Marc Ruiz of Oak Partners, Mind on Money: The College Experience Begins With Financial Aid

By: Marc Ruiz Last Updated: October 29, 2018

Marc-Ruiz Our family has been in college visit mode for the past six months. My second daughter, a spunky redhead with a huge heart, is on deck. Her high school performance has been exceptional, so no school is out of the realm of possibility.

Colleges have stepped up their recruiting games considerably since the last time I did this process, almost seven years ago. Each visit starts with inspirational videos shown in beautiful lecture halls, followed by campus tours hosted by bright-eyed, well spoken co-ed tour guides. Every program we’ve looked at has generously provided access to counselors and professors for deep dives into majors.

Given her personality, it's no surprise she has felt very at home at some of the smaller Catholic universities on her list. Despite my inherent bias to my alma mater Purdue, I have to admit I’ve been charmed by the vibe at some of these smaller private schools.

The problem is, my financial planning for this endeavor — aka the amount I’ve saved for her since she was a baby — has been modeled on the cost of Purdue or another state school, and the sticker price for some of these private universities is three times the cost of Purdue. Most are a solid double the state school price.

All parents know in their hearts which one of their brood will never miss a Thanksgiving, which one will take care of us when we’re old. This little redhead is the one in our family. She’s worked hard and has a unique personality, so I want her to make a careful choice when it comes to her college experience, but the money is definitely an issue.

Fortunately her scores will get her a nice package of merit-based aid at most private schools. Merit aid is the pool of money that schools, and programs within schools, allocate toward their ideal students.

This brings the conversation down into the realm of possibility, but the gap between her 529 plan balance and the cost is still material.

In order to get a merit aid package at any school the family must complete the Free Application for Federal Student Aid, or FAFSA, which now opens for the following year in October. This process requires parent’s 2017 tax returns, the child’s tax return or W-2s if they didn’t make enough to file, bank statements or online access, investment statements or online access, and about three hours.

The biggest challenge I found with the FAFSA is the security procedures. I work on secure financial systems all day, and still found the FAFSA’s triple level security hard to navigate, compounding an already stressful process. Make sure you keep the child’s social security number on hand, as you will need it after every time you get up for a bathroom break.

The purpose of this whole process is to calculate what is called the Expected Family Contribution, or EFC, number, which is a theoretical amount a family can allocate toward the education of the child. The government expressed the EFC in a code (of course), which is a bit hard to read. With mine, I had to take away a zero on the front of the code to figure out the actual number, which quite frankly was absurdly high.

The lower the number, the more needs-based aid can be awarded from both the government and the school selected. At the end of my process my daughter was awarded a “Stafford” loan, which when I clicked on the link led to a website where the word Stafford was never listed again (just love the government).

Next week I’ll talk a bit about the pros and cons of various types of aid that could be awarded at the end of the FAFSA process.