Paying for College When Financial Circumstances Change

Every year I speak with families who find their dreams of a college education jeopardized by changing financial circumstances.  Yes, college is expensive and sometime parents are caught off-guard by the actual price, but even families who have planned, saved, and prepared find their college savings aren’t sufficient when circumstances change because of job loss, death of a parent, failure of a business, or other trauma. There are actions students and parents can take to ensure the college dream stays alive.

1.  Take Steps to Understand the Financial Aid Process

It helps to understand how college financial aid works. The first step in qualifying for aid is filing the Free Application for Federal Student Aid (FAFSA). The FAFSA results will show the EFC, or expected family contribution, the amount the student and his or her family is expected to pay each year. College financial aid offices calculate student need as the difference between the actual cost of attendance and the family’s EFC.

2.  Families Need to Evaluate Their Financial Situation

When financial circumstances change, family members need to honestly evaluate the new financial reality.  Did the primary wage earner lose a job?  Is it a minor pay cut?  Has a non-custodial parent refused to pay? Has there been an unexpected death in the family? Often, changes to financial circumstances are sudden and may affect more than just the ability to pay for college. Unfortunately, I’ve seen students in their senior year of high school face heartbreaking situations – a parent diagnosed with a terminal illness, accidents that take the lives of one or both parents, or unexpected financial crises (remember Enron!).  A colleague of mine had a client who was expecting dad to pay for college, only to find out just before high school graduation that dad’s business was under federal investigation and all family assets had been frozen. No matter what the cause, most of these circumstances catch families by surprise and are highly charged emotional times.  To evaluate how this change will affect their ability to pay for college, families should take time to get all the numbers together and evaluate the entire financial picture.

3.  Contact the College Financial Aid Office ASAP

If an honest evaluation of finances reveals that college tuition will be a problem, families should contact the student’s chosen college(s) and arrange to speak to a financial aid officer. College aid offices deal with unique circumstances each year and are willing to help. If a student has already applied for aid, the process will be faster, because the FAFSA has been completed and the school has the EFC calculation. Colleges have the ability to make onsite changes to a student’s EFCs if his or her family provides supporting documentation, enabling the student to qualify for more aid. While financial aid officers will try their best to work with each family’s unique situation, they may not have any money available for scholarships or grants. In other words, they will do what they can, but even colleges can’t print their own money.  The answer may be more loans, limited sources of aid, or the decision that the family can no longer afford that particular school.

4.  Families Should Prepare Necessary Documentation

After the initial discussion with the college’s financial aid office, most families will have a list of documentation they need to provide. Families that initially planned to pay for college without aid will need to gather tax returns, bank records, and investment documents in order to complete the FAFSA. Because the FAFSA looks at the previous year’s income, most families will need to provide documentation of their change in circumstances and the financial impact it has on their ability to pay directly to the college.  Documentation can include death certificates, termination letters, court or law enforcement documents, and letters from clergy or school counselors.

5.  Students & Parents Can Look for Alternative Funding

In the best case, the college financial aid office will be able to help locate sources of funding to cover the student’s unexpected shortfall.  Last-minute provisions often include student loans, because other more desirable sources of funding have been depleted. Families experiencing only a temporary change in income may want to seek out private sources of lending; some may be able to cover the difference by borrowing from extended family or taking a part-time job. Those facing long-term changes due to death, incarceration, or a business failure should speak to the financial aid office and have a clear picture of what aid they may qualify for in subsequent years.

Conclusion

College financial aid officers help families work through challenging situations each year. They do their best to work around problems and provide needed aid on a case-by-case basis when circumstances change. Ultimately, though, a family will have to determine if the additional aid offered is sufficient to allow a student to complete college at that school.  ]]>