Six Financial Aid Realities that Sound Intimidating but Aren’t

The financial aid office is out to get you! At least that’s what the media would sometimes have us believe.  The FAFSA is frequently portrayed as an impossibly frightening form, student loan debt a ticking time bomb, and the financial aid process  (at best) arbitrary and (at worst) nefarious.  With such portrayals in the news, it’s no wonder that future college students and their parents often feel discouraged.  I fear that families reading a recent article on the website Vox, entitled “Six things colleges don't want you to know about financial aid,” may have felt similarly dismayed. Rather than put families off of the college admissions and financial aid processes, we at College Coach want to encourage families to take control of their application process and use the insider information we provide to their advantage.  With that in mind, let’s take a look at those “Six things colleges don’t want you to know about financial aid,” and see how you can best use this information. 1. Whether you need financial aid could affect whether you get into college. Yes, it could.  But it probably won’t.  Even at “need-aware” colleges, the family’s finances usually only enter the admissions equation for borderline students (and/or, as stated in the Vox article, transfer, wait-listed, and international students).  The vast majority of freshman applicants are accepted or denied admission to a college based primarily upon their own academic and extracurricular credentials, not upon their ability to pay.  If you want to ensure your family’s finances will not affect your admission decision, you can look for schools that practice a “need-blind” admission policy (most often in-state public or elite private colleges).  Otherwise, don’t worry too much about it.  You certainly shouldn’t decline to apply for the financial aid that you need in hopes that it will give you an admissions advantage.  What good is that fat envelope if you can’t afford to actually attend the school?  Always apply for financial aid if you need it (and maybe even if you don’t—see #3 below). 2. A college that promises to meet a student's financial needs isn't promising a debt-free education. Some student loans (like the Subsidized Direct Loan and the Perkins Loan) are, in fact, considered financial aid.  That is because they do not require a credit check, income verification, or collateral, and their terms are better than those offered in the private lending market (for example, no interest accrual while the student is enrolled in school).  If you do not wish to borrow for college, look for schools with a “no loans” financial aid policy, increase college savings in preparation for impending payments, utilize monthly tuition payment plans, and/or apply to colleges where you are more likely to receive recruitment scholarships. 3. ‘Merit' aid isn't just for the smart kids. And that’s good news to all of us who didn’t receive perfect scores on our SATs.  Colleges utilize “merit” aid to help recruit the students who are most attractive to them for many different reasons.  Most often it is above average academic qualifications (GPAs, SAT scores…) that will make you a desirable student to a particular college, but it can also be athletic or artistic ability, demographic factors, your choice to major in an unpopular program of study, etc.  Look for schools where you will stand out among the applicant pool (academically or otherwise)—this strategy will maximize scholarship possibilities.  And yes, there are occasions where you may be offered a scholarship just for “showing up” and completing a financial aid application.  One more reason to fill out that FAFSA! 4. The goal of a financial aid package might be to persuade you not to come. Most colleges don’t have enough funds in their financial aid budgets to make them affordable for every student they accept.  Therefore, some students will necessarily be left with “unmet need” at some schools.  As discussed above, colleges will generally provide more generous financial aid packages to those they wish to recruit the most, and will provide less generous packages to the students they care least about enrolling (i.e. the students who got in, but just barely).  Therefore, it is again in your best interest to apply to colleges where you will stand out among the applicant pool.  You can also look at the relatively few schools who do, in fact, guarantee they’ll meet 100 percent of the financial need of all accepted students. Finally, be sure to include at least one financial safety school on your list. 5. The federal government helps high-earning families pay for college too. More good news!  While federal educational grants, such as the Pell Grant, are reserved for the neediest families, families at much higher incomes can take advantage of federal tax breaks which also provide free money for education.  The most lucrative of these tax breaks is the American Opportunity Tax Credit of up to $2,500 per year for families earning up to $180,000 and paying for the undergraduate tuition of their dependent child.  In addition, the Unsubsidized Direct Loan is available to students from families at all income levels. 6. How much you take out in loans might not be how much you pay back. Federal education loans do come with certain protections not available in the private sector.  There are income-driven repayment plans which cap monthly payments at ten or fifteen percent of the borrower’s discretionary household income and forgiveness programs that forgive remaining loan balances after 10 years for public service workers (and 20 or 25 years for other eligible borrowers).  Though income-driven repayment plans are helpful for borrowers experiencing a temporary financial hardship, and forgiveness programs will benefit the relatively few borrowers who maintain consistently low incomes over a long time-frame, many borrowers will not qualify for such programs.  Furthermore, government programs change as political will shifts, so potential student loan borrowers should prepare to pay back the actual amounts borrowed, plus interest, and should make enrollment decisions accounting for the total anticipated debt burden at each applicable school. While the financial aid process may be intimidating at times, and there may be aspects of their awarding policies that colleges prefer not be made available to the general public, resources do exist to help students from all walks of life attain a high-value education at an affordable price.  College Coach experts, all former admissions and financial aid officers themselves, are able to provide families with the insider information that they need to seize control of the college application process and make it work for, not against, them.