Flummoxed by financial aid?
Wednesday, December 21, 2005


A lot of teenagers I know are sending in their college applications - which means their parents are starting to get very nervous about paying for it all. With New Jersey state colleges charging $18,000 a year (including room and board) and many private colleges charging more than $40,000, who wouldn't worry?

Some parents, in fact, are so anxious they're hiring financial-aid consultants to guide them through the process.

But my advice to them is: Think twice.

"Most of the information a consultant will charge you for takes you about 15 minutes to research on the Internet," said Reginald Page, director of financial aid for Mercer County Community College and vice president of the New Jersey Association of Student Financial Aid Administrators.

And the consultants charge plenty for that information - often as much as $1,000.

Financial aid consultants help parents fill out the two main financial aid forms, the Free Application for Federal Student Aid, or FAFSA, and the CSS/Profile, an additional form used by many private schools. Colleges use these forms to measure a family's ability to pay for college based on their income and assets.

Generally, the wealthier you are, the less financial aid you qualify for. But the formulas are complicated, and aid depends in part on where your family holds its assets.

Consultants often recommend steps like putting more money in retirement plans, including annuities, because retirement assets are not counted in the federal formula for financial aid. Another tactic is saving in the parents' name, instead of the child's, because parents' assets are counted less heavily in aid formulas.

But financial aid officers say this advice is often useless. They argue that parents who have enough assets to take advantage of these tactics also usually have incomes too high to qualify for need-based aid.

"If you have very high income, that alone may disqualify you from need-based financial aid, before we even look at your assets," Page said. "It's very unusual for us to see parents with very high assets and very little income. Usually it's the other way around." (In other words, people who make a lot, but never saved much.)

"We look at both income and assets," Page said. "If your income is very high, manipulating your assets isn't going to help you."

Michael Gaer, a financial aid consultant in Rochelle Park, agreed. He said he often turns away prospective clients because they make too much money to qualify for need-based financial aid.

In his experience, that's about $150,000 yearly income for a family with one child hoping to attend a private college, and about $85,000 for a family with one child hoping to attend a public college.

The aid formulas are complex, counting such factors the parents' age and the number of children in college, so there's no official cut-off number for need-based aid.

Gaer said he charges about $200 to $750, depending on how much service a family wants. He said that many of his clients could fill out financial aid forms on their own, but don't want to - just as they pay someone else to do their taxes or mow their lawns.

"It's not rocket science," he said. But, he added, families without financial savvy often feel "overwhelmed" by the forms.

And he agreed that parents can get financial aid information in books or on the Internet.

"But do they have the time to do that?" he asked.

Gaer makes a case that there are some instances in which it may make sense to hire a consultant.

But keep in mind, there are sharks out there. Some financial aid companies do very little for students or parents, said the Federal Trade Commission. It has put out warnings about hard-sell, unscrupulous companies that take families' money and promise scholarships that never materialize.

David Sheridan, assistant vice president for student services at Stevens Institute of Technology in Hoboken, said that overwhelmed parents don't have to pay consultants. High school guidance counselors and college financial aid administrators can help parents fill out the forms, he said. (I will also tell you, as the parent of a college freshman who has been through this recently: These forms are just not that intimidating.)

Sheridan also said many consultants don't offer much real help.

"Many of their little tricks don't really result in anything," Sheridan said. "Sometimes all it means is that kids will get more student loans,'' rather than grants.

Sheridan thinks it's unethical for affluent families to try to manipulate the system, because that leaves less for needy students.

"The bottom line is all financial aid is drawn from finite pools of money," he said. "Is it the right thing to do, in the big picture, to make less money available for kids who can't go to college if they don't get financial aid?"

Next week: maximizing your chances for financial aid.

Kathleen Lynn's column appears Wednesdays.

Copyright 2005 North Jersey Media Group Inc.
Copyright Infringement Notice  User Agreement & Privacy Policy