April 7, 2012
Student athletes are the subject of intense competition as they consider their college options. Scholars should be similarly recruited, but the Free Application for Federal Student Aid (FAFSA) process is a one-size-fits-all filter effectively eliminating that possibility. The FAFSA form does not take into account indebtedness, car payments, house payments, local cost-of-living differences, individual family circumstances, or the tuition, room and board expense of different public or private colleges and universities.
FAFSA determines the “Expected Family Contribution (EFC)” based upon algorithms that bear little relation to actual family budgets. Our EFC was equivalent to a second full mortgage in Boulder. What wasn’t available in grants or scholarships was made available through the Parent Loan for Undergraduate Students (PLUS) program, which is not subsidized and is only available for students with credit-worthy parents. The interest rates fluctuate pretty wildly, peaking at 8% when our son was in his senior year. After 7/1/12, it will rise from its current 3.4% rate to 6.8% — better than a credit card, but expensive nonetheless, with future rates susceptible to political whims.
For those who don’t need financial aid, student loans don’t matter. Demonstrate significant need under FAFSA’s formulae and you’ll qualify for grants, scholarships and subsidized loans. Colleges meeting “demonstrated need” rest easy, but don’t be in the “sour” spot: parents earning more than a moderate income, but less than the 1% make ($250,000+). Need-based scholarships disappear, and loans are the only option. FAFSA is no bargain for children of the middle class.