6 Ugly Tricks Financial Aid Offices Use
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- Jacking up loans and dumping it on parents. Depending on each family's circumstances, some parents may agree to help finance their children's education. However, some colleges will offer their neediest students loans that are twice as much as their family's salary. New York University is one school that relies on parents taking out loans.
Analysis: Dumping loans on parents is one of the easiest and best ways for a college to save resources but still offer "aid." Keep in mind that interest starts accumulating once your parents take out the money. Talk this over with the parents about how much they are willing to contribute toward your education, and if loans are doable. There are plenty of options out there. So compare financial aid packages if your parents don't want to rely on loans to finance your education. If parent loans are not manageable, try taking out loans under your own name, working extra hours in a job, cutting expenses, and applying for scholarships. - Using future income as "student resources." This is different from offering you a job. For example, a college will tell you that they will cut your financial aid by $3,000 because they will expect you to go find yourself a job (this applies to students who have not already secured one or expressed interest in taking one) that will make you $3,000. Therefore, that is $3,000 less that you need because you will be making it. Many colleges do this.
Analysis: If the amount the college expects you to earn is realistic, then it should not be a problem. Look through the classifieds, on fliers, ask around, and search online for jobs. Pick up a part-time job or two throughout the year and/or a full-time one during the summer. Most of the times, this job component is used to pay off any remaining balances on your account or your own expenses. So if you can't earn the amount you're expected to, you can cut back on certain expenses such as takeout and new textbooks. - Cutting your financial aid every year after they've lured you in. Unless stated otherwise in their policy, colleges tend to give the most financial aid during your first year in order to attract prospective students. Then, each year after that, they reduce the aid incrementally. Barnard College is one school that does this, expecting students to make up the amount by working.
Analysis: Most students their first year are not aware of this policy because they are too happy with their financial aid award that they overlook it. So when considering which college to attend and if financial aid is a major factor, then look into all of their policies before choosing. If the amount the college reduces is manageable, then you should be okay. Some generous schools will your financial aid by around $100 to $1,000 each year. But check to be safe. If you know about the policy ahead of time, you can save extra beforehand or cut back on certain expenses. - Expecting the student to make up for federal cuts. If a student's federal grants are reduced because of budget cuts, most colleges will put the burden on the student to make up the difference.
Analysis: This is unfortunate and usually unpredictable for upcoming years but look for ways to make up for the difference such as scholarships and gifts. - Jacking up student loans and calling it "financial aid." In some cases, the loans will be worth more than the grant. In others, there will only be loans.
Analysis: Yes, loans can, in some ways, can be considered "financial aid." But if you are dependent on financial aid and are among the neediest, the greatest form of financial aid should be in grants. If anything, opt for subsidized loans so you have a lower interest that you don't have to pay until after you graduate and start repayment. Until then, the government pays the interest. Compare financial aid packages that offer you more substantial aid. If you don't already have work-study or a job, consider replacing some or all of your loans with work-study or a job. - Increasing cost of attendance but not adjusting financial aid packages. Some colleges will end up increasing their cost of attendance (increase in tuition; new and required meal plan; increased fees) but will not adjust their financial aid packages to make up for this increase.
Analysis: This is horrible, and unpredictable at the time when you're choosing which college to attend. Your best bet is to choose a school that guarantees to meet 100% of demonstrated financial need, has a large endowment, a good percentage of students who receive some financial aid, and a huge activist student population (whether this is a small or large school). That way, if the cost of attendance does increase but financial aid packages don't increase, there will be plenty of classmates who will protest against the administration. If the situation is really that unmanageable, talk to a counselor at the financial aid office. If the school has a large endowment and guarantees to meet 100% of demonstrated financial need, it will most likely be more accommodating to its students.
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Sounds like the best option is to avoid student loans altogether. I know, trying to cashflow school with a full course load isn't always a possibility, but your hub does a wonderful job pointing out what you lose in order to receive aid: Control.
@souleru - Absolutely! What the college considers "aid" may not be in your own interests. Thanks for sharing your thoughts!
@mskills - Thanks for sharing your input! I definitely agree that student loans are not the best solution. They're good for building credit if it's not that much but it shouldn't be the main source of aid. Interesting point about the "control" part.
Good job with the hub, especially the first three, which are less commonly thought about. I have to watch out for my kid next year.
And frankly, I think that the student should be the one primarily responsible for his or her education. Sure, the parents can contribute but colleges shouldn't just offer so much in loans for parents. I remember when I used to go to college, I didn't even have to take out any loans, much less as my parents to.
@George - financing education must have been much different decades ago. I also agree that so much in loans for parents should not be considered as part of fulfilling a student's aid.
Great info. I wish I knew about this before. Too bad I'm already in college!
Cruel but true... great hub
Interesting and informative hub. I can relate to the information you've shared. My daughter was at the end of her BA for accounting program and the fin aid officer said she had run out of money. I agreed to co-sign for her "emergency loan." It turned out my daughter had enough money to pay out the rest of her education but I am still liable for the loan I co-signed for. People can't trust everything fin aid workers tell them. They have to ask questions until things make sense.
Neil, thanks for the feedback!
6hotfingers3, thanks for sharing your feedback and personal experience. I'm glad your daughter was able to pay out the reset of her education. The financial aid process, from my experiences, is too vague and unclear. I definitely agree that people can't trust what financial aid counselors tell them.
This is why I am leaning toward Macaulay instead. That way, I don't have to worry about financial aid.
I found your article to be enlightening and I wish financial aid offices would actually try to help students pay college instead of making it more difficult.
June - that's a good choice. Best of luck!
Olivia - glad you enjoyed reading the article. Agreed, so it's very important to analyze what they offer as "aid."
Really the reason why schools offer loans to parents is to make up the difference of cost after the students' aid is exhausted through student loans, grants and work study (if they are eligible for the last two), and that's all based on the FAFSA results. The FAFSA results are based on the income that reported, and parents can refuse the parent loan if they want to, but schools will ALWAYS offer the parent loan, because students only get a certain amount of loan money based on what year in school they are (i.e. freshman get 3,500 under the subsidized Stafford loan, sophomores get 4,500, and so on) The reason why the federal govt. limits how much you can borrow is so that the student doesn't become mired in debt after their college career is over. Maybe it is regional, but in my 7 years in being in my college planning/financial aid experience in my job, (and my state) there is not a single solitary school that has worked to the disadvantage of the student, or to "screw" the student. There is no need to. They don't pocket the money given to them by the federal gov't, because they are held accountable by fed rules to use that money correctly (with the exception of one "for profit school" that I won't mention).
There is a lot of misconceptions about this whole process, so feel free to ask any individual questions on my page. I also just posted a hub related to this topic.
Excellent hub! Its unfortunate that financial aid offices use these tricks to the misfortune of the college's s customers (i.e., its students!).
I'd add one more ugly trick that financial aid offices use: confusion. Some financial aid award letters use language which obfuscates the actual financial terms. Its unreasonable to expect the typical college applicant to have enough experience with financial matters to decipher what the language really means.
souleru 12 months ago
Very useful and (shocking) information. I will definitely keep this in mind for when my FAFSA finalizes