The Free College Money Blog

Warning: Does Not Sugarcoat the Financial Aid Experience

While I was a college financial aid director at a small private college, I received a call from a nun who ended up cursing and hanging up on me. She happened to be working with a young girl from a very low income family, and believed that I wasn’t using my full power to give the girl the amount of free college money it would take for her to be able to afford my college. I tried in every way I could to explain our packaging policy and limited funds to her, but she was convinced that I was being unfair. So she swore at me and hung up. You know you’re having a bad day when a nun hangs up on you!

Anyone who has been through the college admissions and financial aid ringer has heard, “Don’t worry about the money. We’ll make it work.” For the lucky few, that’s a reality. However, for the most part, what they mean is, “We’ll make it work by you paying for most of it.” So here is my bottom line, and it may be a bitter pill to swallow: there may be colleges out there that you can’t (or shouldn’t) afford.

Ever since that nun hung up on me, I’ve dreamed of calling her back and saying, “There’s a blue Saturn in the parking lot. That’s my car. I could afford a Saturn, so I bought a Saturn. I didn’t go into the Mercedes dealership and blame the salesman for my not being able to afford the kind of car he sold.” College is the same way.

When I say that perhaps you “shouldn’t” afford a particular school, I’m saying that perhaps you will be so far in debt upon graduation that you’ve mortgaged your future to the hilt. Imagine if I had walked into the Mercedes dealership, and they had given me the best deal they could, but it was still beyond my means. Now imagine that I bought the car anyway. Imagine me driving that car back to my parents’ house, because I could no longer afford my own apartment. Imagine me eating my peanut-butter-and-jelly sandwich as I drove by the restaurant where my friends were having dinner. You get the point. Again, college is the same way. Is the diploma of that particular expensive school worth what you’re going to give up for it? Maybe, and maybe not.

I can already hear the responses now… “Do you mean to say that only rich kids should get to go to expensive colleges?” No. I’m not saying that at all. I’m saying that you need to look at the bottom line for each college before you make a decision.

Here’s an example:

There are two things to consider here:

• Notice the difference in free college money between the schools. Before looking at that, Private College B looked like the most expensive choice. Afterward, it’s almost on par with the State School. Before you decide that a school is too expensive for you, see how much of its own free money it gives to its students.
• Look at the total loan amounts. Even at the state school, you may be borrowing a lot of money. If you go to Private School A, borrow $108,000 and extend the payment period to 30 years, you’ll have payments of over $700 each month, and will pay more than $250,000 over the life of the loan. Now let’s look at the State School example. If you go to the State School, borrow $60,000 and pay the loan off in the 10-year standard repayment, your payment will still be about the same ($690), but you will only be making that payment for 10 years instead of 30, and you’ll pay less than $83,000 to pay it off.

My best advice is

• Find out how much of its own free money a college gives to its students. That can make the difference between what you can afford, and what you can’t or shouldn’t.
• Determine how much you might have to borrow over the life of your college education. Go to www.finaid.org to calculate your loan payments based on that amount.
• Decide whether you want to drive the Saturn and afford to have a life, or drive the Mercedes and live off of PB&Js for the next 30 years.

Technorati Tags: free college money

Free College Money – Why Is It So Hard To Apply For?

Why is it harder to apply for financial aid and free college money than it is to do your taxes? We have been hearing about simplifying the financial aid process, so why can we not seem to do it? Why does it have to be so hard?

Those are good questions, and worth looking into. I have been saying for years that financial aid should not be so hard. It is hard on the students and parents trying to get it, and hard on the financial aid administrators trying to administer it. The system is cumbersome and confusing.

In my perfect world, I envision a student applying for financial aid like we currently apply for credit cards: just one SIMPLE online application. From that information, the Department of Education (ED from here on) would determine their eligibility, and apply that amount to their new “ED account”. ED would then mail the student a debit card connected to the account. The student could take that debit card to the school of their choice. Swipe – tuition is covered. Swipe – books are paid for. It is a beautiful thought, but there is no way for it to work. “Why not?”, you ask… Here is just one little reason why….

There are over 7000 federal regulations that deal with financial aid. You may have heard the saying, “It would take an act of Congress to…”. Well, since these regulations are written into law, it actually does take an act of Congress to change the financial aid process. In and among these federal regulations is an equation (or formula, or methodology) used to calculate a student’s or family’s ability to pay for school. This ability is called the student’s/family’s Expected Family Contribution (or EFC).

Imagine a large, complicated equation (or formula, or methodology). For our purposes, I will use this simple one below:

A + B – D x C = EFC (Expected Family Contribution)

If the regulations dictate that this is the equation you must use in order to calculate a valid EFC, then you have to have some way of collecting the data for A, B, C and D, right? That is exactly what the FAFSA does. It collects all (or most) of the information needed to calculate a valid EFC. So when someone asks, “Why are there so many questions on the FAFSA?”, I say, “Because those are the questions needed to fill in the blanks in the federally-regulated EFC equation.” And when they say, “I think we should simplify it and only ask 30 questions instead of 100.”, I say, “Great idea! But we will have to get Congress to change the EFC equation first, or no one will have a valid EFC.”

Clear as mud, right? The bottom line is, if you want it to be easier to apply for free college money, you will need to contact your elected officials and let them know about the problem.

Technorati Tags: free college money