We’ve touched on this topic before, but with the credit crunch continuing, it behooves us to touch on it again. First, over the last couple of months, the “media” has continually reported that finding loans and other types of financial aid to pay for college would be much more difficult. Unfortunately, the media (present ‘company’ excluded) has only reported half the story. Yes, it is true that, due to the credit crunch, college financial aid loans from many private lending institutions has dried up. However, financial aid loans for college (and it should be noted, most “financial aid” for college comes in the form of loans) is available and will remain available from Federal government backed sources. In fact, as we noted here in a blog posted on 3-23-08 (“COLLEGE LOAN AVAILABILITY UPDATE”):
[A]nyone who’ll need loans for next year’s academic year should be able to get them, since funds for federally backed college loans will be available to anyone who needs them…[A]s Sara Martinez Tucker, US undersecretary of state made a point of noting when she was in Boston…to speak at Northeastern University, any problems in the private college loan sector haven’t affected any federally backed loan programs (such as Stafford and Parent PLUS loans), and gave assurances that federal funds would be available to those who need them for the upcoming academic year.
Second, in spite of (or, probably more to the point, because of) the continuing credit crunch and the ‘media’s’ reporting on how this has effected college financial aid, more and more so-called experts are advising college students (and, more particularly, their families) to try numerous financial ‘tactics’ – such as refinancing and/or taking a home equity loan on the family home, or transferring money invested in (what are considered her to be good) investment vehicles (such as mutual funds) to (what are considered here to be lousy) investment vehicles (such as annuities) – so as to, supposedly, increase the student’s and their family’s chances of acquiring more and/or better financial aid. The kindest thing that can be said about such ‘advice’ is, don’t listen to it. The more accurate thing to say about this “advice” is that this it is terrible advice.
Advising families to take a (or take a larger) mortgage on their home, or take well-invested money and switch it to lousy investments is horrible advice in and of itself. The fact that in most cases such advice doesn’t work (i.e. in most cases it doesn’t qualify your family for more financial aid, and in the few cases it does, it generally just qualifies your family for more financial aid loans (so, you’re basically being advised to take a loan that you don’ need (a first mortgage or larger first mortgage or a home equity line of credit -- all types of loans -- on your home) so that you can qualify for another type of loan (a college financial aid loan, which, as pointed out, you almost certainly could qualify for anyhow) only serves to make these so-called 'experts’ ‘advice’ that much worse. (Indeed, it would appear that in most cases the only ‘benefit’ of such advice is whatever profit these 'experts' may realize.)
Bottom line: your best 'tactic' is to avoid these so-called experts and do college financial aid research yourself (all of the information needed is available online and through high school college counselors and college financial aid offices. Additionally, be sure to start your research early (the earlier the better, but no later than the prospective college student’s sophomore year in high school.
(For good places to begin researching how to acquire Federally backed college loans in particular and other college financial aid in general, go to www.finaid.org and www.studentaid.ed.gov . Additionally, check out the BestMoneyinfo “College Savings and Financial Aid” page (to access, go to the www.969WTKK.com homepage and click on the Best Money Info icon) for more info on, and numerous links to, other websites with more information on college financial aid in general.)