Your clients wouldn’t agree to a six-figure purchase without knowing what it was going to cost … right? As advisors, we would never let the families we serve put themselves in such a precarious position.
Except when it comes to college.
College is the only major purchase families make without getting “pre-qualified” for a large purchase (think cars, houses, vacation homes) before they go shopping. Clients whose children are now in the throes of applying for college for the 2025-26 academic year need a wakeup call to rethink their approach to “college buying.” So do families with future college plans.
For starters, remind your clients that the Department of Education has once again thrown a monkey wrench into the financial aid process by delaying a full rollout of the 2025-26 Free Application for Federal Student Aid (FAFSA) until Dec. 1, 2024 — two months beyond its originally announced launch date. This means that for the second year in a row, families may not have a have a true view of their financial-aid picture before their kids commit to a college.
The Department of Education’s Epic Failure
The Department of Education’s rollout of the “simplified” FAFSA for the 2024-25 filing season — which resulted in a $1.8 billion deficit in available aid — can only be described as an epic failure. The problem was the combination of a monthslong delay in the application’s availability, followed by technical errors and the failure to factor in the impact of inflation. That omission made it look like some families had more disposable income than they actually did. Some aid-award problems for the 2024-25 school year persisted into July or later.
Todd Weaver, president of Strategies for College, a college planning firm that I consult for, notes that the 2025-26 FAFSA delay will further complicate things for students applying to colleges this fall. They must submit their Common Application by November 1 to schools that use the Common App, they may be asked to apply for aid using the CSS Profile after October 1 (more than 220 colleges require that financial aid form), and they won’t be able to file the FAFSA until December 1 or later.
Weaver and I encourage students to keep track of these dates, regularly check college websites’ admissions and financial aid pages for updates, and frequently check the FAFSA website.
Lessons Learned
One of the lessons learned from last year’s FAFSA debacle is the need for the buyers (families sending kids to college) to take back control from the sellers (the colleges). The colleges were hamstrung in terms of making final offers to students, finalizing award letters, and knowing who would enroll and be part of their incoming freshman class. And families were literally paralyzed, stuck in a state of indecision, as they waited for the final award letters.
In fact, there are kids on campus right now, weeks into the school year, that are just receiving their final award letters for the 2024-25 school year.
The best way for families to wrestle back control of the college “purchase” is to treat buying college like they buy a house. One of the first things we do when we buy a house is get “pre-qualified” for the purchase. We outsource the process to a lender who takes it upon themselves to pour over all of our financials (tax returns, payroll stubs, credit card statements, investment statements) to determine the maximum amount they would be willing to lend and have confidence they will get paid back.
Imagine helping families “pre-qualify” for the college purchase! Calculating the spending ceiling for college, all kids, all years. Then helping parents find those schools that fit the affordability parameters. I call that “shopping in the right zip code” for college. Here is a link to a college spending ceiling calculator you could use with your clients.
Too Little, Too Late
While one of my client families was attending orientation in June for the college they ultimately chose, the student received an updated/improved award letter from another college on his list. Like so many schools, the other college was scrambling to fill its freshman class because of the FAFSA delays. Rather than wait, my client proceeded with the offer in hand from the first school because we had already asked the other school to reconsider its offer three times. Its last-ditch effort was too little too late.
Weaver notes that the delay in the federal formula last year made some families choose colleges that weren’t necessarily their top choice. Additionally, more students selected public schools because they looked at the overall cost instead of waiting for a formal financial aid offer or a favorable appeal from another school’s financial aid office.
“Colleges are saying their hands are tied more than ever from the new federal formula,” Weaver told me. “They are claiming they don’t have the flexibility to offer more aid, but I believe that is really for the students who are not in the top half of the admission pool more than anything else.”
Reverse Engineering College Planning
But it’s more than the FAFSA foibles that families need to tackle. Families have historically let the “financial aid tail” wag the “paying for college” dog. It’s time for a paradigm shift. What if families figured out what they could afford to put toward college before students applied to schools? What if we shed the “reach, target, safety” approach to creating a college list and focused on a list of 100% target schools that were a fabulous fit — academically/socially for the student and financially for the parents?
Part of reverse engineering the list of schools so they fit the affordability guidelines of the family would include knowing the likely financial aid package their student would be offered. This can and should be done prior to hitting submit on the application.
Another college planning expert I introduce families to, Stuart Siegel who runs Financial Aid Now, helps families file financial aid forms, creates award-comparison reports that factor in historical offers, and assists families with negotiating award packages.
For Families With Multiple Students
The other big “gotcha” with the new, simplified FAFSA formula is it penalizes families with multiple students in college at the same time. Under the old formula, parents were permitted to divide their calculated expected family contribution among all their children attending college during that school year.
Ironically, families that have kids overlapping in college should seriously consider putting more private colleges on their list because the CSS Profile formula still offers the sibling discount. The private colleges may advertise a higher retail price but they routinely offer better discounts and have higher four-year graduation rates so they often prove to be more affordable by the time the student graduates.
It’s never been more important for families to know what they’re signing up for when it comes to college. As advisors, we can help them be better consumers of higher education. Our message to our clients should be, “It doesn’t matter what college costs. What matters is what you can afford.”
It’s our opportunity to have a meaningful impact.
Beth V. Walker is a wealth advisor with Carson Wealth Management and founder of Center for College Solutions, which is based in Colorado Springs, Colo. She is also a member of the SFC Consortium, a group of professionals which helps match families with colleges. She can be reached at bwalker@carsonwealth.com or 719-522-2278.
