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    A Crash Course in College Cash

    What you need to know to navigate the financial aid process.

    Aaron Basko

    If you find yourself overwhelmed by the entire financial aid process, you're not alone. Most parents find it daunting. But don't lose heart. The process of applying for financial aid certainly can be complex, but it is not impossible to navigate. To help you get started, here are a few easy-to-follow "financial basics."

    Understanding the FAFSA

    The federal government's policies drive the financial aid process, so it makes sense that the aid timeline is loosely based on the tax calendar. The Free Application for Federal Student Aid (FAFSA) becomes available each year after January 1 and is used by all families seeking financial aid during the academic year that follows. The FAFSA is the most important component of the aid process. If you do nothing else, make sure you complete a FAFSA form in January of your student's senior year and submit it to the federal processing center as soon as possible. (The FAFSA form is available at most schools, public libraries and on the web at fafsa.ed.gov.)

    The processing center will apply a set of formulas to the information you provide, using it to determine your family's financial resources. The most important result is a number called the Expected Family Contribution (EFC), which quantifies how much the government expects your family to pay toward higher education. On the FAFSA you have the opportunity to designate which colleges will receive information about your eligibility for financial aid.

    As you consider the deadline for completing the FAFSA, keep in mind that many colleges have priority filing dates. This means they expect that your FAFSA information will be submitted to the federal processing center by their deadline. The most common priority date is March 1, but check the financial aid section of each college's website to find the date the college requests. If you have submitted your paperwork by the priority date, the college guarantees that you will be considered for all available financial aid. If you miss the priority date, you'll be considered for whatever is left.

    The FAFSA draws heavily from the information on your tax documents, so complete your taxes early if you can. If you can use completed tax information to complete the FAFSA by the priority dates, you'll save yourself work and be less likely to have to make corrections later. Since this isn't possible for everyone, the FAFSA allows families to estimate their information based on the previous year's taxes, and then make updates and corrections when their taxes are filed. In order to assure accuracy, the government has a verification process, in which it randomly selects families and requires them to provide additional tax information. If you are asked to verify your information by a given college, don't panic. Some colleges verify all incoming students, while others follow the government's pattern of random sampling.

    One hint on using the FAFSA: If at all possible, apply online. Besides speeding up the application process by days, if not weeks, the online application is designed to eliminate common mistakes and will actually prevent you from filling out certain portions incorrectly. Working with the online form will also allow you to save and easily change your work. As you can imagine, the federal processing center is not very forgiving of mistakes and will typically send paper forms back to you for correction, which delays the process.

    Money from the Government

    Aid from colleges is intertwined with federal financial aid programs for students. When you receive the results from your FAFSA paperwork, called the Student Aid Report (SAR), you will be notified if you qualify for the Pell Grant Program. Pell Grants are offered to a small group of students, typically those with family incomes below $40,000. The Pell program provides up to $4,050 per year that does not have to be repaid. The Pell Grant recipients with the lowest Estimated Family Contributions may also qualify for Federal Supplemental Education Opportunity Grants (FSEOG), which can range between $100 and $4,000 in addition to the Pell amount. The Perkins Loan is another government-funded program for high-need students. Administered by individual colleges and universities, this loan program provides students with very low-cost loans.

    If you do not qualify for Pell Grants, FSEOG or Perkins loans, don't be discouraged. You may still qualify for other forms of financial aid from both governmental and college sources. The government's other financial aid programs—federal work study, Stafford Loans and PLUS Loans—are much more common. Through the federal work study program, the government allows students to contribute to their own education by working at an hourly rate, usually for the college itself. The amount of work study money is not guaranteed, but is based on hours worked. Usually work study funds are paid directly to the student, but if you want the money to apply to his or her bill, you can make arrangements through the college's billing office.

    The federal government administers some Stafford Loans directly or through a network of financial institutions. In both cases, Stafford Loans offer some of the lowest possible interest rates. There are two types of loans available, subsidized and unsubsidized, with two important differences. Subsidized Stafford Loans are offered to students with demonstrated need, and the government pays the interest while the student is enrolled in college and for a six-month grace period after the student graduates. The unsubsidized Stafford is available to students with or without demonstrated need, but the interest is the responsibility of the borrower. Families can choose to pay the interest while the student is in college, or allow it to accrue until after a student's graduation.

    Finally, the government offers PLUS Loans to parents. Although parents must pass a credit check, and the interest on the loan must be paid regularly, the PLUS program does allow parents access to loans with lower rates than they could typically qualify for otherwise.

    Need-Based Money from Colleges

    Colleges provide more financial aid dollars than any other source. They give this aid based on demonstrated need, a term that means the results of the FAFSA indicate that a family cannot afford the college's cost without help. This does not mean the amount of aid that the college awards will cover everything above your Expected Family Contribution. Colleges use the EFC amount as a loose guideline, so you may be asked to pay more or less, depending on their individual aid formulas. Few colleges can cover all of the difference between the Expected Family Contribution and the cost of attendance for every student, so each college sets it own policy of how to distribute limited money equitably.

    The amount you receive is largely out of your hands, but keep a few things in mind. First, complete your paperwork on time, as some colleges have strict priority dates. Second, let the college know about any special circumstances you may have that affect your family's finances. Typically, only events over which you have no control are considered special circumstances. Basically, this means the college will want to know about medical bills or changes in income, but not things like private school tuition or house remodeling. Ask the financial aid staff the best way to document any unusual financial setbacks or unexpected financial needs. Finally, keep in mind that need-based aid is the great equalizer when it comes to the actual out-of-pocket cost you will pay. Even though one college has higher tuition, if it has a generous financial aid policy, your costs may be the same, or even less than colleges with a lower "sticker price."

    Merit Money from Colleges

    Colleges award scholarships for many different reasons—academic ability, musical talent, good writing, community service, athletics—any quality valuable to the college. What scholarships all have in common, however, is that they are not based on financial need (like grants) and they do not need to be repaid (like loans). Some colleges give no merit-based awards while others award something to nearly half of their incoming students. Some colleges offer only academic scholarships while others give money to students for community service, leadership, the arts and a variety of other desirable characteristics. Ask each admissions office about what scholarships the college offers.

    Colleges pursue those students who offer something desirable or exceptional within their group of applicants. The key to finding scholarship money, therefore, is to find colleges that want what you have to offer. Some students find that their high SAT scores and grades gain them scholarship offers, while others find colleges are interested in them for their diverse background or a particular activity. While scholarships can be helpful, don't let them become more important than they really are. What you're searching for is value—the best college for your student at a price you can afford. A great scholarship at a school that's not the best fit for your child is certainly not the best value.

    Remember that scholarship money is your student's responsibility, not yours. It is your student's four-year academic record—or musical ability, or essay writing skills or other positive quality—that will win him or her scholarship dollars, not your efforts to talk the admissions office into awarding one. If you act like a "helicopter parent" (higher education slang for a hovering, over-involved parent), you rob your student of an important lesson. If you have taught him or her by your words that hard work is rewarded, don't teach "the squeaky wheel gets the grease" by your actions.

    The easiest way to know if your student may be in the running for scholarships is to look at a college's profile statistics. If your student's grades and test scores are at the college's average, he or she is probably competitive for admission, but not for academic scholarships. If your student's statistics are significantly above the average, scholarships become more likely.

    Finding "Outside" Scholarships

    Private sources give out an amazing amount of money in scholarships each year. The "catch"? Finding those scholarship dollars requires time and motivation. If you know you'll need scholarship money to make it possible to pay for college, start searching early. Your student should begin researching scholarships in his or her junior year. Juniors should figure out which ones they could qualify for, get the application paperwork, and complete whatever they can before starting their senior year.

    Everybody likes giving money to students. Most civic organizations give scholarship money to students, as do large corporations and many foundations. You have access to almost all of this information online. Look up civic organizations in your local phone book and check their national websites. The fast-food restaurant you eat in, the grocery store where you shop, the local hospital, even that soda you just drank—somewhere in that business may be a college scholarship.

    Free scholarship searches online can help you organize your search. Probably the best known of these is fastweb.com, which works hard to have a good relationship with financial aid offices. The emphasis here is on free services. The financial aid directors I have met universally warn families not to pay for scholarship search services. Not only are the same resources available for free, but some of these so-called services are scams.

    Finally, check with the financial aid offices about their policies on outside scholarships. Some will use these scholarships to replace loans and others may even use it to replace your grant money. Talk with the financial aid office to avoid any surprises.

    Getting Results

    Once you have filed your FAFSA, you will have a waiting period before you receive your results. Most financial aid offices mail aid packages a week or two after a student's letter of admission is sent. During this time, the financial aid office may contact you to clarify any aspect of your financial situation or if you are selected for verification and need to supply additional tax documentation. Again, some colleges verify information for all prospective students, so they may send you letters requesting copies of your W-2 forms, your student's W-2 forms or other tax forms. Typically, the financial aid portion of the college's website will also provide a list of paperwork that the aid office may request. Don't hesitate to call a financial aid office directly with questions.

    When you receive your award letter, examine it closely to make sure you understand everything listed. Colleges use different formats, but most awards will contain the same elements: the cost of attending, a listing of all types of financial aid offered and your family's "out-of-pocket" expenses—which is the difference between the cost of attending and your aid award. Most colleges will give a description of what cost of attending includes. Look carefully at this description to see if it includes things like fees, book cost estimates, insurance and travel allowances. Colleges frequently include these items to give a realistic picture of what this will cost your family.

    One small piece of good news is that the insurance costs can often be dropped if your student can continue on your family insurance. Since seeing the expenses can be a shock, many colleges include financing suggestions to help you see how you can afford the cost more easily. These suggestions may include preferred additional loan programs for both parents and students or monthly payment plans.

    As you look at your awards, a quick recap of terms may be helpful. Obviously anything labeled scholarship is an earned award that does not have to be repaid. Many scholarships are renewable for multiple years, but not all. Colleges will often include a scholarship description or web link to more information about a particular scholarship and the criteria for renewal. Grants do not need to be paid back either, whether they are from the college or government sources. You can choose whether you want to accept any loans that might be offered to you in your aid package. Work study money can be offered through the federal work study program, which will be listed on your award. If your student is not offered federal work study, he or she might still be able to participate in the college's work study program, which is less dependent on a student's financial need. When you have reviewed your award, sign and send it back to reserve this financial aid while you make your enrollment decision.

    Didn't Receive the Aid You Expected?

    So you have successfully completed the paperwork and endured the dreaded wait. You've received financial aid packages, but you are startled and disappointed at how little you've received from the college your student wants to attend. What do you do?

    There is nothing wrong with talking to the financial aid office about how to make it affordable. Some colleges negotiate financial aid packages, others do not. All colleges will have an interest in helping to make the match happen. Some do that by trying to give you the best advice possible, helping you see your options, and making sure that every possible special circumstance has been explored. These colleges operate on the principle of always giving their best possible financial aid package up front. Other colleges will reconsider your financial aid package at your request, and may even want to compare it to other offers that you may receive. So how do you know which is the case? You can certainly ask, but do so respectfully.

    Contact the financial aid office and ask to walk through your aid package with someone. Make sure you understand everything in your award letter. Ask them if you have received all possible consideration for funding. If the answer is yes, ask if the college ever reconsiders packages. Offer to provide whatever documentation the college needs, including financial aid offers from other schools if that is helpful. You will get one of two responses. If the college does not negotiate, they will tell you that they do not reconsider packages, but that you are welcome to fill out an appeal form in case some unusual family circumstances have been missed. This is the polite way of saying, "We'll help you as much as we can within our process, but we don't negotiate."

    If, instead, the financial aid office indicates that it does reconsider packages and asks you how much your family needs to be able to afford to attend, or takes you up on the offer to see packages from other colleges, then you know negotiation is acceptable. In such cases, you should be ready to provide a figure that will make it possible, and be willing to commit to that college if the financial aid office can get you close to that figure. Even colleges that negotiate will not want to haggle back and forth.

    Financial aid offices typically do not respond well to "shopping." To even consider negotiations, colleges want to know that your student truly sees the value of their institution and wants to enroll, not that you are trying to play colleges off one another to get the best deal. This is a question of integrity. If you are telling a financial aid office that you truly cannot afford to enroll without additional money, but are actually just looking for a better deal, you are trading your integrity for a few thousand dollars. If you are telling multiple colleges that your student wants to enroll there if you could only afford it, you are lying to colleges, which is no different than lying to people. No better aid package is worth your integrity. Stick to working with the place where your student wants to be. If that doesn't work out, you can always move on to a second choice.

    If your student's preferred college doesn't negotiate, its financial aid office can still help you. Often parents have not thought through, or are unaware, of the different ways a college education can be financed. Even if you can't get more money, the financial aid office can sit down with you and work out a four-year plan to use loans and the college's payment plan to your benefit. Many financial aid officers have worked with hundreds of families in situations very similar to yours, and can make suggestions based on the previous experience of others.

    Now You Are Ready

    Now that you've completed this financial aid primer, you're ready to get started. Familiarize yourself with the common financial aid terms mentioned in this article. Look at your family finances and decide how you can afford college for your student at several different price levels. Check out the financial portions of college websites and write down questions about anything that is unclear. Start exploring free scholarship searches and local scholarship opportunities early. The research and planning you do now will keep you from being overwhelmed by the financial aid process and help you enjoy your child's exciting next step toward his or her future.

    Aaron Basko (edvising.net) is an educator, freelance writer and education consultant from Lancaster, Pennsylvania.