The Realities of Student Loans and Grants

The Realities of Student Loans and Grants

The price of a whole undergraduate degree is on the rise. College costs, including tuition, room and board, and other fees, continue to rise at double-digit rates (up to 15% each year at some schools) and now total $160,000 and more. Despite this, a historic number of American families are enrolling their children in higher education. How, therefore, do they plan to cover the cost?

The Realities of Student Loans and Grants

The majority of American households are filing their FAFSA (Free Application for Federal Student Aid) on or after January 2 in an effort to mitigate the exorbitant cost of higher education. The procedure for securing financial aid for higher education is rarely straightforward, making this an inconvenient solution. The application process is fraught with potential hazards, and it is much too easy for families to lose all or part of the aid to which they are entitled.

Because they don't know how to apply, wrongly feel they aren't eligible, or are frightened by the complex and convoluted process and all of the paperwork, many families don't even bother to try. We may reasonably anticipate a system deliberately structured to reject all but the most educated and persistent candidates, given that there are considerably more competent applicants than desks in all of America's colleges and universities.

The US Department of Education reports that a shocking 90% of financial aid applications are denied due to mistakes and inconsistencies. Due to the first-come, first-served nature of financial assistance, eligible families that weathered the college funding process alone stand to lose thousands of dollars due to delays caused by the resubmission procedure.

Considering that it can cost anywhere from $160,000 to $300,000 to send one or more children to a four-year university, what are families planning to send many children to college supposed to do? Some people make the common error of believing all they hear from their accountants, financial assistance officers at universities, and guidance counselors. These households are headed for a nasty surprise since they are not being provided with adequate financial information.

Across the country, guidance departments are nearing breaking point, with some seeing upwards of 800 students per counselor. There is no solution in sight for this predicament since budget shortages have forced schools to extend the responsibilities of guidance counselors in areas other than guidance, reducing the amount of time they have to spend with children.

Counselors should be commended for helping students with job decisions and college applications despite these challenges. But when it comes to helping families afford college, they fall short of delivering the essential financial details that may save them thousands.

Both time and knowledge constraints prevent guidance counselors from helping families lower their Expected Family Contribution (EFC), the amount of money the federal government estimates they will have to pay for higher education. In addition, understanding the legal implications of various financial assistance options would help families save tens of thousands of dollars over the course of their children's college careers.

The fact that students have no asset protection allowance, for example, is not widely known by parents or guidance counselors. As a result, the federal government levies a 35% tax on the value of the student's assets for each academic year that the student is enrolled in college. If a student has $1,000 and keeps it in their name for a year, they will be charged $350.  The student will have lost $1,400 in help over four years, while only having $1,000 in assets at the outset. This is terrible because it is possible to prevent this situation legally.

Every so often, counseling services provide "in-house" financial aid nights to help students through the process of applying for and receiving financial aid. Still, year after year, 90% of families who request aid are turned down because of mistakes they made on the application. It's obvious that parents aren't getting adequate help understanding how to pay for college.

High school guidance counselors who invite FAOs to speak do so in the good faith that the FAO will prioritize the students' needs over the FAO's institution's bottom line when addressing student concerns. At the end of the night, many parents are under the erroneous impression that their child will receive the highest financial aid package possible from the college of their choosing. This almost never occurs.

Financial assistance offices (FAOs) are like thrifty businesses; they look for the most promising students to award the smallest possible grants. College savings through an FAO? That's like expecting tax relief from an IRS agent. FAOs are beneficial, but they are committed to their institutions and not to the students who seek their advice.

However, very few accountants have direct experience helping students pay for higher education. While they are pros when it comes to tax returns and tactics for maximizing refunds, financial aid applications and college finance strategies are entirely different animals. When applied to college finance, accounting principles can reduce a family's chances of receiving all the aid to which they are entitled.

There is an overwhelming amount of false information floating around the internet on how to pay for college. In reality, families risk losing thousands of dollars in aid money because they followed a single instruction on the current FAFSA. The specifics are on our website under the FAFSA ALERT section. Hence, "who you gonna call?"

College finance professionals are one of the best-kept secrets in higher education in the United States. Experts in the field of student financial aid work with families to ensure that their children receive the finest higher education possible within their financial means. They must be in high demand to be called to speak at high schools around the United States so often. Sorry to say, that's not the case!

It may come as a shock to parents to find that, nationally, most guidance departments deny the services offered by college funding professionals, sometimes citing that bringing in "outsiders" is against school policy, despite the fact that these services are offered at no cost to the school. The unfortunate effect is that every year, parents enter the college funding arena unprepared and end up paying way too much for higher education.

For more information on how to protect your family against scams in the college finance process, please contact Reecy Aresty at thecollegebook@aol.com or check out his website at www.thecollegebook.com.