You probably help many clients develop and manage a plan to simultaneously save for college and retirement. When it comes time for their children to apply, accept, and begin college—after years of planning and saving—they may incorrectly assume that they won't qualify for financial aid or assistance. But this often isn't the case. In fact, you can add tremendous value by debunking the following common financial aid myths that your clients may believe and encouraging them to consider all financial aid options.
Myth 1: Financial Aid Is Only for Very Smart or Poor Students
Financial aid comes in various forms and from various sources beyond traditional need- and merit-based aid. In addition to the federal government and the college itself, aid may be available through sources such as the state government, local community organizations, and the client's employer. Be sure to research all the possibilities—and consider using an education planning tool to examine costs and affordability more effectively.
Myth 2: College Savings Prevent Students from Qualifying for Aid
Savings will not necessarily disqualify a student for financial aid. The financial aid formula is primarily income-driven; while assets are taken into consideration, their impact on the parent contribution is relatively small. In fact, only 5.6 percent of the parent's assets (after an asset protection amount is taken into account) are considered available for college expenses, as compared to 20 percent of the child's assets.
In general, a family with savings has more options when it comes to paying for college; families who haven't saved may find themselves borrowing to pay all or part of their expected contribution. Repaying student loans with interest may not make as much financial sense as using savings to pay for college.
Myth 3: The Entire Award Package Must Be Accepted
Students don't have to accept every component of the award package. For example, if a student doesn't want to take out a loan or participate in a work-study program, he or she can decline that portion of the award. Your clients should keep in mind, however, that student loans and work-study are considered a contribution from the family. If a student declines a loan or work-study as part of the financial aid package, the family must find a way to replace those funds.
Myth 4: Most Schools Are Willing to Negotiate Financial Aid Awards
Because most colleges adhere to strict award guidelines, it's very unlikely that a student who receives a favorable award letter from one college will be able to use it to negotiate an adjustment from another.
A student may be able to get an adjustment if the family's financial condition didn't translate to the application—for example, if the family has experienced unusually high medical expenses. Be sure that your clients justify the request for a review by including detailed medical costs and payment documentation.
Myth 5: Once the School Year Starts, It's Too Late to Apply for Financial Aid
The earliest date to submit the Free Application for Federal Student Aid (FAFSA) is January 1 prior to the start of the academic year, and the deadline is 18 months from then.
Although many colleges establish preferential filing deadlines for maximum consideration, a later application may still result in the award of some financial aid. A "better late than never" filing will at least give the student a chance of being considered. Remind your clients, however, that an earlier application will likely reap greater benefits. Colleges have different guidelines, so be sure your clients confirm the procedures with the schools to which their children are applying.
Myth 6: The Government Decides Who Receives Financial Aid
Once the student has completed the FAFSA, he or she submits it to a federal processor for review. A federally established formula is used to determine the expected family contribution (EFC). Then, the college itself determines the student's award based on its resources and the student's financial need.
Myth 7: Students Can Get More Aid by Hiring a Researcher
Dependable scholarship and financial aid information is readily available through college financial aid offices, government-sponsored websites, and reputable consumer organizations. Beware of any program that guarantees aid for a fee. Free online resources include:
Myth 8: Work-Study Programs Hurt Students' Academic Performance
Maintaining a regular work schedule on top of academics can be challenging for some students. But remind your clients that colleges limit the number of hours that students can work during the week. Also, students who work part-time tend to develop strong time management skills and often perform better academically than those who don't work. Plus, a part-time job provides good experience and begins to build a student's work history, an asset in the postgraduate job search.
Myth 9: Private Colleges Are Out of Reach
The goal of the college application process is to find a school—public or private—that matches the student's academic, career, and personal needs. Be sure that your clients don't rule out private schools simply because of their high published costs of attendance. In fact, a student may have a better chance of receiving aid from a private school for various reasons, such as a well-developed alumni endowment or a mission to attract a diverse student body. Higher college costs may also provide an opportunity to demonstrate greater financial need.
Myth 10: The FAFSA Form Is Too Confusing to Complete
Many helpful resources for filling out the FAFSA are available. (Encourage clients to reach out to knowledgeable college financial aid offices or the student's high school for additional help.) Clients can complete the FAFSA online, with real-time chat access to representatives. And encourage them to watch this "Five-Minute FAFSA" video, which takes a lighthearted approach to tackling financial aid paperwork.
Myth 11: Students Shouldn't Indicate That They Are Applying for Aid on the Admission Application
Whether or not a student is applying for financial aid does not impact the admission decision. In fact, it's a good idea for your clients' children to indicate that they are applying for aid on the admission application; that way, the college can open a financial aid file for the student and track the related forms.
When helping clients pay for college expenses, do you come across any other financial aid myths, misperceptions, or confusion? Please share below.