About half of colleges front-load grants, he says—giving the most aid or biggest discount to incoming freshmen. It’s more common among private schools, more expensive schools and those that lack big endowments, he says. (These discounts are tallied by an annual survey performed by the National Association of College and University Business Officers.)
Some schools reduce their grants (money that doesn’t have to be repaid) by the amount of a student’s outside scholarship. In essence, “your net price remains unchanged despite your hard work in winning that scholarship,” Kantrowitz says.
Net price calculators on college websites can also be misleading. According to a recent study from the University of Pennsylvania Graduate School of Education, some sites use old or incomplete data or treat loans like grants. By subtracting loans from the net cost, these sites come up with a figure for families that’s much lower than the amount they would actually have to pay, says Kantrowitz.
He checks to see whether colleges’ calculations are in the same ballpark as the more general estimates obtainable through College Navigator, a free tool on the National Center for Education Statistics’ website.
Kantrowitz, author of the 2019 book How to Appeal for More College Financial Aid, also encourages advisors to help clients interpret financial aid award letters they have received from colleges. The letters should state the full price and only subtract out gift aid, not loans, he says.
Filling Gaps
Guidance counselors try to get kids into schools they see as the best fit, “but best financial fit doesn’t always come to mind,” says Riskin. Financial advisors tend to focus on the savings aspect of college planning, he says, and can’t offer much guidance on financial aid, student loans and loan repayment.
To help fill this gap faced by families, Riskin consults with financial advisors on college matters. He’s also still involved with the American Institute of Certified College Financial Consultants, a designation and education program Riskin founded in 2017 for financial and legal professionals (he no longer has a financial interest in the program).
When families use different vehicles, they must also consider the tax ramifications, Riskin says. For instance, families who claim the American opportunity tax credit (which is based on $4,000 in qualified education expenses, for a maximum $2,500 credit per year) can’t use the same expenses if they take a tax-free distribution from a 529 college savings plan.
Beth Walker, a financial planner with the Wealth Consulting Group, a Las Vegas-headquartered RIA firm, would also like to see more financial advisors become “very well versed in financial aid and the tax code during the college years,” she says. “College doesn’t have any kind of professional that creates guardrails for the family.”