Your kid is halfway through high school, and the gap between
your savings and the cost of college has grown alarmingly wide.
Understandably, you want to position your finances, and your
student, to attract as much financial aid as possible, preferably
in the form of grants and scholarships you don't have to pay
4 Strategies for Securing More Financial Aid
Meet the financial aid consultants. Also known as college
financial planners, they can help you navigate the convoluted
financial aid process and, if you visit them early enough, provide
valuable advice on saving for college. Typically, they market their
services through referrals from college admissions consultants or
presentations at high schools and community colleges, or through
their general financial-planning practices. Many offer a free
initial consultation, then charge by the hour or session -- say,
$100 to $250 -- after you sign on.
But some planners go further, using the sessions to sell you a
financial product that gets them a commission but may not get you
college money. Others charge several thousand dollars for an iffy
outcome, or make promises about money that isn't theirs to give
away. Some of the advice can even hurt your finances or leave your
student deep in debt. Think twice before you fork out big bucks for
the sake of financial aid. Some of the strategies you're likely to
hear may not pan out.
STRATEGY: Lowering your expected family
If you've already filled out the Free Application for Federal
Student Aid (FAFSA), you know that the expected family
contribution, or EFC, is the amount you supposedly can afford to
cover in college costs, based on the federal financial aid formula.
Some private colleges use a different method, called the
institutional formula, to come up with a comparable number. Either
way, the expected family contribution is a starting point for
determining your need. Theoretically, the wider the gap between
your EFC and the total cost of attendance, the more money you
Accordingly, planners will suggest ways to lower your EFC --
say, by postponing a bonus into the following year, or spending
down savings, especially in your student's account.
Those tactics won't necessarily change your out-of-pocket cost.
Why? Few colleges fill the entire gap between the amount you are
expected to pay and the cost of attendance, and any award you do
receive will probably be a combination of grants, work-study and
federal loans -- not the rich package of grants you were hoping
Rather than rely on a FAFSA-produced number to gauge how your
award might shape up, use the net-price calculators (required by
law as of October 2011) posted on college Web sites (Read our
How to Zero In on the True Cost of College
). The net price reflects grants, not loans, based on the average
award for families in your circumstances. (Be sure to focus on net
price as opposed to net cost, which is what you get when you
subtract the entire aid package, including loans, from the cost of
STRATEGY: Taking assets off the table.
Whatever your expected contribution, neither colleges nor the feds
expect you to put every penny you have toward the college bills
(although it may seem that way). Both the federal and the
institutional formulas remove certain types of assets from the
financial aid calculation before crunching the numbers, the idea
being to leave you a way to sustain yourself after your kids get
through college. Among the excluded assets: retirement accounts and
cash-value life insurance. The federal formula also excludes home
equity; the institutional formula includes it.
Some advisers recommend that you convert assets that count
against you in the formulas into assets that don't -- say, by
selling stocks or borrowing against home equity and investing in a
variable life insurance policy.
Before you make such a move, know that income, not assets, is by
far the biggest factor in financial aid. If you earn too much, you
won't qualify for aid no matter where you stash your cash. As for
home equity, the vast majority of colleges use the FAFSA, which
ignores that asset. Colleges that do consider equity often cap the
amount at one or two times your income, rendering it less
significant in the financial aid calculation.
Nor should you worry unduly about the impact of other, countable
assets on your financial aid prospects. The federal formula
protects a chunk of parental assets, based on the age of the older
parent, and it assesses the remainder at 5.6%; the institutional
formula also protects parental assets using a different
calculation. (Student assets have no such protection and are
assessed more heavily.) The amount protected in the federal formula
approximates the age of the older parent times $1,000, so a parent
age 50 would have a protected allowance of $50,000. Most families
don't have nearly that much in savings outside of retirement
accounts, says Robert Feil, of Waterfront College Planning, in
Neptune, N.J. For those families, "a life insurance policy will not
help at all. All it will do is give a life insurance agent a
Consider, too, that shifting assets actually costs money, in the
form of capital-gains taxes on a stock sale or interest on a
home-equity loan. And making important financial decisions based on
financial aid prospects can have unforeseen consequences. A few
years ago, "people were sucking out their home equity and putting
it in life insurance," says Rick Darvis, of the National Institute
of Certified College Planners. When the housing market crashed and
their equity shrank, they were stuck with the loans, and some lost
STRATEGY: Focusing exclusively on getting the most
Some financial aid advisers offer to improve your chances for aid
regardless of your child's interests or the schools on his or her
This strategy ignores looking for a school that represents the best
fit for your student. "One of the biggest misconceptions I see is
the idea that admissions decisions and financial aid decisions are
separate from each other," says Feil. "Playing with numbers is not
the be-all and end-all. Colleges want to know if the student will
be an asset. They will make the financial aid offer more lucrative
for students they're really excited about than for students they're
not excited about."
They also might up the ante if they suspect your student has
more-lucrative offers on the table from competing colleges, says
Richard DiFeliciantonio, vice-president for enrollment at Ursinus
College, in Collegeville, Pa. "I have to calculate not only
people's need but also their willingness to pay." The message?
Don't let a financial adviser persuade you that the FAFSA is the
last word. Find a school that suits your student's strengths, and
have a conversation with the financial aid office about your
chances for aid.
STRATEGY: Hiring a pro to fill out the FAFSA.
Once, the FAFSA was a complex, multi-page application that struck
fear in the hearts of parents, some of whom were willing to pay a
financial aid consultant $100 or more to complete the form for
them. Financial planners will still offer to do the work for you
and will charge accordingly.
If you pay a financial aid adviser to complete the FAFSA for you or
give you advice in completing the application, he or she is
required to sign it. That doesn't assure you of financial aid or
take you off the hook for providing inaccurate information, but it
just might cause your application to get noticed -- and not in a
good way, says Mark Kantrowitz, publisher of Finaid.org. Financial
aid officers give closer scrutiny to an application prepared by a
professional than to one you prepare on your own, and they may look
harder for anomalies.
Improvements to the federal application, including a
streamlined, online format, have made the do-it-yourself approach
less daunting and professional help less enticing. "The FAFSA is
not that complicated," says Cara Stevens, a high school counselor
and part-time college planning consultant in Marion, Ohio.
For free handholding, however, try the FAFSA-guidance nights in
your community, typically at your high school or community college.
"Families can come in, bring their tax information, sit at the
computer and have somebody there who can help them with the
questions that come up," says Stevens. Local branches of public
universities represent another good resource, she says, as do Web
sites such as Finaid.org.
STRATEGY: Fudging the numbers.
Presenting your finances in the most advantageous light is one
thing, but some advisers have been known to cross the line,
encouraging clients to present a picture of their finances that is
If you venture into fraud, not only do you risk a fine or even
imprisonment for lying on your federal aid application, but you'll
likely be taking that risk for nothing. Financial aid
administrators are alert to information that doesn't add up, such
as an application from a wealthy zip code that reports an unusually
low income, or one that lists interest and dividends without
showing corresponding assets. "These things do get caught," says
What happens then? Even if you don't technically lie, financial
aid officers who think you're trying to hide the ball will ask you
to verify your information and adjust the numbers, if needed, to
more accurately reflect your financial situation. The more
manipulation they spot or even suspect, the less likely you'll end
up with a grant out of institutional funds or a successful appeal
of your financial aid award, says Kantrowitz. Recently, the federal
government has improved its system for spotting red flags and
requiring that families verify FAFSA information.