How to beat 'The House' on college bills

Key Points
  • Three in 10 undergraduates don't file for federal aid.
  • Payment plans can help you break up a big college bill.

If you're looking for some last-minute strategies to navigate fall tuition bills, don't add "underground casino" to the list of contenders.

Parents experiencing a little bill shock at their student's looming college tab may identify with the plight of Scott and Kate Johansen (Will Ferrell and Amy Poehler) in "The House," now in theaters.

Will Ferrell and Amy Poehler in The House.
Source: Warner Bros. Pictures.

The couple's daughter, Alex (Ryan Simpkins), is accepted into fictional Buckley University, but thanks to a one-two punch of no savings and no financial aid, Scott and Kate have to contend with an outstanding balance of $50,819.87. Reluctant to tell Alex they can't afford to send her to her dream college, the couple instead works with their friend Frank (Jason Mantzoukas) to open an illegal casino.

"The math seems to check out," says Ferrell in the movie's trailer.

"Do this math," Poehler responds. "You're 40 years old, and you're in jail for 20 years. How old are you when you get out?"

How much to borrow for college

Obviously, it's better for families to avoid the shock of an unaffordable school by looking for one that's a good financial fit and creating a four-year plan to figure out how you'll cover those costs. But financial advisors say real-life families who find themselves with an unexpected gap ahead of that fall tuition due date aren't without options.

Here are eight last-minute strategies that are less of a gamble:

1) Revisit the FAFSA

Three in 10 undergraduate students don't file the Free Application for Federal Student Aid, according to a 2016 brief from the National Center for Education Statistics based on 2011-12 data. If you haven't, it's worth doing (the deadline is June 30, 2018 for the 2017-18 academic year), said Matthew Boersen, a certified financial planner with Straight Path Wealth Management in Jenison, Michigan.

"A lot of people think that once it gets past January or February, it's not worth filling out anymore," he said.

Late filers may have lost their shot at some first-come, first-served state and college aid, but a completed FAFSA is required to apply for federal student loans (which, if you need to borrow, are better than private student loans on rates and borrower protections) and to qualify for many schools' merit-based aid.

Already filed? Alert the school if that bill shock stems from a change in your financial circumstances, said certified financial planner Melissa Sotudeh, chief compliance officer at Halpern Financial in Ashburn, Virginia. For example, if you've experienced a job loss, unexpected medical bills or other hardship.

"Once your child is in, a lot of schools want to work with you," she said. "It never hurts to call."

2) Break up the bill

If you can come up with the full tab — just not all at once — ask the college if it offers a payment plan, Sotudeh said. Setup fees are often less than $100, and many colleges don't charge interest. Spreading out the tab over a semester (or longer) can make it easier to cover the bill with current income (i.e., your paycheck), she said.

3) Scrutinize college costs

Tuition gets a lot of the focus, but don't forget to look for savings on room and board, said Rita Cheng, a certified financial planner and chief executive officer of Blue Ocean Global Wealth in Gaithersburg, Maryland. She crunched the numbers and found it was cheaper to pay for her daughter, a rising college senior, to have a daily Starbucks breakfast (or make her own) than have those meals at the dining hall.

"Depending on your child's eating habits, you could easily go from 19 to 14 meals [per week] and save some money," she said.

Adding an extra roommate, picking a different dorm or even opting to live off campus could also yield savings on housing. The University of Florida's East Campus, for example, lists per-student, per-semester prices ranging from $2,236 to $3,947 depending on the building, room amenities and number of roommates.

4) Search for scholarships

Don't count out the possibility of outside scholarships, said certified financial planner Joel R. Cundick, a financial advisor at Savant Capital in McLean, Virginia. There are plenty with summer deadlines for incoming freshman and upperclassman.

"It's not necessarily going to be the easy hunt people think it is," Cundick said. "You have to go into the search thinking, 'I'm going to get some from a few,' rather than one big-ticket win."

Deciphering your financial aid offer

But before you go all-in on this strategy, it helps to ask the college about its displacement policy on outside scholarships. Some colleges may offset grant aid first, rather than loans — meaning the award will have less of an impact (if any) on your bottom line.

5) Explore work-study

Working in college or over breaks can have advantages both immediate (cash to cover bills) and long term (money management skills and work experience), said Cundick. (As an undergraduate, he covered a year's room and board by working as a resident assistant.)

But be mindful of the impact of student work on next year's FAFSA application, he said. The formula on expected family contribution expects that half of income the student earns will be used to pay for college. Aid packages often factor in some work-study element, but more substantial student earnings could hurt next year's package, he said.

6) Assess your balance sheet

Depending on other elements of your financial situation, you might have different investments or assets to tap, or options to borrow. (Just keep your hands off those retirement accounts.) Home equity loans, for example, have low rates right now and the interest can be deductible, said Boersen.

But you'll need to carefully consider how a particular move could influence financial aid in future years, and more broadly, the health of your finances now and in the future. You don't want to end up in a situation where your home is at risk because you can't repay that loan, for example. Co-signing a private student loan or taking on parent student loan debt can also have expensive consequences.

"Can the parents financially sustain those payments, and are they still OK for their own lives, whether that be retirement or their own current needs?" Boersen said. "Just because the bank's willing to qualify you for something doesn't mean it's going to be a good financial decision."

7) Ask for help

Nearly 4 in 10 high net worth grandparents are chipping in for college, according to Fidelity, and more are willing to do so — but haven't been asked.

If you do reach out to relatives, be mindful of how their gifts might impact aid in future years, said Peter McKenna, a certified financial planner with Highland Financial Advisors in Wayne, New Jersey. Funds from a grandparent-owned 529, for example, are treated as student income in FAFSA filings. You'd be better off waiting to use that gift until the student's senior year, he said.

8) Come up with a four-year plan

"You really do have to have a plan," said Sotudeh. "You don't want this to repeat."

Part of that is strategizing about how you're going to navigate next semester's bill, and the ones after that, she said: Maximizing scholarships and savings, taking advantage of tax breaks and evening out borrowing. Keep in mind that aid offers may be less generous over time, if they don't renew for upperclassman or keep pace with tuition increases, Sotudeh said.

If you expect financial struggles to continue, you might weigh bigger moves like switching schools or boosting the course load to meet degree requirements more quickly. Tuition for online or summer courses can be less expensive, Cheng said.

It's also key to enlist your student, said Cundick. Awareness of how the family is stretching to cover bills, and what their own student debt burden will look like at graduation, could spur them to be more responsible about graduating on time and curbing outside costs.

"There used to be a time where we talked about living like a college student, and that seems to have gone out the window," he said.

Cost of over-borrowing GRANT 20170209 PF