On April 9th New York State became the first state to adopt a free tuition program for public schools.  The program was named the “Excelsior Scholarship” and it will take effect the 2017 – 2018 school year.  It has left people with a lot of unanswered questions

• Do I qualify?

• How much does it cover?

• What’s the catch?

• Can I move my finances around to qualify for the program?

This article was written to help people better understand some of the facts and myths surrounding the NY Free Tuition Program.

Who qualifies for free tuition?

It’s based on the student’s household income and it phases in over a three year period:

• 2017: $100,000

• 2018: $110,000

• 2019: $125,000

MYTH #1: “If I reduce my household income in 2017 to get under the $100,000 threshold, it will help my child qualify for the free tuition program for the 2017 – 2018 school year.”  WRONG.   The income “determination year” is the same determination year that is used for FASFA filing.  FASFA changed the rules in 2016 to look back two years instead of one for purposes of qualifying for financial aid. Those same rules will apply to the NY Free Tuition Program.  So for the 2017 – 2018 school year, the $100,000 free tuition threshold will apply to your income in 2015.

MYTH #2:  “If I make contributions to my retirement plan it will help reduce my household income to qualify for the free tuition program.” WRONG.  Again, the free tuition program will use the same income calculation that is used in the FASFA process so it is not as simple as just looking at the bottom line of your tax return.  For FASFA, any contributions that are made to retirement plans are ADDED back into your income for purposes of determining your income for that “determination year”.    So making big contributions to a retirement plan will not help you qualify for free tuition.

What does it cover?

MYTH #3:  “As long as my income is below the income threshold my kids (or I) will go to college for free.”  DEFINE “FREE”.  The Excelsior Scholarship covers JUST tuition.   It does not cover books, room and board, transportation, or other costs associated with going to college. Annual tuition at a four-year SUNY college is currently $6,470.   Here are the total fees obtained directly from the SUNY.edu website:

Tuition:                       $6,470             Covered

Student Fee:               $1,640             Not Covered

Room & Board:          $12,590           Not Covered

Books & Supplies:      $1,340             Not Covered

Personal Expenses:    $1,560             Not Covered

Transportation:          $1,080             Not Covered

Total Costs                 $24,680

When you do the math for a student living on campus, the “Free” tuition program only covers 26% of the total cost of attending college.

What’s the catch?

There are actually a few:

CATCH #1:  After the student graduates from college they have to LIVE and WORK in NYS for at least the number of years that the free tuition was awarded to the student OTHERWISE the “free tuition” turns into a LOAN that will be required to be paid back.  Example: A student receives the free tuition for four years, works in New York for two years, and then moves to Massachusetts for a new job.  That student will have to pay back two years of the free tuition.

CATCH #2:  The student must maintain a specified GPA or higher otherwise the “free tuition” turns into a LOAN.  However, the GPA threshold has yet to be released.

CATCH #3:  It’s only for FULL TIME students earning at least 30 credit hours every academic year.  This could be a challenge for students that have to work in order to put themselves through college.

CATCH #4:  This is a “Last Dollar Program” meaning that students have to go through the FASFA process and apply for all other types of financial aid and grants that are available before the Free Tuition Program kicks in.

CATCH #5:  The free tuition program is only available for two and four year degrees obtained within that two or four year period of time.  If it take the student five years to obtain their four year bachelor’s degree, only four of the five years is covered under the free tuition program.

Summary

There are many common misunderstandings associated with the NYS Free Tuition Program.  In general, it’s our view that this new program is only going to make college “more affordable”  for a small sliver of students were not previously covered under the traditional FASFA based financial aid.   Given the rising cost of college and the complexity of the financial aid process it has never been more important than it is now for individuals to work with a professional that have an in depth knowledge of the financial aid process and college savings strategies to help better prepare your household for the expenses associated with paying for college. 

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.