Do Consultants Ease Financial Aid Angst?
Just when it seemed the college advising landscape couldn't get more crowded, a new type of counselor is clamoring for the attention—and money—of harried parents and high school students. The certified college planner, also known as a financial aid consultant, is the latest addition to the growing laundry list (SAT tutors, college advisers, and admissions experts) many families turn to in the pre-college years. And as with much of the advising industry that has grown up around admissions angst, there's debate over whether these consultants are worth it.
The private planners say they help students find the best financial aid packages, correctly fill out financial aid forms, and negotiate for better aid offers. They also provide advice on how to take advantage of education tax incentives and college savings plans. The National Institute of Certified College Planners (NICCP), founded just five years ago, has certified more than 1,200 accountants and family financial planners to assist families with financial aid services and planning. Another business, College Assistance Plus, which helps students find the best financial aid package at the college of their choice, was founded in 2004 and has 23 franchises in 17 states.
What's driving these businesses? Parents' realization that college and its huge tuition bills (BusinessWeek.com, 10/22/07) are imminent.
Curse of the Upper Middle Class
"They come when their kids are seniors in high schools and they say, 'Oops, my kid is going to college next fall and I haven't saved a dime,'" says Rick Darvis, a financial planner who is a co-founder of the Certified College Planners group. "I'd prefer if they came to us four or five years earlier, because there are more savings you can get if you do things right and have a solid financial plan."
Victor Berliant, a San Rafael (Calif.) retirement planning adviser, decided to take the NICCP certification exam when his two daughters were about to attend college several years ago. His income bracket was too high to make him eligible for financial aid, he says, but by using tips from NICCP he managed to save about $60,000 in college costs for each of his daughters, both of whom attended the University of California at Davis.
Berliant's clients are mostly upper-middle-class families with incomes of $100,000 or above. The cost of living in the San Francisco Bay Area is so high that even these families have trouble paying for college, and most don't qualify for typical financial aid, Berliant says. He charges his clients $500 to $1,000 to put together a college financial plan.
A Concern at All Levels
"I guarantee that if I don't save them at least twice what they pay me, then I will give them their money back," Berliant says. "That is how confident I feel that I can help them."
One of Berliant's clients is Elena Fuentes-Afflick, who is already worrying about how expensive college will be for her two sons, a freshman and a junior attending a private high school in San Francisco. Although the family is upper-middle class—Fuentes-Afflick is a pediatrician and her husband is a mechanical engineer—Fuentes-Afflick says they still felt they needed guidance from a professional on how to pay for college.
"I think it is a concern for people at all [points on] the economic spectrum because the cost of higher education has increased so much over the last several years that I think very few people who can afford a private college education without some sort of sacrifice," she says.
Easier to Ask An Expert
At a school auction last spring, Fuentes-Afflick jumped at the chance to bid several hundred dollars for a consultation with Berliant. Since then, Berliant has given her numerous tips and financial strategies on how her family can help finance their son's college education, essentially "demystifying" the financial aid process for her family, she says. While she admits she probably could have gotten similar information from books or Web sites, she felt more comfortable working with a professional, she says.
"There probably is a lot of this that you could educate yourself about by doing a lot of reading. But it is sort of like, do you want to spend 20 hours reading books or spend an hour working with a person?" Fuentes-Afflick says. "Given the types of things I have to do in my life, I thought it would be easier to go to an expert and do it this way."
As these types of counseling services grow in size and popularity, financial aid experts are casting a wary eye at the services they offer. In many cases, the advice they give is already widely available for free, says Robert Shireman, executive director of the Project on Student Debt, a group that raises awareness about financial aid.
Certain Number of Scams
"There is a certain element among those who advertise themselves as college [financial] planners that has a kind of slimy feel to it," says Shireman. "In some cases, maybe they have a genuine way of helping people figure out how to do it. Probably in a lot of cases it is more hype than reality, and they are giving people mostly basic information they could get if they bought a book or went to a Web site."
There are also outright cons. A growing number of families are defrauded by financial aid scams, through outfits that charge fees for scholarship applications and completion of the FAFSA (BusinessWeek.com, 1/18/08), the federal financial aid form required of most applicants, says Marcia Weston, director of the College Access Program at the National Association of Student Financial Aid Administrators (NASFAA).
"There are some of these providers that aren't legitimate, and there are many that are legitimate," Weston says. "We try to educate families so that they will know what questions to ask." Among the group's warnings: Avoid planners who offer a guarantee of financial aid or charge a fee based on a percentage of aid received.
A Major Worry for Families
The private planners agree there are some sketchy financial aid services. Darvis says he launched his certifying organization in 2002 in part because he was worried families were being taken advantage of by disreputable scholarship databases and misleading Web sites. Darvis' group limits membership to certified public accountants or financial planners, who pay $1,895 for the materials, certification test, and membership. The coursework allows the consultants to build on their base of financial knowledge, but with a focus on college planning.
College Assistance Plus, a company based near Rochester, N.Y., was co-founded in 2004 by Paul Celuch, a former marketing and sales executive at IBM (IBM). Celuch, also a deacon at his church in upstate New York, used to counsel families in distress and found paying for college remained one of their greatest financial worries, along with buying a house, he says.
Celuch says his company helps its clients select a college they can afford by matching their information with a database of financial aid information on more than 2,500 colleges. The group's counselors encourage students to apply to schools that match their academic and financial criteria.
Using Offers as Leverage
"We try not to get families to visit colleges they can't afford. We use that predictive tool of the database to keep them from doing so," Celuch says. "One of the reasons we do that is the whole process is so fraught with emotion. We try to take the emotion out."
Celuch estimates he saves his clients anywhere from $1,500 to $25,000 a year. The company charges clients a one-time fee of either $1,695 or $1,895, depending on what counseling package they choose. Once students apply to the colleges handpicked by College Assistance Plus—many of which are direct competitors—they await news from the schools on what types of scholarships, grants, and loans they will be offered. "We then see what the best financial aid package is and use that as leverage [to negotiate]. It works about 90% of the time," Celuch says.
One reason college financial planners are in demand is many parents have failed to save adequately for their child's education, financial aid experts say. A typical family today is able to cover just about 24% of college costs, including tuition, fees, and room and board, according to Fidelity Investments, which markets tax-advantaged college savings plans.
Forms Are a Foreign Language
Arranging family finances is one area where private consultants can help, says Pamela Fowler, executive director of financial aid at the University of Michigan—who otherwise isn't a big fan of consultants. In some instances, she says, consultants can help a family "better position" themselves for financial aid. "It can give families an advantage," she says. "Do I think that's equitable or right? No. But I can certainly understand why some families do it."
Another factor driving people to consultants: Many parents are overwhelmed by lengthy financial aid forms and scholarship and grant applications, says Johnavae Quinn, director of College Goal Sunday, a NASFAA program that offers free financial aid counseling to first-generation and low-income students. "Many of the families who come to our events come up to me and say, 'This is a foreign language to me. I just don't understand anything,'" she says.
College financial aid officers say the bottom line is most of the services provided by private consultants are offered for free by the schools. "Those of us providing free services just need to do a better job at getting the word out that you don't have to pay for these services," says NASFAA's Weston. "That's probably our challenge."