June 10, 2012

Personal Finance: New push helps educate you about college aid

Getting into college is hard enough. Paying for it? That can be even more intimidating.

Getting into college is hard enough. Paying for it? That can be even more intimidating.

But as student loan debt piles up and college costs nationwide seem stuck on the "up" escalator, there have been renewed efforts recently to help families make smarter, more informed choices about financial aid and to avoid getting fleeced.

Last week, the White House and 10 universities announced a commitment to making financial aid offers clearer and easier to compare, starting with the 2013-14 school year. Also last week, the federal government announced it's making it easier for "responsible" graduates to enter into income-based repayment plans for their federal student loans.

The new push to make financial aid offers more understandable comes as the average debt on student loans for a college graduate is $25,000 – and triple-digit debt isn't unusual.

"It's hard enough to figure out how to pay for college without confusing, obscure or misleading information about costs and aid," said Lauren Asher, president of the Oakland-based Institute on College Access & Success, which runs the research-driven Project on Student Debt. "Consumers need to know what each college really costs and how much of that cost they will have to save, earn or borrow to cover."

She said there's often too little distinction between loans and scholarships and too much confusing jargon that makes it difficult to compare colleges' costs.

The 10 universities that signed on ranged from Arizona State to Vassar. Starting next year, those 10 have committed to issuing financial aid letters to students that spell out: How much one year of college will cost; financial aid options, including a clear difference between grants or scholarships (which don't require repayment) and loans (which do); estimated monthly payments – after graduation – for federal student loans; and student graduation and loan payment/default rates.

It's part of the "Know Before You Owe" initiative launched by the new federal Consumer Financial Protection Bureau. Initially focused on making mortgage loan terms more understandable, it's now being applied to college financial aid offers.

On its website, the bureau is asking for public comment on its "financial aid shopping sheet," a mock financial aid letter that could become a model for how colleges communicate financial offers. Comment deadline is June 20 at

For those already bogged down in student debt, the IRS and Treasury departments are streamlining application procedures for "income-based" student loan repayments, which are currently capped at 15 percent of discretionary income for "responsible graduates who make their payments on time." Starting in 2014, the cap would be 10 percent for qualifying borrowers.

Meanwhile, the Federal Trade Commission is reminding parents and students to be wary of scholarship scams that dangle promises of "guaranteed" college financial aid.

"These firms are alluring because they promise certainty," said Dean Graybill, FTC assistant regional director in San Francisco. "If you're strapped for college education funds and someone says 'For $500 I can assure you a $10,000 grant,' you're gonna take it."

While they aren't new – the FTC says it first started seeing companies peddling phony scholarship help in the mid-1990s – the schemes tend to crop up during times of economic stress.

While noting there are plenty of legitimate companies and school counseling offices that can offer help with financial aid and scholarships, Graybill said "the scams we take action against are those that go far beyond that. They claim they can guarantee a grant or scholarship for an upfront fee."

The offers, which can arrive via mail, email or as seminar invitations, typically carry similar red-flag statements, like: "The scholarship is guaranteed or your money back." "I just need your credit card to hold this scholarship." "You can't get this information anywhere else." "We'll do all the work. You just pay a processing fee."

As with any investment, Graybill said, families looking for financial aid should never feel pressured into signing documents or giving out credit card or bank account details. Offers should be in writing. Be wary of glowing testimonials or "success stories" from individuals who may be paid shills.

The best and most basic way to start the financial aid process is the Free Application for Federal Student Aid, or FAFSA. It's available at It's typically filled out in spring; deadlines vary by state and college system.

Generally, the recommended route to paying for college: scholarships and grants first, then federal student loans.

Private student loans – typically those offered by banks or other lenders – continue to get criticism.

"Private student loans are the worst they should only be considered as a last resort," said student debt expert Asher. Compared with federal student loans, she said, they tend to have higher variable rates, limited repayment options and fewer borrower protections.

For students, perhaps the best route to finding scholarship dollars is the old-fashioned way: hunting and applying on your own.

Last year, we wrote about Connor Quinn, a Bella Vista High School senior who methodically applied for more than 80 scholarships during his last two years of high school. By the time he graduated in June 2011, the Fair Oaks resident had nailed down $22,700 in scholarship monies, whose donors ranged from Best Buy to a Buddhist foundation.

Even after he enrolled at the University of Texas, the scholarships continued to trickle in. By last count, he'd tallied up 36 scholarships totaling about $37,000.

Quinn, an economics major, said he's reapplying for some of those same scholarships to help pay his out-of-state tuition this fall.

His scholarship-hunting tips? Go local and go big. "In the beginning of my scholarship search, I relied on, until I realized it wasn't paying off. I then switched to applying to either local scholarships or nationally known companies' scholarships – that's when I started receiving the awards," he said in an email.

The 19-year-old scholarship expert also recommends sites like and "talking to past graduates and following their footsteps. Avoid sites that make you pay."

Other websites offering scholarship searches:,, and


Our recent column on a United Way program that helps foster teens open bank accounts and learn financial skills prompted several calls from readers asking how to donate. The program, which offers matching funds to foster teens who learn specific skills, covers 236 students in five Sacramento-area counties.

To make a donation to United Way's $en$e-Ability program, go to: or call (916) 368-3050. Or call the individual programs directly, including Koinonia Family Services at (916) 652-0171 and the Child Abuse Prevention Council of Sacramento at (916) 244-1975.

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