7 On Your Side: Offsetting college financial aid costs
Whether you're a high school, returning student or a parent planning to pay for college, right now is an important time for financial aid.
College is very expensive, so it is critical to take steps to offset costs before you leave money on the table.
"Aid is first-come-first-served, the sooner you get it done the better. Whether it's Federal, State or school financial aid, if other applicants beat you to the pool of money available first, you could be leaving money on the table," says Charlie Javice.
At the offices of Frank, www.withfrank.org, an online resource for students to apply for and navigate various paths of college financial aid, founder Charlie Javice, says it is critical to allow time to appeal your first aid offer.
"You're going to get your financial aid award that comes after you been accepted, then you look at what you get and say oh my goodness I can't pay for this!" added Javice.
Javice's advice is to ask for a tuition discount - more aid in the form of a scholarship or just a straight-up deduction.
"Try to keep that secret slush fund the school financial aid office has, write a letter explaining why you can't afford the offer, make it personal and detailed. Sometimes it's your parents lost your job, didn't make bonus a, death a birth...unexpected circumstances." Javice suggests.
Next - keep your options open/ Frank advisors encourage applying to state schools, which are cheaper and will match your aid package.
Create a budget list all expenses, food, rent books so you have a case of what you will need in aid.
PROS AND CON'S OF ISAS
One alternative gaining traction is income-sharing agreements, a sort of loan, where the student repays the student loan, but as a percentage of their post-graduation income.
ISAs, as they're becoming known, as are not offered by a lot of schools yet, but the appeal of this new type of financing is very wide, because, under an ISA, the student has either all or part of their tuition paid for upfront. With that being said, it is, for now, unregulated and risky.
"It makes it extremely flexible if you don't have a job - you typically don't need to pay anything back," says online resource, Frank.
Her advisors welcome the alternative to the traditional student loan but warn Income Sharing Agreements are a form of debt, and investors expect profits, typically 3-10 percent of their starting salary.
Right now, ISAs are popular, but few schools are offering them another con - Javice warns low salary professions pay higher rates
For example, if a code writer lands a job making $80,000, they may be required to pay back just $2,400 the first year, while a teacher earning $30,000 may wind up paying $3,000 - that's a ten percent slice of their salary.
But ISAs do have caps on the total amount a borrower can pay - typically 2.5 percent the amount borrowed.
But a big con "Frank" warns its clients questioning if ISAs are right for them - you won't have the same protection as traditional student loans, like, forbearance deferment -some of the protections that come with loan forgiveness. You can't forgive ISA.
The big takeaway is that the market for ISAs it not regulated at all, so while popular there are no rules in place yet.
Javice says the potential to take advantage of students or parents who are not financially literate is huge.
Federal student loans and private loans are still the best options.
