For what I thought (ok, hoped) would be a pretty quiet Monday, I’ve gotten lots of questions today about whether and how the Congress will ‘simplify’ the Free Application for Federal Student Aid (FAFSA) in this Session.

There’s certainly traction to do so… from both sides of the aisle… and from the President.  The current proposals range from the one favored by Senate Education Committee Chair Lamar Alexander, who wants to slash the entire Application to two questions (from the existing 108); to a less radical call, backed by President Obama, to revive a 2009 proposal to eliminate about 30 questions from the FAFSA.

And for the first time in the decade since I’ve been tracking the matter closely, I think that Washington just might actually make some changes to the financial aid application (the FAFSA).  Remember, this is the application that is not only used by the government and all colleges to determine what a family ‘can’ afford to pay for their child’s college education, but it has also been called so complicated that Education Secretary Arne Duncan has said that you need a “PhD to figure it out”.

So, yes they’ll make some changes. The real question, however, is will these changes actually ‘simplify’ the financial aid process…

And the answer…   Unfortunately, not so much!  Like so many ‘good on paper’ concepts, Washington’s way of ‘simplifying’ something will actually wind up further complicating what is already a complicated and nuanced financial aid application process.   Here’s why.

Today, the government uses the FAFSA to determine what they (as in the Government) think(s) your family can afford to pay for one year of college for one child.  This figure – which is derived from your responses to the 108  questions about your, your spouse’s and your children’s income, assets, net worth, household, education level etc.,  contained in the FAFSA (and based on formulas hidden within thousands of pages of Department of Education regulations)  – to determine your family’s Expected Family Contribution (EFC).  This (your EFC) is the amount that the government tells the colleges on your child’s list that you can afford to pay for one year of college for one child.  In turn, many colleges (but not all) accept and use this number to make determinations about what your child should be eligible for both in terms of federal financial aid grants, and (and this is important) their own institutional scholarship opportunities. Most of the clients I see are not eligible for federal financial aid, but they do receive tens of thousands in institutional scholarships.

Now, for about 300 plus colleges (often those that are private and thus a little more generous with doling out those large scholarships/grants to middle and upper income students), the FAFSA does not give them sufficient insight … and so, these schools require a much more in depth financial aid application known as the CSS Profile as well as various supplements. Is it complicated and nuanced?  You bet (each school has a slightly different way of calculating ‘institutional’ need)   But is it worth it if you understand it and do it right?   Very much so – this is why so many students of six-figure earners have five-figure scholarship awards.

So that’s today.

Now, if policy-makers in Washington succeed in their effort to ‘simplify’ the FAFSA – and wind up doing so by merely slashing the number of questions on it (as proposed), I can promise you that  fewer schools will accept the government’s calculation of a family’s EFC.  In fact, they’ve already said as much.  If the proposed changes to the FAFSA go through, not only will more schools will require the CSS Profile, many will develop their own financial aid applications, formulas and mechanisms for determining who is eligible.  Thus an already complicated, requirement-laden, nuanced process – full of hidden loopholes, landmines and opportunities —  will become even more so.   The colleges will have to work a lot harder.  The applicants will have to work a lot harder. I’Il have to work a lot harder.  The only real beneficiary: The College Board, which owns and makes money from the CSS Profile.  Yes, you have to pay the College Board an application fee when you submit the CSS Profile (and yes, I do get the irony that you have to pay to apply for financial aid!).

For years I’ve been navigating my way through, over and around the maze of regulation, requirements, paperwork and loopholes that comprise the financial aid process — so I’m quite certain that I’ll find the opportunities in a new more ‘simple’ version of the FAFSA.  I guess what I’d like to say to my private clients, subscribers, and any family who is concerned about paying for college is this:  Regardles of how complicated  the process is (or will become), it’s absolutely nothing compared to facing the alternative challenge of paying 60-Large a year out-of-pocket (or worse, through debt) for college.  The point is you literally can’t afford to be scared off by the process… you need to arm yourself with the right advice… from the outset.  If you are depending on a singular funding strategy like sticking to state schools and relying on FL Prepaid or hoping for an athletic or academic scholarship to cover the full freight, you’re not going to maximize your (or your child’s) opportunities and you may needlessly limit your options… or your child’s.  The admissions and financial aid processes can be uber-complicated, with the various forms, rules, and deadlines; but when you know how they work (and work together), you can neutralize the sticker price and limit your out of pocket expense.  Consider that only 3% of all families have enough saved to pay for college for all of their children, whereas about 66% of students qualify for some type of discount, either merit- or need-based through this process.

I meet with hundreds of families each year.  Many of them should qualify for some type of need-based aid, but even extremely high income/high net-worth families who have little or no chance at need-based aid can reduce the price and make college more affordable, assuming they have the benefit of a prudent and integrated admissions/funding strategy, and an efficient implementation of said strategy.

Regardless of your financial position, if you haven’t saved enough to pay out of pocket for your children’s college education and would like to learn more about how the process works and how you can make it work for you, then I’d like to invite you to one of the two College Planning  workshops I’m holding this month.    I’ll cover:

• The biggest mistake parents make with FL Prepaid and other 529 plans
• The crucial questions parents should ask of every school on a student’s college list
• How a ‘pricey’ private college can cost less than a state school, even considering Bright Futures and FL Prepaid
• Why it’s taking, on average, 5+ years to graduate from college today and how to buck this trend
• How to compile a list of schools that maximize chances at both admissions and financial aid
• More!

These workshops will not cost you a penny to attend, and I promise that you will leave with valuable knowledge that can save the typical middle class family thousands off the cost of college.  If you are the parent of a high school student,  it’s time to get a rock-solid plan together on how you will pay for college for all of your children.  The best way to start is to attend my workshop. I’m holding one tomorrow night in Pembroke Pines.  Click here to register.  I look forward to seeing you there.

Best,
Peter

P.S. Back in November, I wrote an article about the mid-term elections and the results could affect Higher Education policy.  In it I mentioned changes to the FAFSA, among many other possible implications.  If you’re interested, you can click here to read it.

P.P.S. Feel free to forward this to a friend, relative, neighbor or colleague who is a parent of a college-bound, high school student.  They’ll thank you for it.