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By Lucy Lazarony, Next Avenue
Companies lay off or discharge approximately 1.5 million people every month, shocking family finances of those affected — particularly if the finances include college plans for a son or daughter.
Students and their parents are not helpless, however. Here is a closer look at how college plans may be affected by a layoff and suggestions on how families could handle the changes.
Call the college financial aid department at your child’s college and explain that you have been laid off and are experiencing a dramatic drop in income. Do this as soon as possible. Family income affects the financial aid available to your child. You or your child may qualify for more aid if your income has declined significantly.
Tell The College Immediately
“It’s a good idea to contact the financial aid department at your child’s current or target school (if an offer of admission has been received) and let them know what changes have occurred as parental income is a significant factor in financial aid considerations,” says Patricia Roberts, chief operating officer at GiftofCollege.com. She is based in New York City.
Here’s what to expect when reaching out to your child’s college financial aid following a job layoff.
“Students should call their college’s financial aid office and discuss the school’s stated criteria for amending financial aid awards,” says Rachel Coleman, an independent education consultant at College Essay Editor. “These criteria are published on the Financial Aid Office’s website and typically include circumstances that would change a family’s financial status such as unexpected medical expenses, a parent losing a job, adding a new dependent to the family.”
“However, there is always wiggle room!” Coleman adds. “That’s why it’s worth discussing a student’s financial circumstance directly with the financial aid officer. Once the student has had this discussion, they can then submit a ‘Financial Aid Appeal Request’ along with documentation the financial aid officer has asked them to include.”
Submit Financial Paperwork
What type of financial documentation would an aid officer require? Here’s an example from the website of Occidental College in Los Angeles:
- Copy of federal tax return and W-2s for the current calendar year.
- Estimate of total income expected for the current calendar year, including unemployment benefits anticipated (if applicable).
- Copy of signed letter on company letterhead stating the reason for layoff, termination or furlough, last date of employment and any severance, bonus, vacation or other payouts provided.
- Copy of unemployment benefit statement (if applicable) that shows the full amount of benefit eligibility and benefit start date.
- Copy of the last dated pay stub (if applicable) before the layoff, furlough, termination or reduction of hours, showing year-to-date earnings and employee’s name.
Your Situation Is Not Unusual
Once the financial aid department has the necessary documents, it can begin re-assessing your child’s financial aid package.
“Colleges have experience with situational changes,” says Steven Kibbel, a Certified Financial Planner at DayTradingZ in Franklin, Tennessee. They can re-evaluate your finances and may be able to increase your aid package, whether through more grants, scholarships or low-rate federal loans.
It is also a promising idea to pursue other sources of aid for your family.
“Every dollar counts when money’s tight,” Kibbel says, “so also look into private scholarships or aid from nonprofits that help families who have lost their income source. Fastweb.com is a great scholarship search engine I recommend to clients.”
Consider Colleges With Lower Costs
If your child is applying to colleges, check financial aid available and also consider colleges with lower costs such as state universities or community colleges. These lower-cost options may be good strategies until your family’s finances have stabilized. Living at home and working are other ways your child could help to manage college costs.
“While it may not be what they had planned to do, your child can always start at a lesser-cost school and transfer down the line to their preferred institution or could live at home during all or part of their studies or could even defer a year and work if money is a major concern,” Roberts says. “Remember there’s no one path to a successful and rewarding educational experience and career.”
Ease Off Of College Savings Plans
When your income has been slashed, there may not be enough to let you continue to contribute to your child’s college savings plan such as a 529 plan. Don’t worry. You can always pick up savings after you find a new job.
“For those with younger children,” says Roberts, “while it may understandably be disappointing to not be able to contribute as you had been to their 529 plan accounts, give yourself some grace and accept that you may need to take a pause while you get back on your feet.”
Don’t forget about the money you already have invested in a 529 plan. This may still increase in value even if you have postpone new contributions.
Consider Help From Your Family
“During this stressful time, take a moment to pat yourself on the back for having gotten those 529 accounts opened and funded to the extent you have,” Roberts says, “and feel good about the fact that the money you’ve previously contributed is staying invested and likely to grow in value.”
This also may be an opportune moment to ask friends and family to contribute to a child’s 529 plan.
“You don’t need to go it alone. If you have not already done so, this may be a good time to let friends and extended family know of the opportunity to contribute for birthdays, holidays and other special occasions,” Roberts says. “It’s a tradition you won’t regret developing and one gift givers can really feel good about.”
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