Another complication with financial aid is that schools use different requirements on their forms to decide awards. Most schools use the Free Application for Federal Student Aid. Schools using the FAFSA, he says, look at assets the day the form is filed and tax forms from prior years. Sometimes, parents can shift income a couple years before students start school so that they get more aid in the students’ first year. “Freshman year is when you want your families to look as poor as possible, because that’s the base year,” he says.
About 300 top schools also use the CSS Profile form, which includes hundreds more questions than the FAFSA. Another is the 568 Presidents Group “Consensus” form to analyze financial need. Most schools using these two forms are private, have huge endowments and want to give aid to students who need it most.
As a result, one difference is that CSS and 568 President schools look at home equity, while FAFSA schools do not, Messinger says. “Let’s say you have $300,000 in home equity, a Consensus or Profile school, they might say we want $15,000 toward the cost of college next year. Five percent. That’s a big difference.”
Also, Profile and Consensus schools look at the finances of the noncustodial parent. “Regardless who claims them on taxes, financial aid goes to the custodial parent, which is the one [the students] live with 51% of the time,” Messinger says. “So I’m divorced, and my ex-wife is a surgeon making $500,000 a year, and I’m making $50,000 a year. I’m going to have my student live with me one more day that year and I’m going to apply for financial aid. And I’m going to focus on federal schools, because the Profile schools and Consensus schools pull in the noncustodial parent. … In this case, it could be a $75,000 or $80,000 swing [in a financial aid award]. They think you can afford it.”
Messinger stresses the net cost of attendance at any school is what counts; the sticker price is irrelevant and shouldn’t be used as the deciding factor on where a student applies.
One bright spot for families looking for financial aid is that many smaller private schools are competing fervently to fill their freshman classes, Messinger says. They are often more ready to reduce the price for students, and may be willing to do so even if a student’s family is judged able to afford it. Often, Messinger says, the net cost at these private schools can end up being less or about the same as a state school.
Dorothy Hinchcliff is executive editor of Financial Advisor magazine.