By Kalman A. Chany, author of The Princeton Review’s Paying for College.
Applying for financial aid has never been more difficult and competitive given the high cost of college and the increasing number of students seeking such assistance. Indeed, articles in national publications have reported that a majority of private colleges and many state schools are now hiring consultants and using various criteria to determine the smallest amount of aid they need to give in order to get students to attend their school. As such, students and their parents must be much more assertive and savvier when seeking aid for college.
If you are thinking that all you need to do is complete the aid forms and then sit back and hope for the best, you’re likely to be shocked and disappointed when the financial aid offers arrive in the mail.
The information that follows is designed to give you the basics for improving your chances of getting the maximum amount of aid.
The Importance of College Financial Aid Planning
In theory, financial aid funds are supposed to go to those who need the money the most. In reality, financial aid dollars flow to those students and families who plan ahead and best understand how the financial aid process works well before it’s time to apply for such assistance. Here are some key points to remember:
*Don’t forget your consumerism. Higher education in America is big business. The college is trying to get you to pay the most money; you are trying to pay the least amount. It can be very costly to assume that the college is going to show you how to get the most aid. As a college financial aid administrator quoted in the New York Times once said, “Parents and students sometimes forget that we work for the school, not for them.”
*Don’t initially rule out any school as being too expensive. The amount of financial aid you are eligible to receive is based on the relationship between two items: the “cost of attendance” and the “family contribution.”
The cost of attendance represents the sum of tuition and fees, room and board, as well as allowances for books, transportation, and personal expenses. The family contribution is the amount of money the college expects from the family for the student’s education in a particular year.
If the cost of attendance is greater than the family contribution, you have demonstrated “need” and are eligible for financial aid. So, in theory, once the family contribution is met, the greater the cost of the school the more aid you are eligible to receive.
*Plan ahead. Assuming the student will graduate from high school in the spring of 2024 and start college in the fall of 2024, aid eligibility for a student’s first year in college (that is, the Fall 2024 – Spring 2025 award year) will usually be based in part on the parents’ and student’s taxable and untaxed income received during the 2022 calendar year that began January 1st of the student’s sophomore year in high school and ended December 31st of the junior year. This calendar year is known as the prior-prior year (PPY) and is sometimes called the base income year.
To increase your chances of getting the most aid: As early as ninth grade, you should get a rough estimate of your family contribution by using worksheets in financial aid guidebooks or by hiring an aid consultant. If appropriate, make the necessary changes to lower your family contribution. Certain reductions in discretionary PPY income items could increase your need.
Keep in mind that even if the base income year has ended, you must re-apply for aid each year in college with the following calendar year being the next base income year for the next award year.
Be aware that colleges have the ability to use more recent income, if such income is more representative of your current financial situation — though they are not required to do so. While this can be done via an appeal later in the aid process, one must still provide 2022 PPY income when requested to do so on the 2024-2025 aid forms.
You should also consider making the appropriate changes to your assets, debts, certain expense items, and retirement accounts to boost aid eligibility. While there usually is a look-back period for the income, all the other required information items on the aid applications, including assets, are as of the date you submit the aid forms.
*Keep on top of the aid process. Financial aid doesn’t just happen. You get rewarded for planning ahead, paying attention to details, knowing all the rules, and utilizing a proactive approach to the entire aid process. This is more important than ever given the coming changes to the federal student aid system as a result of recent legislation known as FAFSA Simplification, which will be anything but simple when it is being implemented.
*Concentrate on the big money. The federal government, the state governments, and the colleges themselves award the bulk of financial aid funds. Scholarships that are awarded by corporations, foundations, community groups and other organizations represent only a tiny piece of the financial aid pie. Unfortunately, many families mistakenly concentrate their time and energies pursuing those little known scholarships that supposedly go unclaimed each year.
*If you are getting outside help, be sure it’s from the right source. If you are confused about the process, you are not alone.
While there is no law that requires you to do so, you can always hire a skilled independent professional to help you with your aid planning and/or with the aid application process. However, if you are seeking professional help, make sure the consultant’s main focus is financial aid planning. Don’t automatically assume that your accountant, tax preparer, or financial planner is a financial aid expert, as most of these professionals have little or no training in this very specialized field.
The fees charged by private aid consultants may seem high, especially if you have no experience with the complicated aid process. In the long run, the added financial benefits achieved by working with an experienced professional usually exceed the cost — often saving families several times the fee charged when compared to the results one would get had they handled the process on their own. After all, there is a huge difference between simply completing the aid forms as instructed by the colleges or the high school guidance office versus engaging in financial aid planning and then pursuing the multi-step aid application process to get the maximum assistance possible.
So if an independent aid consultant can find ways to increase your aid eligibility by several thousands of dollars and/or can help you better navigate the tricky aid process, then even a seemingly expensive fee is worth the investment. This is especially true if you are considering the private colleges, where the aid process is usually much more complicated, and where mistakes and errors of omission can cost you tens of thousands of dollars in lost aid.
Hopefully after absorbing the information presented in this article, you will have a much better understanding of the importance of college financial aid planning.
Copyright 2022 by Campus Consultants Inc.
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