You have selected the colleges; now you have to pay for them. But how? In the same way you had to use strategy in the application process, you need to use strategy to get the best financial aid package.
One of the first people that you should talk to about the financial aid process is the college’s financial aid officer. However, you will soon discover that the kind of strategic information you are seeking will not be easily given by any financial aid officer. It is the financial aid officer’s job to award monies to needy students. It is your job to get the most that you can get.
Here are some strategies to use as you go through the financial aid process:
Don’t assume the financial aid award that you receive is set in stone
When you receive the financial aid offer and you are surprised that the award is so low, place a call to the financial aid office of that college and request a meeting with the financial aid officer to review the results. It is true that in the current college market financial aid officers do not like to “negotiate” offers, but they will take the time to “review” the package with you particularly if your circumstances have changed (e.g. a loss of a job, death of a spouse). Specific family situations (e.g. medical treatment, disabled child, private school tuition costs) may also impact the way the package was put together. Schools have room to maneuver with almost every financial aid package. If you don’t ask before you accept the offer for admission, you won’t have a chance at getting a better offer.
Pit one school against another
If you receive a significantly higher offer for financial aid at one school over another, again it is time to call and request a review of the financial aid calculations. This strategy works best if the two schools being compared are equally matched in academic reputation and admission standards. It also is to your advantage if you are a particularly strong applicant that the college would hate to lose to a competitor. Not all colleges will consider competitor’s offers, but it doesn’t hurt to ask.
Hide your assets
Make your income and savings look smaller. Financial aid examines finances only one year (and in rare cases, 2 years) before your child applies for aid. If you are considering selling your stocks or property to pay for college expenses, don’t, at least not until your child graduates from college, or better yet, a few years before s/he enters college. The capital gains will only serve to increase your assets, not something you want to do at financial aid time. You should also ask your boss if you can defer raises or bonuses as long as possible to reduce the size of your income. You should never misrepresent facts on financial aid applications, however. Doing so is a crime!
Your savings are also scrutinized so right before January 1st of your child’s junior year might be the perfect time to go on a shopping spree! If you have been considering buying a new car or renovating the house, the time to spend the money is before the first of January of your child’s junior year to reduce the amount of money you have in your savings account. It might pay off in the end with a better financial aid award.
Don’t save money in your child’s name
It is wise to put money away in a college account for your child, but it is a mistake to do so in your child’s name just for tax purposes. It is true that you will be taxed at a lower percentage if you have those dollars in your child’s name, but this tax break strategy can backfire on you at financial aid time. Federal guidelines mandate that the student be assessed 35% on his/her net assets; in comparison, the parent’s net assets are only assessed a maximum of 5.7%. A huge difference!
Be aware of “Bait and Switch”
Some colleges are in the practice of luring students to their college by offering a great financial aid package to them in the first year or two of their college experience. Then they substantially cut aid back in the following years. Don’t be caught off guard! It is your responsibility to ask if your financial aid award will remain the same for all four years before you commit to any college.