investing a lot of money in a whole life insurance plan, probably not the best idea. You can probably make you money perform at better places but having some on hand as a way of getting rid of some cash, is, is an OK idea. So, look around for a decent insurance provider that fits what you can afford and that isn't going to try and get you to over-commit too much cash. OK, so let's call it at three for today because like I said, we have nine of these tips to go through and I want to cover them, and go into a little bit of detail about them. Again, with a FAFSA, you want to make sure that you've got your financial house in order. It's kinda like, maybe secret zero. Make sure that if you've got some anomalies with your taxes or your finances, get them straightened out. Get everything organized. Put everything in a big binder so not only will your FAFSA filing go easier, but you'll also have an easier time with your taxes as well. Alright, that is gonna do it for the FAFSA stuff. Let's hit one more piece of Podsafe Music and then I think we'll call it a show.
New Podsafe Music from Cheryl B. Engelhardt, "Complacent and Pretending". Before we rap up today's show, I actually want to talk about one more thing, well not really talk about it, just play it. A promo for a fellow New England podcaster, "The M Show", John Wall's show. So, here's a quick promo from "The M Show".
What a great promo. Does anyone actually remember the "Six Million Dollar Man" show? It's been awhile. I, actually, you know that would be a great candidate for a remake. Either as a movie or as a series. Although, I think they would have to change the price tag because six billion dollars won't buy you a whole heck of a lot in high tech anymore. Alright, that's going to do it for today's show. As always, show notes are available at www.FinancialAidNews.com/blog. Or, at our website: www.FinancialAidPodcast.com. If you're listening to us and you're not subscribed, I highly recommend that you do subscribe. There's a bunch of good things in the RSS feed. There's back issues, there's the Scholarship Searching Secrets e-book. There's a "What is a Podcast PDF?" So, if you wanna help, help some friends understand what a podcast is, that's a great one page flyer to give to them. So, definitely check it out. Get subscribed; really easy. The instructions are on www.FinancialAidPodcast.com. So, very simple to forward people to that. If you like the show, great, let me know at email@example.com. If you really like the show, help two of your friends get subscribed to it. It's really easy. It's free. All it requires is some Internet connectivity and, of course, a podcatcher of some kind. And not necessarily, iTunes, but I recommend iTunes 'cause it's simple. Alright, that's gonna do it. Until next time, take care.