WHEN YOU ARE KNEE DEEP in financial aid applications, desperately trying to figure out how you're going to pay for your child's college education, it's easy to forget one thing: The laborious process offers as many opportunities as it does headaches. Though the labyrinthine aid forms make even the 1040 look simple, financial aid officers aren't like the Internal Revenue Service. They use a system you can easily master -- and even beat. We'll show you how to squeeze the most out of the financial aid process.

The Basics
 
How Colleges Calculate Your Need
Colleges use two numbers to decide on your financial aid package: their annual costs and your expected "family contribution." They reach the latter number by plugging the information you give them into a federal formula that takes into account family income, total assets, family size, number of children in college, even parents' ages. The more family members attending college and the closer parents are to retirement, the more generous the government will be.
Then schools subtract your family contribution from the total cost of attending college -- tuition, books, room and board, transportation and living expenses. The difference is defined as your need. Sounds simple? Don't believe it. There are plenty of gray areas that also determine the amount of aid you receive including:

  • Whether You're Divorced
    The federal government requires that schools include a stepparent's income when calculating the family contribution -- even if the stepparent has no obligation to or intention of supporting the child. This can increase the funding gap substantially.

  • Whether You've Chosen A Private School
    Private colleges and universities have their own formulas that often figure in your home equity, the amount you expect to contribute to retirement accounts while your child is in school and the student's income and assets. Again, this can boost your expected contribution.

  • How Many Other Students Need Money
    This number varies every year. If you happen to be applying when the school is under siege from needy students your chances of receiving a good package are much lower. The lesson: Apply as early as possible.

  • How Desireable Your Kid Is As A Student
    Schools will pay up for exceptional grades or athletic talent. There isn't much you can do about this after the fact, but make sure your aid officer has all the facts.

  • How Much Money The School Has Available
    When it's gone, it's gone. One more reason to apply early.

  • Unrealistic Federal Numbers
    The Fed's allowance for basic living expenses is barely above the poverty level. A five-person family with one child in college is expected to live on $21,230 a year. This is something else you should point out to your aid officer.

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    Mastering The Paperwork
    This is the most tedious, but in many ways the most important part of the process. One blank line or miscalculated number and your application can be held up for weeks, putting you at a distinct disadvantage. So, shore up your patience and make your way through the following guidelines:

    Know Your Forms
    There's no one financial aid form. That, of course, would be too easy. Depending on the college your child picks, you could end up filling out several forms.

    Everybody must fill out the Free Application for Federal Student Aid (FAFSA), the standardized national form for U.S. government grants, work-study jobs, state grants and such student loans as Perkins (for low-income students) and Stafford. (See Student Loans Demystified for more on those types of loans.)

    Next is the CSS/Financial Aid Profile Form, or Profile, which about 450 private colleges and 450 private scholarship programs require. The Profile is administered by the College Board, which charges a $5 registration fee, plus $14.50 for each copy it sends out to schools. In addition to the standard financial questions there is a section tailored to meet the criteria of each individual. Some private schools -- especially the elite universities -- have their own financial aid applications, which they may ask you to fill out in lieu of or in addition to the Profile.

    Finally, divorced parents may face one more form. Some schools require that a non-custodial parent fill out the Divorced/Separated Parent's Statement, available from the College Board. If a non-custodial parent's divorce decree specifies that he or she won't be contributing to the child's education, now is the time to let the school's financial aid officer know. Or, for custodial parents who can't depend on their ex-spouse's help, make sure the school's financial aid officer knows of the situation. In either case, this additional information should go straight to the school. Do not attach it to the FAFSA or Profile.

    Pay Attention to the Date
    The due date on the financial aid application is not necessarily the same as your school's deadline. The date on the form represents the last day the financial aid form processors -- independent companies that do the calculations and then send the results to the schools -- will accept your application. Two years ago, for instance, the standard form had a May 1 deadline. That was a full two months after the March 1 application deadline required by the University of Massachusetts.

    Don't Give Up
    Don't throw up your hands midway through the process because you think you'll never qualify for aid anyway. Even if you're right and you do have too much in income or assets to receive any grants, chances are you're going to need to do some borrowing to pay tuition bills. If you don't fill out the FAFSA you can't qualify for any of the federal student loan programs.

    Don't Rule Out Any School, No Matter How Expensive
    Private schools sometimes award more generous aid packages to help make up for their higher costs.

    Don't Make the Most Common Mistake of All
    An overwhelming number of financial aid forms are rejected by the schools for one naggy reason: parents put their own -- and not their child's -- Social Security number and birthdate on the application.

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    Two Rules to Live By
    If you do nothing else, remember these two tips.
    • Be Prompt With Your Application
      This is crucial. William Heffernan of Ocala, Fla., learned that the hard way. When his ex-wife filed the federal financial aid form for his daughter's freshman year at Auburn University three months late, the girl received only $1,000 in Pell grants -- government-sponsored gifts for low-income students -- even though, by Heffernan's calculations, she should have been eligible for some $4,000 in aid. Why the discrepancy? Auburn had already given away most of its campus-based aid by the time it heard from Heffernan's daughter.

    • Bring Up Any Special Considerations
      Although you can't add any information to the forms you will fill out, you can contact the schools directly about special circumstances that aren't covered. For example, the forms will ask how much a divorce agreement states that you should receive in child support payments, but there is no space to write in whether or not you get the money each month. If you never see a dime from your ex, you'll have to explain your plight to the aid officers. In such situations, chances are you can convince them to recalculate your need in your favor.

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    Finding Outside Grants
    Students seem to have the most success when they concentrate their search in their own backyards. The best opportunities are often found through community and church groups that award academic and other types of scholarships. To find these check with your high school guidance department. In addition, check with the college you plan on attending if there are any alumni grants you may qualify for.

    On the Web, check out the College Board's Fund Finder service, which lists hundreds of sources of aid. Or visit The Princeton Review's site. Its search engine of the "best colleges" allows you to find out what sorts of grants are available at specific schools. Another great source i FinAid, the Financial Aid Information Page, sponsored by the National Association of Student Financial Aid Administrators. Also online, try AOL's Reference Service Press Funding Focus forum (keyword RSP), where the listings of grants and scholarships are constantly updated.

    Be Careful
    No matter how frustrating the financial aid process becomes, we urge you to be careful when it comes to hunting up scholarships and grants from private sources. Anyone who has looked on the Internet's financial aid bulletin boards has seen messages like, "Do you know that billions of dollars in scholarship and grant money go unclaimed each year? Do you know that almost everyone qualifys [sic]..." Usually whoever's posted the message will offer to find that money for you -- for a $100 to $200 fee. Don't pay it: These firms are the snake-oil salesmen of financial aid.

    First of all, only 1% of the $42 billion in financial aid awarded each year comes from third-party sources. And the bulk of that money is tied to such specific requirements -- earmarked for Purdue students named Murphy or the winner of the All-American Soap Box Derby -- that a student's chances of qualifying are slim. Worse, many schools will deduct the amount of outside scholarships from their aid packages. And what about those billions in unclaimed grant and scholarship money? That number includes unused corporate tuition-reimbursement benefits -- not too useful for an 18-year-old high school graduate.

    Even the legitimate search firms are rarely worth their $50 to $250 fees. The first questions they're likely to ask are where you live and whether you're a veteran, then they'll fill you in on scholarship money that you'd find out about anyway. Wisconsin, for instance, gives up to $2,172 to low-income residents who attend in-state private colleges. "I can't tell you how many times I've seen those automatic grants show up on scholarship databases," says Jeffrey Zahn, financial aid director at St. Norbert College. His point: Why pay a fee to a search firm to "find" you money you can find yourself?

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