College Financial Aid: Five Ways To Get the Best Package

Visit Original Forbes Article

I’m currently in the process of reviewing financial aid offers for my oldest daughter, who will be attending college in the fall.

There are six offers on the table, three from private colleges and from three big public universities.

Although we’re still awaiting an aid offer from her top pick, we are prepared with some key questions:

1) Does your aid cover all four years?

Many aid offers are only for one year, after which time your family’s income and assets will be re-evaluated through the FAFSA form, which should be filed every year your child is in school.

Ideally, getting the best-possible package would lock in aid for all four years and includes grants over loans.

2) How does the aid break out?

Since I’m an advocate for grant-based packages, I need to know what kinds of loans are included. To me, loans aren’t aid, because you’re borrowing, not the school. They have no skin in the game when they set you up in loans. And  I’m loathe to borrow money as a parent (PLUS loans), since I will qualify for Social Security in just four years.

Some colleges will throw work-study programs into the mix, which are far better than loans. Others may differentiate between “need-based” aid vs. “merit” assistance. The need-based component is based on financial need while the merit aid is based on the student’s academic record, test scores, activities and athletic accomplishments/abilities.

Keep in mind that if you push, a college will come up with in-house scholarships, grants and departmental assistance.

It also helps if your child has a well-defined curriculum in mind such as engineering or math. There’s lots of money available for STEM (science, technology, engineering and math) students and much less for arts and humanities.

3) What Costs Aren’t Covered in Their Package?

Travel and personal expenses, for example, generally aren’t included in aid packages.

Keep in mind that freshman will need to put all kinds of things in their dorm rooms such as computers, desk lamps, microwaves, etc.

You will find that colleges may also charge you for student health insurance. One college we saw wanted to charge $3,000 a year. Ask if the insurance is mandatory. You can easily keep them on your policy (up to age 25) for a lot less money.

4) What Options Do You Have to Sweeten the Package?

Colleges rarely advertise this fact, but you can ask for an “appeal” of the original offer or a “professional review.”

When you do this, you could ask them for more grants over loans or work-study and to cover expensive items such as room and board. It never hurts to ask.

To bolster your case for more aid,  tell them more about your financial condition.

Did you suffer job loss or anticipate being laid off? Are you a single parent going through a divorce? Do you have other children in school? Are you facing extraordinary medical bills?

Don’t be afraid to make your case for why you qualify for more aid. More detail is better. Private colleges usually have the money to give, so a little push is not out of bounds.

5) Should I Stick to the “Expected Family Contribution (EFC)?”

No.  This is an estimate churned out by a computer program when you filed your FAFSA that estimates what your family should be contributing to pay for college. It’s based on a static picture of income and assets available for college.

Things change. Since we first started college applications last year, I had to drain our savings to cover nearly $8,000 in taxes due. That ate into our cash reserves, some of which we could’ve used for education expenses.

All changes in your cash or income should be noted in challenging the EFC. It’s not an amount written in stone.

Since college financial aid is an opaque process — you never really know how colleges come up with aid formulas — you have to work with them individually. They are not all the same since they all have different resources available.

When we started our college search, we targeted smaller liberal arts colleges that had large endowments and small student bodies. We also applied to mammoth state universities, although we knew they had fewer aid resources and large student popluations.

Even though we’re through the first round of this process, it’s far from over.

If you focus on putting financial facts on the table and asking for more grant-based assistance or significant tuition discounts, you will do well.

Going in the door, we are not intimidated by huge “sticker” prices and are willing to negotiate. What counts in the end is the lowest-possible “net” cost that hopefully is not contingent on loans. More on that in future posts.

John Wasik is the author of “Keynes’s Way to Wealth” and 13 other books. He writes and speaks about investing across the globe. Follow him on Twitter and Facebook.