Devising a battle plan for college financial aid

Anyone can go to college. Even the most financially challenged can draw on financial aid or loans or find a low-cost school.

At least that’s what the experts have always said.

But it’s getting tougher. Most colleges mail their financial-award letters in April, and it’s a safe bet that most families will be disappointed, especially this year.

College costs continue to rise faster than household incomes.  Although you may have seen news stories in the past few months about colleges that have dramatically improved their financial aid programs, this is largely confined to elite schools with huge endowments.

Now the credit crisis that began a year ago with the subprime mortgage meltdown has spread to the college loan industry.

Many lenders trying to contain risks have made it harder to qualify for college loans. Some private lenders have raised interest rates or stopped lending to students altogether, worried that the weakening economy means graduates will find it hard to get the jobs they’ll need to pay the money back.

Congress is considering various measures to strengthen federal student loan programs. A House committee has approved increasing the four-year undergraduate loan limit to $31,000 from $23,000. The Department of Education is looking for ways for federal agencies to make student loans directly rather than just guaranteeing loans made by private companies, which are scaling back.

But any action from Washington probably won’t come soon enough to affect the decisions families have to make this spring.

What should you do if you’ve been offered a financial aid package that simply isn’t big enough? Negotiate.

Colleges can sometimes be convinced to sweeten the deal. In fact, because they are no longer allowed to consult one another to compare offers to specific students, they’ve had to become more flexible about making counteroffers to beat competitors. Colleges cannot withdraw an offer of admission just because you ask for more help, so you have nothing to lose by trying to improve the aid package.

But money is limited, and you’re competing with other families, so make your request right away. Your leverage is better before you’ve accepted the admission offer, rather than after.

Start by comparing the offers you received from various schools. Don’t fixate on the total aid figure, which may include grants and scholarships, work-based loans and work study. The most important figure is the family contribution — what you’ll have to pay on top of the other sources.

Remember that grants and scholarships, which don’t have to be paid back, are better than loans, which do. One school requiring a somewhat higher family contribution may actually be more generous than a competitor that has a lower family contribution but emphasizes loans rather than grants. The College Board has a good calculator for comparing aid packages on its Web site.

Double-check your aid application, looking for any errors that might have made your finances seem stronger than they are. Then list anything that has changed since the application was filed two or three months ago. Has the family’s income dropped due to a lost job or a reduction in working hours or shrinking commissions? Has the turmoil in the stock market reduced your investments’ value?

Your request for more aid is not limited to the topics covered in the aid application. Most forms, for example, don’t count the value of the family’s home. But perhaps you were planning to take out a home equity loan for college costs. If you can’t get one now because home prices have fallen, be sure to say so.

Perhaps your living expenses rose for some unavoidable reason, like the need to help out an elderly relative. Or maybe your employer has cut back on reimbursements for business expenses. Tell the college.

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