9/26/2012 6:20 PM ET|
10 ways to boost financial aid
Student debt can last a lifetime, so it's critical that students and parents take every (legal) advantage of the system.
The real, inflation-adjusted cost of college has more than doubled since 1980. What's also changed is the nature of financial aid. It's much harder, for example, to be declared "independent" from your parents in order to qualify for more help. Loans (which have to be repaid) have replaced grants (which don't) as the primary form of college financial aid. And many colleges that were once need-blind -- accepting students regardless of their financial situation -- are now paying closer attention to the bottom line by being "need aware" -- that is, being more willing to admit a student the more he or she can pay.
How are parents and students supposed to navigate this tricky world, without winding up deeply in hock? There are ways to increase your chances of financial aid, but first here are some basics you need to know:
Schools expect parents to help. Federal and private aid formulas are largely based on the parents' income and assets. If the parents are divorced, the financial aid package typically will be based on the income and assets of the custodial parent. If the custodial parent remarries, the stepparent's income and assets will be considered as well. A student won't get more aid if parents refuse to contribute.
Parents with high incomes who expect their children to pay for all or most of their schooling are putting those kids at a real disadvantage, since the aid package reflects the parents' assumed ability to pay rather than their actual contributions. For more information (including how hard it is to be declared independent or self-supporting as a student these days), read "What can you do if your parents refuse to help" and "Deadbeat parents who won't help pay for college."
Income matters more than assets. People often worry that saving for college will make it harder to get aid, but the reality is that if you can save, you probably should. Financial aid formulas expect those with moderate and high incomes will have had more opportunities to save than those with lower incomes -- whether or not they actually have saved. The higher your income, then, the less aid you should expect, no matter how you deploy your assets. If your income is more than $150,000 and you have only one child in college at a time, don't expect much, if any, need-based help from any but the priciest universities.
Financial aid policies differ enormously. Most colleges base their financial aid packages on the Free Application for Federal Student Aid. Some use an additional form, the College Scholarship Service (CSS) Profile, which asks deeper and more detailed questions about the family's finances.
What you actually get from the schools, though, will vary depending on a number of factors. Some schools have big endowments; others don't. Some "gap" their students, which means they don't provide enough aid to meet the students' entire need. Some rely heavily on loans, others on grants that don't have to be paid back. Some use "merit" (non-need) scholarships to attract good candidates; others don't. While you should use a calculator to figure out your Expected Family Contribution (like this one at FinAid.org), the number you get is just a starting point for what you might actually be asked to pay. You also should use the net price calculator found on every college's website to get a better idea of what the school might actually cost you. You can use the calculators to try out different scenarios, such as using savings to pay off debt, to see if it will move the needle on your EFC.
I've included some strategies below that are designed to do just that. You should know, however, that reducing your EFC doesn't automatically mean you'll get more grants or scholarships.
"People who think 'I'm going to get more free money' may be deluding themselves," warns Lynn O'Shaughnessy, the author of "The College Solution" and a blog that goes by the same name. "It's not necessarily true. You might just get more loans."
With those warnings and caveats, here are some strategies that can help you get more financial aid:
1. Be first in line. To boost your chances of both need- and merit-based aid, apply early, advises Deborah Fox, the founder of Fox College Funding, a San Diego company that advises parents on financial aid strategies. If you wait until the "priority deadline," which actually means the application deadline, the merit aid may be long gone and the needy "might just get loans," Fox warns. You may need to get your financial aid and application forms into the school as early as mid-November. Each school has different deadlines, so call and ask, Fox says.
By the way, even if you don't expect need-based aid, you have to submit a Free Application for Federal Student Aid, or FAFSA, to be eligible for federal student loans. Federal student loans have fixed rates, numerous repayment options and the possibility of forgiveness. The amounts undergraduates can borrow are limited, which can prevent them from getting over their head in debt. Private student loans have variable rates, are often more expensive and have far fewer consumer protections. Private student loans are kind of like paying for college with credit cards, except unlike credit cards, student loans typically can't be erased in bankruptcy. Bottom line: Stick to federal student loans.
- Calculator: How much should I save for college?
2. Find a generous school. The most powerful way to reduce college costs is to find a school that's committed to helping students in need, O'Shaughnessy says. You can start your research at CollegeBoard by typing a school's name into the "College Search" box on the home page. You'll see not only the school's costs but also the percentage of student need the college meets and the average size of financial aid packages. In Los Angeles, for example, Loyola Marymount University's $39,125 sticker price is $5,338 less than the University of Southern California's. Loyola Marymount, however, meets only 72% of its students' financial need, while USC meets 100%. The average USC financial aid package is nearly $12,000 more. "Parents focus on the sticker price, and that's meaningless," Fox says. O'Shaughnessy agrees. "Find the schools that meet the best percentage of need that your kid can get into," she advises.
More from Liz Weston:
VIDEO ON MSN MONEY
lost among all articles about college enrolment and parental aid for kids in college, is some parent steping up and telling there kid "i'm not paying for that IDIOT degree with no job potential.
i'm all for personal growth, but serious debt to pay for an art degree or "communications" degree is money borrowed and thrown down a toilet.
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