Summer is here. Many of us have kids headed to college in the fall or high school kids who are making more serious plans for college. A big part of the college planning process is financial aid. Our family has found it to be surprisingly complex and confusing.
Since putting the kids through college is a major financial goal for many families, I have looked for partners who could help my clients. I work with College Inside Track, a local company that helps families select colleges and negotiate financial aid to make the college experience better for parents, students, and your financial future. Find out more about College Inside Track at this LINK.
The following is an update from College Inside Track on ways that families can lose financial aid during their student’s college journey.
Often, it’s a relief to get accepted and receive financial aid from the college of your choice, but many families overlook the strings attached to maintain, and not lose, the financial aid they received freshman year.
It’s easy to see how this happens. Families are grateful for any financial aid they get and simply assume it will be the same every year. But there are a number of circumstances where that isn’t the case.
Three common ways families lose financial aid are:
- Do not maintain academic requirements for grants and scholarships
- Do not fill out the financial aid forms on time for each subsequent year of college
- Transferring schools
If a student struggles academically — and in some cases doesn’t necessarily struggle but cannot maintain a high GPA — they may forfeit grants that require a certain minimum GPA. This comes as a surprise even to high-achieving students who may have been awarded a generous grant but don’t realize they need to maintain a 3.8 GPA to keep it each year. And even if he or she is aware of the terms, the student may not understand what it takes to perform to those standards in college as opposed to high school.
Another common issue is missing deadlines for financial aid forms each year. Families are often much more focused on deadlines when they are applying to college, but less so once their student is in college.
Losing financial aid opportunities is a little-known consequence of transferring, which for many other reasons may be a good idea (and may save money in other areas). But institutions give far less aid to transfers than they do to incoming freshmen.
Why? According to Robert Kelchen, a professor at Seton Hall University who was interviewed in the New York Times, transfer students don’t count in federal graduation rates, let alone the algorithms that go toward rankings and reputation.
So, combine the loss of those grants with the almost inevitable rise in tuition and fees each year, and suddenly most families are looking at a bill that is much larger than expected.
While the government is pushing to make college pricing more transparent, the reality is that nearly every tool focuses only on the estimated cost of the freshman year and provides no information on the remaining years.
In a study done for the New York Times, Brad J. Hershbein, an economist at the W. E. Upjohn Institute for Employment Research, found: the average institutional grant dropped by 6% at private colleges between freshman and senior year and 3% at public institutions between freshman and junior year.
My favorite quote from that same New York Times article:
“This is an odd kind of industry with odd kinds of transactions, which are highly susceptible to embellishment and manipulation,” said Barmak Nassirian, director of federal relations and policy analysis for the American Association of State Colleges and Universities. “No other consumer purchase has so many pieces of financial machinery in motion with prices constantly rising, opaque discounting practices, and terms subject to change. It’s the ultimate faith-based financing scheme.”
I you would like to talk about how your college funding fits with your other financial goals, I would be honored to visit with you. I’m a fiduciary advisor who is always my client’s advocate and I love helping families reach their goals. Reach out and we can have a get-acquainted visit. Just follow this LINK to find a time that works for you.
Yes, I am a CERTIFIED FINANCIAL PLANNER™ professional. I’m always a fiduciary and I work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.
If this article has you thinking about your own circumstances, contact my office at rdunn@dunncreekadvisors.com. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.