Everything a Parent Wants to Know About Financial Aid, but Was Too Overwhelmed to Ask
Whether you are rich, poor, or middle class, everyone is eligible for financial aid today. It is the one good thing that has come out of this too long recession: the feds want students to go to school and they want them to graduate, so they have not only increased financial aid but they have made it easier to get.
Since 2008, colleges and universities on average have gone up 15% (USA Today Report, 6/20/12)). If you want to go to one of the 25-most popular, prestigious and expensive colleges in the U.S., you will pay an additional 15% after your freshman year.
Let’s take Harvard for example. The current cost, 2012-2013, is $57,950.
At 15% added on to the tuition price every year, you will pay $289,364 for your four years there!
In addition, public universities like UCs in California are currently $120,000 for 4 years (if you can make it through in 4 years; average time in public universities is 5 to 6 years because of impacted classes); other private colleges average $180,000. And they are also going up at an average of 15% a year.
Bottom line, you are going to pay the price of a house to go to college.
Let me tell you an important secret: you don’t apply for financial aid, the story you tell on your application applies. Financial Aid officers don’t have time to sit down and interview you personally before they award you money. They award money for the story you tell on your financial aid application.
This is why parents need to get their story right about financial aid.
Everyone needs financial aid and scholarships today.
Because nobody can pay that much.
And now I am going to tell you the most important secret: Nobody does. Nobody pays stick price for college. (See Blog #2 Nobody Pays Sticker Price for College)
You won’t pay sticker price for college.
What you are going to pay is your EFC. This is the abbreviation, in financial aid lingo, for Estimated Financial Contribution.
Whether you’re rich or poor, if your EFC comes out to $20,000 or $200, this is what you’re going to pay, no matter which school you go to. The balance will be picked up by financial aid, which is a combination of free money (grants and scholarships) and self-help money (work study, and loans).
This is why it is important for you to learn to talk about your financial situation (via story and back up evidence) to your best advantage.
There really are legal loopholes for you to use to reduce your EFC, because EFC is what you want to focus on.
Even if a college costs $58,000 a year like Harvard, if your EFC is $3000, you will only pay $3000, the rest will paid in a ‘financial aid package’ (more lingo).
If your EFC is $30,000 which would make you ineligible to get financial aid at community colleges or state schools, you will be still eligible for financial aid at more expensive schools like Harvard or Pomona.
You will pay your $30,000 (EFC) and Harvard (and the feds) will pay the $28,000 left.
And if your child is positioned well, in other words, if his/her story is told well (with back up evidence, meaning recommendations, transcripts, testing scores, awards, etc.), you are going to get even better money.
This is because the bright line between financial aid and admissions is dimming. (See Blog #5 The Secret of Getting Great Scholarships)
Colleges bring in remarkable students with good financial aid packages, which always means less loans and more grants and scholarships.
But first things first.
Why College Financial Aid Officers Don’t Want You to Know These Secrets:
College and universities are big business and they want to decide how they spend their own money and to whom they ration out federal and state funds to.
Financial aid officers do not like these secrets because they believe these legal loopholes tell rich people how to look poor.
These secrets also tell the poor how to squeeze out every bit of financial aid they are entitled to (and if you make less than $50,000 a year you are entitled to a lot!).
And, believe it or not, they help the rest of us–the middle class who make enough to support our families but certainly not enough to pay full price for college–learn how to use everything we can to position ourselves for the most money.
Personally, I believe the financial need formulas, both the FAFSA (federal methodology) and Profile (institutional methodology), are little more than a money rationing system that does not reflect a middle class family’s ability to pay, especially on the West and East coasts.
For instance, if you have a lot of consumer debt that comes out of your check each month, it works against you on the FAFSA because the formula does not count any credit card, car or mortgage debt against your Adjusted Gross Income.
Say you make $140,000 a year but 30% of it goes to your car, your credit card debt and your monthly mortgage. After taxes (at 20%), you really make $112,000 but since 30% goes toward debt (which the FAFSA does not count), you actually live on $78,400.
But the financial aid formula will only look at your AGI as $112,000 not $78,400! This makes a huge difference whether or not you qualify for financial aid or not.
The point here is that you can solve this problem, no matter how much money you make, in three ways:
–Learning how to tell your financial story in such a way that you maximize your ability to get as much financial aid and scholarships as possible;
–Learning how to help your child tell her story in such a way that way that she not only gets in a great school but gets plenty of scholarships to go;
–Learning how to be a terrific college consumer so that you not only help your child find a number of dream schools where he will thrive but also colleges where you can afford him to go! (Blog #6 How to Find the Best Colleges with the Best $$ for Your Child).
I will help you do all of this legally, legitimately and in such a way that it not only makes your child irresistible to a great college but gets you great money to go!
That’s my promise.
Stay tuned for blog # 2 Nobody Pays Sticker Price for College. Check out my website at www.college-quest.com. Leave me a comment on this blog or ask me a question. I can’t promise you I’ll be able to answer each one but I will carefully read them all. And learn from them. Thank you for listening!