The FAFSA, Free Application for Federal Student Aid, application will determine if you are eligible for federal student financial aid and what types of aid you are eligible for. Not all students are eligible for all aid programs. In short, the federal college aid programs you are applying for via the FAFSA are grants, work-study, and student loans. Below is a partial list of the federal financial aid programs:
Federal Pell Grant – For students with demonstrated need
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Would you pay $200 to save $10,000? Or $25,000? Or $40,000? Let me start off by saying that hiring a college financial aid consultant is not absolutely necessary. Many families manage to put in the time and effort to research the financial aid process, and end up doing just fine. Having said that, I’ve seen firsthand how being uninformed and making mistakes when it comes to financial aid can lead to devastating consequences.
A friend of mine (we’ll call him Rob) is a prime example. He hired a “financial aid consultant” to help him navigate the bewildering financial aid system when his oldest son was applying to colleges. I don’t know the exact qualifications for the man who showed up at Rob’s house to “help” him, but, he was clearly not qualified. Rob’s son was subsequently admitted to the expensive private school of his choice (which was no surprise, since it wasn’t a selective school), and they paid full price for the privilege. The son graduated, and now, 4 years later, both Rob and his son are still struggling every month to cover the payments on over $80,000 in student loans. I look incredulously at Rob and ask him, “What were you thinking?!?” His response: “We just didn’t know.”
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There’s been a tremendous amount of news about the student loan and financial aid industry lately. Those who follow the industry know that New York State Attorney General Andrew Cuomo has been pressing settlements or lawsuits to both lenders and colleges, alleging unethical and illegal practices. The headlines have been filled with sensational claims of all kinds – some factual and some probably exaggerated to some extent. Let’s take a balanced look at some of the practices being called into question.
- Revenue sharing. When a college sets up a revenue sharing agreement with a student loan company, the loan company may offer the college a payment based on the loans taken out by that college’s students, usually a percentage of the loan. While some argue that revenue sharing gives colleges more money to work with for defraying administrative costs or funding additional scholarships, it has been deemed a conflict of interest when colleges have a financial incentive to push students to a preferred lender when it may not offer the best benefits or lowest rates.
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