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Paying for College When You “Make Too Much”

Holly Lichtenfeld | October 1, 2016 4 MIN READ

A few weeks ago I was at a Dartmouth College informational meeting when this printed statement caught my eye: “We offer free tuition for students coming from families making $100,000 or less and possessing typical assets.” That’s amazing news for many prospective students but also begs the question: What about everyone else? Is a near lifetime of student loan debt the only option?

We hear about it frequently; college debt is a problem. It’s both a problem for individuals and a drag on the economy. About 70% of U.S. students graduate with college debt and a total of 40 million people currently carry student loans equaling $1.3 trillion dollars. If you care to see how much that debt has increased in the short time since I wrote this article, you can visit the Current Student Loan Debt Clock. With college costing from $20,000 (public universities) to $70,000 (selective private universities) annually, it’s easy to see why the debt clock continues to crank.

Getting Salaried Out of Assistance

Even if your household income is higher than the national average, it is still financially challenging to put a child (or two or more) through college.

To understand the relationship between income and federal financial aid, I ran a few very simple scenarios using the online financial aid calculator at bigfuture by The College Board. This tool calculates Expected Family Contribution (EFC), which is a number used by many schools to calculate how much financial aid a student is eligible to receive. For instance, if a student goes to a school that costs $20,000 and their EFC is calculated as $15,000, that means their annual financial need is $5,000. Keep in mind that some colleges use a different formula than the Federal Government when offering their own tuition discounts and grants. At, you can access the net price calculators for hundreds of schools. Take a minute to run your numbers today.

Have a High EFC? You Have Options.

529 Plans: These are tax-advantaged savings plans for higher education costs. While there’s no federal income tax deduction available for annual 529 contributions, many states do offer such a deduction (limits vary by state), and earnings in the plan grow federal tax-free and will not be taxed when the money is taken out to pay for college expenses. In addition to the tax advantages mentioned above, 529 plans:

  • Do not have a big impact on EFC. If a parent owns the 529 account, up to 5.6% of the value is included in EFC as a parent asset.
  • They are good for friends and family, such as grandparents, too. For example, if grandparents own the account, none of its value is included in the FAFSA (Federal Financial Aid Application). However, withdrawals from the 529 plan are counted as student non-taxable income and up to 50% of the value of the withdrawal could impact financial aid. So if the student is filing annually for financial aid, consider waiting until the child files their last FAFSA form before withdrawing any 529 funds. Cash gifts to a 529 plan can qualify as annual exclusion gifts ($14,000 per beneficiary in 2016), and the grandparents retain full control over the account throughout the life of the account.

Scholarships: Scholarships are a very compelling option because they don't have to be repaid, but most parents and students are very overwhelmed and don’t know where to start the process. I reached out to the college guidance staff at American Heritage, a college preparatory day school with two campuses in South Florida that is known for success matching students with college scholarships. In 2016, their students were awarded an impressive $15 million dollars.

The American Heritage college guidance counselors, Luciana Mandel and Victoria Polentas, shared these helpful tips:

  • Use online tools. Consider accounts with and bigfuture by the College Board. These databases include both university and external scholarships.
  • Look to colleges and universities, as these are the most generous entities for scholarship money. The merits of each student should guide the college matching process. For instance, over 50 universities offer full tuition or full ride scholarships to students who are National Merit Semi-Finalists. Many universities are also looking to reward those students who not only achieve highly, but also have an intense desire to help the community at large.
  • A couple final tips on scholarships: 1) check with your employer since many companies around the country do award scholarships to qualifying employee family members; check with your employer to ensure you’re not leaving any money on the table; and 2) continue to look to the college or university as many scholarship opportunities can be found for upperclassman as they make their way into specific areas of study.

Saving for college is a lot like saving for retirement—start early, become educated on your options, and use compounding tax-free gains to get ahead.

Holly Lichtenfeld
Holly Lichtenfeld
Holly Lichtenfeld
Holly Lichtenfeld
Holly is a regular contributing author to EverBank Insights, sharing practical tips and insights on a range of personal finance and money management topics. She is an entrepreneur and private business owner ( and has previously held positions at such companies as Morgan Stanley and Dun & Bradstreet.

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