Applying for Financial Aid


Should my child apply for financial aid?

Congratulations, you’ve survived the diaper stage, taught them to tie their shoes and tell the time, you’ve even made it through years of puberty. You are finally ready to send them off to college.  One item that might be looming large on your to-do list is applying for financial aid.  This can be a difficult task to tackle, as often parents don’t want their children to stress about the cost of their dream school, all the while they are stressing out about how they can possibly pay for all the costs of a high priced further education.

Here are our suggestions for dealing with the issues of financial aid.

1. Apply Apply Apply

One of the most common statements we hear from clients when discussing their children’s upcoming school enrollment is “We didn’t apply because we didn’t think we would qualify”. This is a classic mistake. The number of people we would recommend not applying for financial aid it so small, I could probably start naming them. Warren Buffet, Bill Gates… That’s not to say that anyone earning less than Mr. Gates will receive aid but there are always situations and scenarios that open the door for even small amounts of financial aid.

2. Apply every year for every student

Another thing we regularly hear from clients is “We applied for Child A and didn’t qualify so we didn’t bother to apply for Child B”. Things change and it’s wise to submit an application every year and definitely for every child. One thing many people don’t realize is that schools take into account how many students a family have enrolled in school, and as that number goes up, so the threshold for financial aid goes down. For example, if you have a combined household income of $280,000 and your first child attends an expensive private school, you might not be eligible for financial aid. But, if your second child will be in college concurrently, especially if it is another private institution, you could be eligible at that time for some level of financial aid for both students.

3. Remember, retirement accounts don’t count toward aid assessment

Financial Aid offices aren’t looking into your retirement accounts when they assess eligibility. The basic calculation method looks at taxable assets, including bank accounts, saving accounts, brokerage accounts, investment real estate and 529 college saving accounts etc. From that, they deduct between $30,000 and $50,000 as an emergency reserve allowance. From the remaining balance, parents are expected to contribute between 5% and 6% toward the cost of college.

4. Applying for financial aid won’t hurt your kid’s chances of getting in

This is a tough one to explain and there may be situations where an advisor would suggest not applying for aid but it’s definitely not a black and white situation. For one thing, if you apply and don’t qualify, your child’s application goes right back in the pile with all the other non-financial aid kids, no harm no foul.  A number of schools, including Harvard and MIT are ‘need-blind’ schools, meaning applicants are not judged at all by their financial needs. Most other schools are ‘need-aware’, meaning some importance is placed on the student’s ability to pay. However, this generally only affects borderline applicants who are also looking for a large amount of aid, and if you need large amounts of aid there is no avoiding applying for it, unless you plan to finance the whole thing through outside loans. Good candidates looking for small amounts in aid will not be affected by this situation. 

If your kids aren’t yet old enough for college, check out our article on saving for college for an idea of how much it might cost to send your little one off in the future.