Bridging the Aid Gap

Man

y of the country's high school seniors are learning their academic fates — and their parents' financial ones — as colleges send out acceptance letters. Most families have until May 1 to pick their school, and for the half of students who get some form of financial assistance, the aid package a school offers will play a big role in that choice.

The offer a student receives is determined by two factors: the school's financial-aid formula and how badly the school wants the student. So how do you sort out hard-to-compare offers? Is it possible to persuade a school to offer more? Where do you come up with the dough if you fall short?

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COMPARE APPLES TO APPLES. The raw size of each financial-aid package doesn't really matter, especially considering that student loans are generally thrown in and counted with other aid. What matters is how much the family is expected to pay (after outright grants and scholarships) and how much the student is expected to borrow.

TRY AN APPEAL. If your top school choice doesn't offer enough aid to make attending feasible — or if it offers you much less than other schools do — it's O.K. to appeal. (Don't say "negotiate." Aid officers think it makes them seem like used-car dealers.) Seamus Harreys, Northeastern University's dean of student financial services, says he has seen many cases in which a parent's income has been hit by the slow economy. The key is documentation: unemployment paperwork, a letter from a former employer, a letter from your accountant if you're self-employed. If you have paid high medical bills, don't just say so; show the bills.

But what if yours is not a hardship case? What if an aid package is just not attractive compared with those from other schools? It's still a good idea to present new information, says Kalman Chany, author of Paying for College Without Going Broke. You might make the case that you face a higher-than-average cost of living in your area, then send the numbers and a budget to the school along with copies of more generous offers from schools of similar quality. Don't delay. You have the most leverage after being accepted but before committing to attend.

BORROW THE REST — WISELY. If you're still having trouble affording your favorite college, don't panic. Withdrawing retirement assets can inflate your income and hurt your future aid eligibility. Even working overtime to earn more can hurt you. Borrowing is often smarter, especially today. A PLUS (Parent Loans for Undergraduate Students) loan charges 4.86% interest, and that could fall (even on existing loans) with the annual rate review in July. For more on the loans, see finaid.org.

Home-equity borrowing also makes sense; rates are low, and the interest is usually deductible. If you think interest rates will rise, and your school will allow it, consider a fixed-rate loan (rather than a variable-rate line of credit) big enough to prepay more than one year's tuition. That can save you the rate of tuition inflation, currently about 5%.

Don't forget that if your household income is less than $103,001, you can get a Hope Education Credit of up to $1,500 per student for the first two years of school. You take this credit on your tax return. And that's one thing you don't have to negotiate.