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A Gap Year Can Save You A Boatload

As the number of kids who graduate high school and go on to college increases, the number of kids who choose to complete a gap year increases, too. Gap years have been common overseas for years. Their popularity, which has been relatively low here in the U.S. is changing, and quickly. The most recent high-profile student taking a gap year was President Barack Obama’s daughter Malia. She’s beginning her freshman year at Harvard University after spending a year interning.

What Is a Gap Year?

In a gap year, a student typically takes a break from schooling after graduating high school. He or she might complete an internship, volunteer, or work in the year immediately following high school graduation. And then he or she returns to school, entering with the freshman class as he or she originally intended.

In a recent 2015 study carried out by the American Gap Association Research Committee, the Institute for Survey Research, and Temple University, nearly half of students who completed a gap year said they used the opportunity to explore potential careers. A successful gap year requires some pretty significant planning. There are resources to help students plan a meaningful gap year.

Most students benefit from a gap year where there’s structure, obligations, and limits. After applying to college and earning acceptance, student can typically apply for a 1-year deferral on their admission. While a seat in a college or university can be held for a gap year student, and some scholarship money may also be held. It’s important to note, however, that a new FAFSA must be completed the next year which can affect our financial aid package.

Why Choose a Gap Year?

There are several possible advantages for taking a gap year. Students explore their commitment to a chosen field or area of study. Or in some cases, they decide upon a different career field, because they’ve realized their first choice was not a good fit, after all.

Many students also report being more emotionally mature. But perhaps the greatest benefits can be financial in nature. Students who take a gap year can earn more money for college, they may do better in college because they have a better understanding of the financial commitment college requires, and they may boost their financial aid through a reduction in their EFC, or estimated family contribution on the FAFSA.

Earn Money for College

Students who work through their gap year could make a significant contribution towards their college tuition and fees. This could help their family save on college costs. The caveat is they should be careful about where they put any money they earn. For example, a child’s assets are evaluated at a different rate than parental assets in the FAFSA (or Free Application for Federal Student Aid) process. Parents have what’s called an asset protection allowance for their money, but students do not receive that same consideration.

There are also big differences in how student money is looked at, depending on where that money is located. Student earnings could be placed into a savings account, a 529 college savings account, or another financial savings instrument. Since each of these affects a student’s financial aid package differently, it’s important to speak to a financial advisor who understands the pros and cons of each option.

Perform Better in College

It may sound counter-intuitive, but deferring entry into college for a year can improve a student’s ability to perform well in college. He or she may demonstrate stronger motivation to succeed and better academic performance after completing a gap year. They may also make better academic and financial decisions to help them get through a degree program on time, and with a manageable school loan debt load.

In a recent survey, more than three-quarters of students who completed a gap year reported that their year-off experience had an influence on their career decisions. This kind of mature thinking can minimize the chances that students change majors and need to spend more than four years in school, incurring additional tuition, expenses, and fees.

Get a Better Financial Aid Package

As mentioned earlier, students who complete a gap year must refile their FAFSA. In doing so, all their financial information is updated and reviewed again. A completely new financial aid package is put together. It’s entirely possible that students will be awarded a substantially increased financial aid package through a reduction in their EFC, or expected family contribution, especially if their gap year causes an overlap in college attendance with a sibling.

Let’s say that a student takes a gap year. During that gap year, she re-files her FAFSA. By the time the resumes her seat in college, she will have a younger sibling that’s also entering college. Because there are two children in that family in college at the same time, the EFC may be substantially less, making each child’s financial aid package significantly higher.

To show the math, let’s say that a family’s EFC is $60,000 when the eldest child applies to college. That child takes a gap year. When she returns for her freshman year, her younger sister is ready for college, too. When revised FAFSAs are filed, the EFC drops to $30,000 per child. This change in EFC could have a significant impact on the level of financial aid a student received.

Saving Money with a Gap Year

As you can see, choosing to complete a gap year after high school can provide genuine benefits for students, especially financial benefits. Students get a dedicated window of time in which to work and save money for college. Other positive options are toe explore career options, including important facets like networking, or participate in other worthwhile experiences, like volunteering, or travel.

There’s also the added benefit of submitting a FAFSA again during the gap year. This financial aid would cover studies when a student returns to school. In some cases where a second child in the family will also be attending college, the EFC will decrease significantly. This could have the effect of increasing the financial aid package that each student in the family receives, saving students and families a lot of money.

Jim Slowik

Jim Slowik strategizes for families of all incomes to leave no stone unturned to reduce college costs. Jim has worked for over 30 years in marketing and management with 20 of those years in financially related industries. As a parent of college students, Jim understands the challenges of navigating the college process. He holds a Bachelors of Marketing from North Central College.

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