Stern Advice: Opening day of financial aid season

By Linda Stern

WASHINGTON (Reuters) – This is the week most colleges send out their financial aid award letters.

Enterprising students and parents will consider those packages a first offer. They will spend the month of April trying to cut a better deal before they decide, by May 1, where to send their sons, daughters and dollars.

That makes sense, because most financial aid officers are used to fielding phone calls and making adjustments during April — so much so that, privately, they often refer to it as “haggle month.”

This year’s aid season could be even more challenging than most. Budget-crunched states are looking at tuition hikes and limiting the grants they dole out. At the same time, some private school endowments that were hard hit by the stock market sell-off of 2008 and 2009 may have recovered enough to bolster awards. It pays to understand the system.

So, bone up on the unique and arcane details of the financial aid game. Here’s how to win it.

— Understand your letter. Those financial aid award letters make tax forms look simple. Your bottom line aid package may look great, but when you delve into the details you will learn that much of the package is probably in the form of loans that must be repaid. And those loans might have different terms, conditions and interest rates.

Finaid.org, a college education website, has produced a guide to financial aid award letters (http://www.finaid.org/fafsa/FinancialAidAwardLetters.pdf) that’s worth reading if you are confused.

— Compare awards wisely. Just looking at the amount of aid offered by various schools doesn’t tell you much; you have to look at the bottom line. You can use the college cost adjuster calculator at SimpleTuition (http://www.simpletuition.com) to compare aid offers and see, in dollar amounts, how much you’ll have to pay monthly after graduation. It’s obvious that the school’s starting price matters; a big aid package from a costly school might still leave you borrowing more than a small aid package from a less expensive school. There are other differences to consider, says Mark Kantrowitz of Finaid.org. For example: Some schools will meet all of your expected needs and some won’t; some underestimate what that “need” will be by failing to include a big enough allowance for textbooks, travel and the like.

“Do not rely on the… (cost of attendance) listed in the financial aid award letter,” warns Barbara Cooke, author of “Parent’s Guide to College and Careers.” “Your child’s actual costs may be greater, or less, than the official estimate.”

— Ask for more. Go back to the financial aid office and ask for a review if you have anything unusual going on in your family, such as job loss, illness, lower-than-expected earnings or a house that you are carrying and can’t sell. They do have some extra money to throw at kids they really want and whose need is greater than demonstrated on the forms. Not many schools will admit that they match offers from competitors, but it’s definitely done, so let the aid officer know if you got a sweeter deal from a similar school.

— Think three times before you take big loans. “Live like a student while you are in school, so you don’t have to live like a student after you graduate,” says Kantrowitz. It isn’t well publicized, but you can take the grants and work-study portions of your aid package and leave the loans on the table. Parents who are willing to borrow money and have home equity may find it more worthwhile to refinance their mortgage or take a home equity loan in lieu of the more costly 7.9 percent PLUS loans that the Department of Education is now offering.

— Find another way. More families are bottom-line driven when they make that where-to-attend decision, reports a new survey by Maguire Associates and Fastweb.com. That’s a good thing. It means the Class of 2015 won’t graduate with tens of thousands of loans and few prospects for jobs that will support repaying them. Other options to consider include (1) starting at a cheaper school and transferring to Pricey U; (2) deferring college for a year to work and earn money; (3) Loading up on credits during summer school to trim a semester or a year out of full-price costs; (4) Forgoing your first choice to attend your second or third-choice school, if it will put you in a much better position when you graduate.

(The Personal Finance column appears weekly. Linda Stern can be reached at linda.stern(at)thomsonreuters.com)

(Editing by Gunna Dickson)

Stern Advice: Opening day of financial aid season