Financial Aid Consultants: Spending Money to Make Money?
I discussed the dangers of personal statement coaches on Saturday, and I'd like to address a similar topic today. I am always skeptical of any type of 'college admissions coach', and financial aid consultants strike me as even more suspicious. While other consultants offer a benefit that is rather unquantifiable (there's no specific dollar value of a 2200 SAT score or Harvard admission, for example), financial aid coaches offer money for money. On a simple analysis, if you earn more in financial aid than you pay the coach, you come out ahead. On the other hand, if you pay more than you earn, you have lost money with no other material benefit.
Thus, I am wary when I see steep fees charged for these consultants. Ivywise, a New York-based firm, in particular receives a lot of criticism for their programs. At roughly $650 an hour, I have wondered if their financial aid coaches can actually get you that much money back.
My suspicions grew when I read Ivywise's February 2008 newsletter which featured an article written by financial aid counselor Rod Bugarin, in which he says: "government loans for parents (called PLUS loans) have a relatively low interest rate (currently 6.1%)."
While this piece of information would be correct for students borrowing in the 2005-2006 aid year, PLUS loans have been fixed at 8.5% since July 1, 2006. Mr. Burgarin who presumably also charges the approximately $650/hour fee of Ivywise is relying on information almost two years old to give financial aid advice. This worries me.
In fairness, I e-mailed Mr. Burgarin last week about the error and he had this to say:
[T]hanks for letting me know. I[']ll make changes on monday. I should[']ve double checked the interest rate before publishing the article. As this article was in a two part series, I[']ll let readers know in next month[']s edition. Thank you.
Though it is now Tuesday and the error persists, I am glad to see him acknowledge the mistake and endeavor to correct it. But should I, a small, independent purveyor of free advice really be correcting the errors of a career financial aid consultant who charges hundreds of dollars per hour for his service? Ivywise's most expensive package runs for over $32,000, and patrons could potentially be paying for damaging advice. Industry experts earning salaries for their services should know better.
I do not mean to criticize any one program or company. Instead, I would like to remind students and parents that there are options available outside of high-priced consultants. Much of the advice they offer is available free at many places on the Internet, including this site. The industry of college admissions consulting is one in which more the expensive services are not necessarily better.
Have a question or comment? 2 people do.Could Rising Interest Rates on Student Loans Actually Be a Good Thing?
I've blogged previously about private student loans and why they tend to be a bad choice (see the final point on my article about comparing forms of financial aid). Federal loans with their lower interest rates are almost always a better option than the high-interest, often restrictive private alternatives. But the current sub-prime mortgage crisis and recent Federal legislation have meant that even if students avoid private loans, they are still getting hit with the effects of a tanking economy. As John at Free College Blog points out, the credit crunch is having far-reaching effects:
[T]he recent legislative reform drastically reduces the amount of income [student lenders] are able to generate. To make up the difference, lenders are: raising rates on private loans; denying loans to students with low credit scores; or getting out of the [Federal] subsidized loan business all together.
One of the biggest advantages of Stafford and Perkins loans, and also graduate PLUS loans, is that none used to require a credit check. But with students as such big credit risks, and with lenders losing money on defaulted loans, banks are becoming more reluctant to deal with students as openly as they have in the past. This is troublesome for everyone.
Perhaps, though, the news isn't entirely dire. John goes on to make another excellent point:
In the long run, this could be helpful for tuition costs as more schools figure out business models that allow them to admit students without necessarily needing loans to pay for it.
Surely we should be cautious in praising soaring interest rates, but this point is a good one. As the cost of education continues to increase exponentially and as graduate debt follows its own upward path, colleges will soon have no choice but to dip into their endowments to make their programs more accessible. We're looking at a lot of trouble in the short-term, but there may be light at the end of the tunnel after all.
Have a question or comment? Leave me one.Why (and How!) to Take Control of your Online Presence
Did you know that college admissions officers actually check MySpace, Facebook, and Google? What was long just a myth designed to scare students has now become reality in a new Web-driven era.
Learn their search strategies and how they find you online, and tips to make sure that what they find helps rather than hurts you by reading my newest article on how (and why) to take control of your online presence.
Have a question or comment? Leave me one.The College Opportunity and Affordability Act: Why It’s Good News
The U.S. House of Representatives decided yesterday to address the soaring price of college tuition and remove other obstacles that make it harder for qualified students to go to college. The bill they passed, the College Opportunity and Affordability Act (H.R. 4137), promises to reform and strengthen the university programs to ensure that they operate in the best interests of students and families.
It is no secret that tuition costs have steadily increased over the past few years, far surpassing the rate of inflation. With masses of students graduating with enormous debt, Congress hopes to alleviate the problem by encouraging colleges to rein in price increases, ensuring that states maintain their higher education funding, and providing students and parents with more information about tuition and college fees. Even better, the bill demands greater disclosure and protections on private student loans.
Other notable goals of the bill include:
- Streamline the federal student financial aid application process
- Make textbook costs more manageable for students
- Allow students to receive year-round Pell Grant scholarships
- Strengthen college readiness programs
- Increase college aid and support programs for veterans and military families
- Improve safety on college campuses
What's best about the bill is that it targets middle class families in ways that previous bills did not. While the federal government has sought many times to increase access for very low income families, middle class students were often left shouldering the leftover tuition. Now it seems that all students are gaining the benefits.
Personally, I think the commitment to greater education regarding student loans is a long overdue change. Even worse than skyrocketing tuition are the ultimate interest payments that later gouge graduates. And with student loans impossible to escape through bankruptcy, early education on smart borrowing (and, more importantly, other financial aid programs) pays off.
Have a question or comment? Leave me one.How to Compare Financial Aid Offers
As soon as the excitement of all of the acceptance letters wears off, it's time for the incredibly difficult decision of what college you'll ultimately attend. Different financial aid packages make this time a lot tougher.
Read about ways to compare financial aid offers and learn which each type of financial aid means. In this new article, I discuss the pros and cons of scholarships, grants, work study, and federal and private loans.
Reader Question: Will One Bad Semester Kill Me?
Reader and high school senior Gigi has submitted a college admissions question likely shared by many students in her position:
during my senior year in high school (last year), my parents decided that they wanna move to bakersfield, [California]... and that decision pretty much just ruined my senior year in high school... my grades dropped... my GPA was, i think, about 2.0... or even lower... not sure...
i was a complete stranger in a new school, with no friends whatsoever... it really affected my life and grades...
i'm wondering if i'm even eligible for college...
Terrific question, Gigi.
Remember that college admissions committees are not full of robots. They are real people who genuinely want to work with you to help you succeed. Since you had a tough senior year in high school, that is something you will want to address in your personal statement. Talk about the difficulties associated with moving to a new place, and then explain that you feel that you are ready to return to your academics and excel again. If you discuss your situation exactly as you have in your letter, the admissions officers will understand.
Remember that it's not about making excuses or casting blame, but rather persuading the admissions officers to believe that one semester or one year of grades does not accurately reflect your abilities as a student. Then, tell your story and why you believe you're ready to overcome the difficulties you had.
If you are not able to get accepted by any of your preferred California state colleges, remember that community college is always a viable option. If you finish two years, and do reasonably well, you could transfer to a California State University without having to take the SAT or ACT. You could also look into some of the admissions programs offered by the Universities of California (UCs) including the Transfer Admissions Guarantees of UCs Davis, Irvine, Riverside, San Diego, Santa Barbara, and Santa Cruz, or the similar Transfer Alliance Program of UCLA. Each offer either guaranteed admission or priority consideration if you transfer from a participating community college. Many other states have similar transfer programs as well.
Best of all, you'll save money (community colleges are way cheaper than universities) and in the end, it won't be any different than if you had gotten into your college of choice in the first place. Your diploma will say only the school you transferred to.
The most important thing is to stay calm and keep perspective. Just because you had one less-than-stellar year does not mean your opportunities are lost forever. I would recommend calling a few local community colleges to ask about their transfer programs. They will be able to make some recommendations for what you should look into initially.
Good luck!
Have a question or comment? 3 people do.