EXPERT SPEAKS from November 15, 1998 issue of Bottom Line/Personal

Kalman A. Chany
Campus Consultants Inc.

New World of
College Financial Aid
How to Get Your Full Share
Most parents need financial help when they are paying for their 
children's college educations. Unfortunately, many parents are not 
familiar with the best ways to apply for and receive financial aid.
Result: They pay more out of their own pockets and enroll their 
children in colleges that they can afford--rather than colleges that 
are ideal for their children.
Here are the most common mistakes people make when 
applying for financial assistance from a college...
Mistake: Assuming that you're not eligible for financial aid. 
Many people don't apply because they believe they are not eligible if 
they earn more than $75,000 a year or own their own homes ...or 
they've heard that their neighbors applied and were turned down.
Reality: There is no real income cutoff. Sometimes families 
with incomes in excess of $125,000 receive financial aid. Financial 
aid is awarded based on a complex formula that factors in many 
variables, including the number of members in the household, the 
number of children in college and the age of the oldest parent.
Mistake: Failing to do any advance planning for the application 
process.
Reality: Eligibility is determined by taking a snapshot of your 
family's financial situation. If you are applying for your child's 
freshman year of college, the year that is scrutinized is from January 
1 of your child's junior year in high school to December 31 of his/her 
senior year. Any financial transactions you make during that year 
could help--or hurt--your child's chances of getting aid.
Example: If you had accumulated some stock investments to 
pay for college and sold them during the first half of your child's 
senior year in high school, the capital gains on the stock would 
increase your income and reduce your eligibility for aid.

To give your child the best chance of receiving financial aid, 
you must plan to accelerate income into earlier years and minimize 
discretionary income items during the key tax years that affect your 
eligibility for aid.
Mistake: Missing the deadlines. Many people believe that the 
time to apply for financial aid is after the child has been accepted to 
a college.
Reality: It's crucial to apply for aid at the same time that your 
child is applying to colleges. There is a limited amount of aid 
available, and priority is given to those who meet the deadlines. 
Extensions are rarely granted.
The best source of information about deadlines is the school 
itself. Be certain to find out if the material is to be postmarked, 
received or processed by the deadline.
Mistake: Not keeping track of the process. Many families 
simply fill out the financial aid forms and hope for the best. They 
are not assertive enough and do not keep track of things. They also 
don't check in with the colleges.
Reality: You have to assume that things are going to go wrong. 
Check with the school, and make certain it has everything it needs. 
Find out if there is anything else you could send to improve your 
chances. Make photocopies of all the forms in case you are asked 
any questions.
Important: Although instructions on the application forms will 
tell you not to send them by certified mail, I recommend you do so for 
your own protection. If your forms are lost or misplaced, the processing 
center or the college may try to claim that you never filed them. Using 
certified mail/return receipt requested gives you proof of mailing 
and delivery.
Mistake: Assuming the college will help you get the most 
financial aid possible.
Reality: It's important to understand that the college is 
apportioning a pot of money...and demand exceeds supply. 
Therefore, it is not in the school's best interest to help you figure out 
how to maximize your child's financial aid.
Mistake: Assuming financial aid packages are set in stone.
Reality: It is often possible to negotiate a better package than 
the one you are initially offered by the college. One of your strongest 
bargaining chips could be a better financial aid package from a 
comparable school.
You might say, I'd really love to have my child attend your 
school, but the money is an issue. We've been offered a much more 
generous package from College X. Be honest about this, though, 
since you may be asked to provide a copy of that package.
Trend: The first offer that any college makes to parents is often 
not its best offer. The college wants to see if you will blink---and it 
is leaving itself room for bargaining. College officials will deny this 
vehemently...but every year, I see colleges change the amounts of 
their awards.
Mistake: Rejecting student loans when they're offered as part 
of a package. Many parents say, I don't want my child to borrow or 
to have debt when he/she graduates from school. Meanwhile, these 
parents have thousands of dollars in outstanding credit card debt.
Reality: Student loans are great deals and compare favorably 
with other borrowing options.
Example: The need-based student loans (Perkins Loan and 
subsidized Stafford Loan) charge no interest and do not require 
repayment of principal until the student leaves school.
Better: Take the student loans, use current income to pay off 
other debt and then, if you want to pay the student loans off in a 
lump sum after graduation, you can do so with no repayment 
penalty. In this way, you might save hundreds--or even thousands--of 
dollars in interest.
Mistake: Being unaware of other attractive borrowing options.
Reality: Even if they don't qualify for need-based student loans, 
virtually all students qualify for unsubsidized Stafford Loans. The 
colleges' financial aid offices can tell you how to apply for these 
loans.
How they work: Although the child is charged interest while in 
school, it is at an attractive rate based on the 91-day Treasury bill 
plus 1.7%. The rate is set each year at the end of June. For the 1998-
1999 academic year, the rate will be 6.86%, with an 8.259/0 cap 
over the life of the loan.
Some colleges have their own loan programs, which may have 
very attractive terms. There is also the federal Parent Loans for 
Undergraduate Students (PLUS) program, which allows you to 
borrow the total cost of education less any aid offered.
Example: If the tuition costs $25,000 and your child is getting 
$10,000 in financial aid, you can borrow up to $15,000.

To maximize your aid package: Take out a Perkins Loan first, 
then a Stafford Loan, then a PLUS Loan.
Mistake: Failing to understand the implications of every 
financial decision you make during the years you are seeking aid.
Reality: From January 1 of your child's junior year in high 
school to January 1 of his junior year in college, any decision you 
make could ruin the chances for aid the next year. Common 
mistakes:
Note: Widowed or divorced parents who remarry during a 
child's college years are sometimes unpleasantly surprised to find 
that the income of the new spouse is factored into the financial aid 
formula.
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