Which financial aid award is best?

Not all financial aid awards—or all financial aid award letters—are created equal. Financial aid can come in several forms, from free money that doesn’t need to be paid back, to loans, to work study programs. There’s no standardized way to present the award elements to families, and many colleges highlight the total amount of the aid package but make the families decipher just how much of that award, if any, is tantamount to a discount off the sticker price of the college.

To help you compare one school’s financial aid package with another, check out the financial aid comparison tool on the College Board’s website. You enter the figures, then it does the math and tells you what each school will actually cost to attend.

A new investment strategy for 529 plans?

Many families saving for college in 529 plans use age-based asset allocation, a strategy that invests more aggressively early in your child’s life and later changes to a more conservative strategy as the student gets closer to college. If you’ve got young kids and you’re saving in a 529 plan, you might be interested in Mark Kantrowitz’s recent white paper, “Improvements in Age‐Based Asset Allocation: Strategies for College Savings and Retirement Plans.”

As the summary describes in part:

“This paper presents a systematic way of improving the performance of age-based asset allocation strategies by delaying the onset of the shift to a more conservative mix of investments by up to 10 years. This increases the return on investment by increasing the duration of the initial investment in high-risk, high-return asset classes, but without significantly increasing the overall risk of investment loss. The age-based asset allocation is then compressed to fit the remaining investment horizon.”

The summary is here, and the paper itself is here.

Saving for college during a market downturn?

Mark Kantrowitz is a nationally recognized expert on financial aid and paying for college. Here’s what he had to say about the recent market downturn and how that might impact families’ college savings plans.

“Typically, parents with 529 accounts, the tax-advantaged college savings plans, are making a flat monthly contribution into those accounts. That means that when the market is down, they’re getting more shares for their buck than if the market was higher, said Mark Kantrowitz, a financial aid expert. ‘If you think that the market is going to go down and continue going down forever until it hits zero, then maybe you should be worried,’ Kantrowitz said. ‘But if you think this is a momentary blip and then eventually the market is going to recover then you should continue investing.’”

The rest of the article is here.

Paying for college: what advice can you trust?

If you search the internet for advice about how to get into college, some of it will be great and some will be flat-out wrong, but most sites don’t exist with the sole intent to scam you. Unfortunately, the same cannot be said for advice that purports to help you pay for college. Many of those sites appear to be offering free, helpful advice, but actually have an unstated financial interest in whether or not you follow it. They push lenders that they have arrangements with, or require a fee for something that’s widely available free of charge, or arouse fear with the promise to cure it for a fee.

Thankfully, the National Association of College Admission Counseling has created a list of trusted, current sources counselors can recommend to families. You can find that list here.

Fear of (scholarship) displacement

The New York Times opinion piece “The Catch 22 of Applying for Private Scholarships” shares one student’s frustration with “scholarship displacement.” If you win private scholarships (also known as “outside scholarships”) from companies, churches, non-profits, etc., many colleges reserve the right to reduce your need-based financial aid award accordingly. For example, if you win a $1,000 scholarship from the local Rotary Club, your college may reason that you now need 1,000 fewer dollars in financial aid. It raises a logical question: What’s the point of actually applying for private scholarships if the net gain will be $0?

But it’s important not to make rash decisions around college financing. So here are a few important points that are not made clear—or are left out altogether—from the article.

First, not all need-based financial aid is free money. It can also come in the form of loans or work study programs. According to the National Scholarship Providers Organization, 80 percent of colleges will reduce loans or work study first if you receive a private scholarship. That’s not such a bad displacement break.

Also, remember that every dollar you win in scholarships is a dollar less you’ll be required to pay for college. Yes, that dollar in scholarship terms may count for more at some colleges than it does at others depending on each school’s displacement practices. But free money (that does not have to be paid back) to pay for college is pretty much always a good thing because it gives you more control over your financial destiny.

And finally, there are steps you can take to mitigate your award displacement if you find yourself in that situation. Financial aid expert Mark Kantrowitz shares some of his tips in this article.

The vast majority of the funds available to help students pay for college are accessed by applying for need-based financial aid. But private scholarships can help reduce your costs even further. If you’re concerned about college costs, don’t let fear of displacement deter you from availing yourself of every option.

Need some FAFSA motivation?

If you know you should be completing the FAFSA but just can’t quite muster the gumption to dive in yet (totally understandable), here’s some additional information from expert Mark Kantrowitz that might give you the oomph you need.

“The sooner you get your FAFSA done, the more money you’re going to get, on average… People who file it in the first few months tend to get double the financial aid, the grants, of people who file it later.” 

The rest of the article is here. And here’s the link to the FAFSA.

It’s FAFSA time

For students applying to begin college in the fall of 2018, the FAFSA (Free Application for Federal Student Aid) becomes available today. The FAFSA is the gateway to all available need-based financial aid, and every student applying to college should file one. If you believe you’re an exception, maybe because you don’t think you’ll get aid or you’re worried that filing a FAFSA will hurt your chances of admission, please read this past post and the links within, which I hope will convince you otherwise.

Colleges set their own deadlines for FAFSA submissions, but prevailing financial aid wisdom dictates that earlier is better. No need to pull three consecutive all-nighters just to file before the end of the week. But try not to make one of your New Year’s resolutions for 2018 to “File FAFSA!” either.

If you’re not yet sure exactly where you’re applying, that’s OK. Get to work on the form anyway. You can always add or delete schools later.

And finally, please remember that while just about all colleges require the FAFSA to be considered for aid, some colleges require additional forms, too. Much as you should pore over the requirements for admission (letters of rec, test scores, essays, etc.), you’ll also want to review the financial aid section of each of your chosen colleges’ websites to note what forms are required and by what dates they need to be submitted.

Updated advice on paying for college

Kalman Chany is a nationally recognized financial aid consultant and the author of Paying for College without Going Broke, a book I’ve consistently recommended since I started Collegewise in 1999. If you’re looking for advice on the best ways to save for college, to get the financial aid you need, and to avoid mistakes that can cost you thousands of dollars, I’ve never come across a single work with better or more thorough advice. He also updates the book every year, and the 2018 version was released last week. It includes line-by-line instructions for completing not only the updated FAFSA with all of its changes for this year, but also the CSS PROFILE application required by many private colleges.

I don’t have a personal or professional connection to the author—I’m just a fan of good advice that helps families, and this book is chock full of it.

Monday morning Q&A: the FAFSA and merit scholarships

Samantha asks:

Could a decision not to file a FAFSA for need-based aid negatively impact a student’s eligibility for possible merit scholarships? We have diligently saved for college and will not qualify for financial aid, but the cost still won’t be easy with other children at home. My child is a top student with a perfect GPA and near perfect test scores, and many applications ask if we will be applying for financial aid. We can’t lie and say yes. But checking “No” makes it seem like we don’t want help. Most financial aid departments have been somewhat vague when we ask.

Good question, Samantha. The foremost expert in all things financial aid and scholarships, Mark Kantrowitz, certainly wasn’t vague in this New York Times piece, “Answers to Readers’ Questions About Scholarships”:

“Never check off a box that says that you are not applying for financial aid. You can turn down the specific types of aid later. Some colleges will not consider your child for merit-based aid if you indicate that you do not need financial aid. Most colleges practice need-blind admissions, so checking the [“No”] box will not increase your chances of getting in.”

I’ll go even further than Kantrowitz does. Every admissions and financial aid officer, every knowledgeable counselor, and every qualified financial aid advisor I’ve ever heard, read, or actually spoken with about this topic advises against families assuming they will not qualify for need-based aid. The formulas are complex, they can vary by school, and they can be impacted by the strength of the student relative to the rest of the applicant pool at each college. You have nothing to lose but the time spent completing the forms.

For Samantha, and for any other readers who might still need some convincing to file a FAFSA, I’m sharing two past posts, here and here, that I hope will help you.

Thanks for your question, Samantha. I’ll answer a different question next week. Here’s the form if other readers would like to submit one of their own.