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Calculating Financial Aid Can Be Tricky Before College Admission

Many high school seniors already have embarked upon the nerve-racking process of applying to a private college. Historically they wouldn’t worry about college deadlines until after the holidays. Now that we are in the Era of Early Decision, some students must submit applications as early as Nov. 1.

Early Decision turns up the heat on an already pressure-filled college admissions cycle. When students apply for ED, they must enroll in that school, if admitted. For those with ample financial resources and a desire to completely fund college education for their children, ED can be a shortcut to enrolling in their first choice college.

But families who have not saved enough to fund four years of private education face a conundrum. With ED you may be signing up to spend more than $200,000 over four years, but have no idea of the total cost at the time of commitment because your child hasn’t been offered a financial aid package, if there even is one.

To determine your student’s financial aid, private colleges usually require the CSS Profile and federal FAFSA forms. While the FAFSA does not consider retirement assets or home equity, which can be substantial for many Boulder County and Broomfield residents, the profile may inquire about these resources. Different private colleges can use profile data and tax returns in divergent ways to determine student financial need.

For example, Colorado College considers home equity up to 150 percent of family income as a parent resource, but does not usually consider retirement assets, even a $1 million 401(k) plan, according to John Gudvangen, associate director of financial aid.

Helping matters is that starting next fall, colleges must make available a net cost calculator that approximates financial need based on your family’s income and resources. It also tells you how much would be given in grants versus loans, although this is less dependable as it can differ by applicant.

Although your favored school may not have the calculator this year, you can look on the Web sites of Princeton, Carleton College and others to give you an idea of how your income, assets and other college students in your family would qualify your student for aid.

If after running the calculator you believe your child can qualify for need-based financial aid (and that’s most private school applicants), talk with the financial aid office of your child’s first choice college and try to determine how it awards aid. Does it consider home equity, retirement plans, cash value life insurance, annuities or other assets?

Unless you are unlikely to qualify for need-based aid, pursue Early Decision only if your child’s test scores and grades are in the mid-range (or lower) of a college’s admitted students. This applies to almost everyone seeking entrance to the most selective universities where no one is guaranteed admission. Your child may need that higher ED admissions rate to gain entrance to the dream college and is unlikely to lose out on aid given your financial status.

Waiting for non-binding Early Action or regular admissions gives your family the chance to compare multiple financial aid offers. Another factor is that if a college is already guaranteed to enroll your child, it may direct more grants to the more competitive students in the open admissions process and offer the Early Decision pool more loans. Excepted are some top-flight schools such as Harvard that meet all financial need with grants.

With over a month until Early Action and regular admissions deadlines, by avoiding Early Decision your child may now have time to consider options other than the $53,000-a-year private schools. In a future column, we’ll take a look at the commendable “Debt-Free U,” by Zac Bissonnette that charts a contrarian, affordable course to a respected college degree.

Dave Gardner, for the Daily Camera.