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Navigating the financial aid maze

More parents are turning to college financial planners for advice on how to pay for college.

For high school students about to graduate and head off to college, February is a month filled with acronyms, abbreviations and confusion. There's the FAFSA. EFC. PLUS. SAR.

Understanding and navigating that student aid alphabet can seem like a calculus problem in itself, which is leading some parents to hire private college aid planners to help paint the best financial picture (or worst, as the case may be) possible.

That’s what brought high school junior Caya Williams and her mother Erika Ijames-Wilson to Karen Powell’s office in suburban Atlanta. Powell is a Certified Financial Planner and a senior college planning consultant.

“We’re squarely middle class,” says Ijames-Wilson. She and her husband make a decent living, but have told Caya it’s up to her to pay for college if she wants to go.

And she wants to go.

Her first choice is Spelman College, a private historically black women’s college in Atlanta. A year can approach $40,000.

“Our reality is that estimated family contribution is hers, and that’s a lot to put on an 18-year-old,” says Ijames-Wilson.

That’s why she’s considering paying college planner Karen Powell between $350 and $2,500 to help Caya take advantage of opportunities for scholarships and aid.

So what will they get for that money?

Powell says a comprehensive, six-pronged approach that begins with beefing up academics. Since Caya is already in good shape there, the next move is to scrutinize finances.

“There’s tax strategies and income shifting and asset shifting,” says Powell.

Take income shifting: if a family owns a business where the student works, for instance, Powell recommends raising the teenager’s salary, then sitting aside that money for school. That offers a tax savings, because the student’s tax bracket is lower than the parents’.

Another way to shift income is hit up the college fund ahead of time to buy things the students will need for school. That way there’s less cash in the bank, cash that could count against financial aid eligibility.

But Powell says it’s not about gaming the financial aid system.

“We especially look for ways they will not be disadvantaged by the way their either income or assets are being held,” she says.

Powell is upfront about her fees, which are priced “a la carte” starting at a few hundred dollars.

Other college planners aren’t so transparent.

Lynn O’Shaughnessy is the author of the book "The College Solution." She says a lot of planners are really just insurance agents looking to sell you a policy. “And the problem is with these insurance guys, they can tell perspective clients, ‘Oh, well, I got a $15,000 scholarship for this family,’ or ‘$13,000 a year for that family.’ And it sounds all well and good, but the thing is, usually those families would’ve gotten that money anyway.”

That’s not to say there isn’t good advice to be had, even if it comes at a price. Mary Fallon says some parents need help filling out the financial aid form. She’s a spokeswoman for Student Financial Services, Inc., which runs the website FAFSA.com.

“The federal government lets you prepare your own income taxes for free, or you can get help from an income tax preparation service,” Fallon explains. “And the same thing works with the FAFSA.”

Fallon’s group charges between $80 and $300 to help fill out the federal aid form.

With in-state tuition averaging more than $22,000 a year, and private schools almost double that, parents and perspective students are easy prey for unscrupulous college planners.

Consumer advocates say avoid those who use the hard sell to get you to shell out cash for their products. And if you don’t know whether something’s legit, call your local college’s financial aid office.

Its services are free.

About the author

Jim Burress is a reporter for WABE in Atlanta.
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Prices listed in this story for fee-based help in preparing a federal student aid application (FAFSA) are incorrect. Student Financial Aid Services' online service cost $79.99 and its telephone service cost $99.99. Students have 2 options when preparing a FAFSA either do it themselves for free on the US Dept of ED website or get professional help from a fee-based service, which typically ensures accuracy and meeting deadlines.

I'm a long time fan, and this is the first time I've heard something on Marketplace that I find flat-out misleading. Great idea for a report topic, but WHAT BAD ADVICE!! I wish Mr. Burress had researched a bit himself first so as to find a worthy advisor.

Colleges demand about 33% of student assets but only about 5% of parental non-retirement assets, so no need to give the kid more money to save (ha ha) at the parents' expense. Also, as only 5% of parental non-retirement assets is taken, spending money so far ahead of time on guessed-at school needs isn't smart (especially when parents should preserve as many assets as possible to try to weather the 49% percent levy on parental INCOME during those college years). There are plenty of better ways to adjust your savings/spending approach with financial aid in mind (for example, contributing to Roth IRAs as much as possible).

Also, I agree with the comments above that the parents' attitude/actions are bizarre and contradictory, and their expectation that they will just have their 18-year-old handle the expected contribution needs some explanation!! Much as I too would love to say "you're old enough to count as an adult now, so pay for it yourself", the formulas take parental income into account in a major way and there's no way out as far as I know!

I'm sorry...I'm a bit lost here. I am supposed to feel sorry for parents who are attempting to weasel out of their responsibilities to their OWN CHILDREN? Please explain to me why these parents who are, by their own admission, "squarely middle class" feel entitled to tell their own child she is on her own for college tuition and then turn around and pay up to $2,500 to a consultant who will help them game the system. Why don't they just contribute that money to their child's education for god's sake? I don't have children, but I know ALL of my friends who do are putting money away for the future educational needs of those kids. And that is really the way it should be. Financial aid should be for those who truly can't afford to pay, not for those who have other priorities for their money.

I totally agree with cmaddox's comments, whats the deal?? being middle class means you can't 'afford' a college education for your kid??do your homework, save your money and give your kid the basic things in life: love, shelter, food and an education. I believe it is called PARENTING!! And sock the $2500 in an S+P index fund at Vanguard in your child's name. The earlier you begin to save for college (when they are born) the better (the power of compounding). finally when you need to make the important college choice (who offers you merit money) then you have flexibility, crazy thought-choices!

Dear Mr. Burris,
Thank you your for the terrific reporting and the warning about unscrupulous college planners is very pertinent. Just have to quibble about the last line, that your local college's financial aid office offers free services. Those services aren't free: that fee is hidden in those high tuitions that are causing the debt problem in the first place.
A similar practice: Study abroad programs run for a profit and can cost $20,000. But some colleges offers incentivizing 'scholarships' of up to $2000 to worthy students to defray study abroad expenses. That is, they give back selectively to students a small portion of what the student has just paid in tuition, while pretending to award some kind of prize. That is, unscrupulous college planners have nothing on the colleges themselves.

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