Q&A: Financial Aid Tips

Haley Chitty is the assistant director of communications at the National Association of Student Financial Aid Administrators. In an interview via e-mail with Derek Thompson of BusinessWeek, he told us how the financial aid system is changing and what families can do to get the money they need. Here's a transcript:

What's the first thing every family should do before the financial aid process?

The financial aid office on campus is the best place to start. Financial aid administrators on campus will have the greatest knowledge of federal, state, local, and school financial aid and their goal is to provide students and their families with as much financial aid as possible.

What are some strategies you would suggest for students and parents as they begin the financial aid hunt?

Fill out the [Free Application for Federal Student Aid] FAFSA, even if you don't think you will be eligible for federal aid. Many state and institutional student financial aid programs also rely on the FAFSA to determine financial aid eligibility, so you may miss out on this aid if you don't fill out the FAFSA. Make sure you secure all the grant aid you can before borrowing student loans—borrowing should be a last resort. When it comes to taking out student loans, borrow as little as possible and make sure you understand all the terms of the loans and your responsibilities as a borrower. Borrow as much as possible from federal loan programs (subsidized and unsubsidized Stafford, Perkins, and PLUS loans) before turning to private loans, which are usually more expensive and don't contain the same protections for borrowers.

What do you see as some common mistakes made by students and parents applying for financial aid?

Some of the most common mistakes include:

1. Failing to fill out the FAFSA because they believe they will not be eligible for aid or because the form is too complicated.

2. Paying someone to help them fill out the FAFSA (BusinessWeek.com, 2/3/08) when the same or similar service is provided by financial aid offices and nonprofit programs like College Goal Sunday.

3. Borrowing through more expensive private student loans before exhausting federal student loan options. This is usually because private loans are marketed directly to students and families so they borrow without first consulting a financial aid administrator at their college.

What are some of the encouraging trends in financial aid among top schools?

The recent efforts of wealthy schools like Harvard, Yale, and others to make higher education more affordable (BusinessWeek.com, 2/3/07) are certainly commendable. However NASFAA remains concerned that significant financial barriers keep the America's neediest students from achieving their higher education goals. Unfortunately, wealthy schools like those that are eliminating loans for low- and middle-income students serve a small fraction of the nation's needy students. Most low-income students attend community colleges and public universities that lack the resources to provide financial aid packages. NASFAA advocates a greater federal investment in need-based student aid programs to help America's neediest students overcome financial barriers to achieve their higher education goals.

Are there any top schools out there that you would like to revise their financial aid programs?

While we encourage schools to do all they can to make college affordable, especially for low-income students, we feel that the individual school is in the best position to decide the best way to use their funds to best meet the unique needs of their student population.

What do you feel about the move away from loans at some schools like Princeton?

Again, NASFAA commends efforts by schools like Princeton to eliminate loans from students' financial aid package. The fact that these schools have to fund these aid programs also demonstrates the need to increase funding for federal financial aid programs to help low-income students who generally don't attend these elite schools.

What are these wealthy schools doing with their financial aid program, and do you think it will have a trickle-down effect among smaller colleges?

Basically, Harvard and other institutions that have followed suit supplement federal and state grant aid with aid from the institution to ensure that students and families with an income below certain levels do not have to borrow too much in student loans. It has certainly had an impact but it is unlikely to significantly increase access to higher education for the nation's neediest students because only a small fraction of these students attend these institutions. Additionally, preliminary research questions the effectiveness of these programs in increasing the number of low-income students at these institutions. The bottom line is that anything schools can do to defray the costs of college for their institutions is a welcomed move.

Which schools do you think are going in the right direction on financial aid, and why?

I think schools are doing all they can to make higher education affordable for their students. Unfortunately, not all schools can afford to offer these programs, especially the schools that serve a large low-income student population. Again this highlights the need for a greater investment in need-based student aid by the federal and state governments.

Are you ever frustrated at certain schools that don't do enough to make their education more affordable? Can you name examples?

No, because each institution is unique and it is difficult to judge all of the things schools do to keep costs down for students. Schools use their institutional dollars to fund education and research programs, maintain and build campus infrastructure, conduct outreach activities, and provide additional financial aid.

There have been some pledges on the campaign trail to improve college accessibility. What can politicians do to make college more affordable?

Increasing investments in existing federal need-based grant programs like the Pell Grant remains the most effective way to increase college access.

What do you see as the greatest challenge today among college financial aid programs?

A variety of factors—including increased operating costs because of ballooning energy and health-care costs, combined with decreased state funding for higher education—have forced schools to increase tuition and fees. At the same time, federal funding for student aid has remained relatively stagnant. With the threat of recession, colleges could be dealing with the dual task of increasing access for low-income students in the face of potentially shrinking budgets and modest increases in federal student aid.

Congress has been moving forward with increases in some need-based programs like the Pell Grant. That is a step in the right direction. Federal legislators and higher education advocates must do more to ensure students have access to postsecondary education.