July 25th, 2008 10:15 EST
Scholarships can sock financial aid
By Mark Huffman
This is the time of year that students get ready to head off to college, and parents start checking their bank accounts. With college costs rising, finding a student aid package becomes an important priority.
Financial planner Reecy Aresty has specialized in helping students and parents find money for college. His book "How To Pay For College Without Going Broke, serves as a blueprint for finding financial aid.
"Many states, including California, have grant programs for low-income families," Aresty told ConsumerAffairs.com. "Other states, such as Florida, have `merit aid` programs. Any family can qualify for substantial financial aid, if they own and control a small business. Private scholarships are great when the family can`t qualify for need-based aid."
Aresty says the way students receive scholarships and financial aid is important to their overall bottom line. All too often, he says, a scholarship check is made out to both the student and the college. When that happens, he says the college usually reduces the amount of aid it has promised the student by the exact amount of the scholarship.
"The colleges consider it a resource to help pay for a student`s education," he said.
For example, let`s say the cost of attending college is $45,000. The "expected family contribution" is $10,000, so the family needs to come up with $35,000. In most cases the college is only too willing to help.
The college might guide the student toward Stafford Loans and other aid packages, cutting the need from $35,000 to $22,000. If it`s a student the college really wants, Aresty says it might offer $22,000 in college scholarships, grants, and tuition waivers, and put the offer in writing.
But what happens when the college learns that the student has landed a $10,000 "private" scholarship? Aresty says the student gets another letter, showing the college`s offer of $22,000 in aid has been reduced to $12,000.
Colleges might look at this policy as a commonsense way to spread aid around, but Aresty likens it to theft. He says many colleges require students to show their financial cards early in the process.
"Those students who applied to any of the 220 elite private and a few state colleges that require the CSS Financial Aid Profile financial aid form may have already indicated they would be scholarship recipients," Aresty said. "Section SR, Student`s Expected Resources for 2007-2008, Question 5, asks for the total dollar amount expected from `grants, scholarships, fellowships, etc., from sources other than colleges,` and they must be listed individually in Section ES."
Aresty says the majority of schools that only require the Free Application for Federal Student Aid form simply send out a questionnaire asking about private scholarships. They`re less devious, he says, but just as deft.
"Truth be told, it`s all about the money, and have no doubt about it, he said. "Every year there are billions awarded in private scholarships, and who benefits? None other than these `poor` institutions of higher learning, enriching their billion-dollar endowment funds at the cost of their deserving students."
While he says there are a number of reasons that college costs are rapidly rising, the amount of aid now available to students in the form of grants and loans is a large contributing factor.
"Guaranteed Stafford Loans of $5,500, $6,500, $7,500, and $7,500 enable schools to charge more because every student can now borrow more," he said.
Aresty recently founded the College Information Network, which includes the The High School Blog, The College Blog, Payless For College, and The Way To College.