Can You Get More Financial Aid If You’re In Debt?

Hi, everybody. As you probably know, this site started out as a site about scholarships and how to get them, but has slowly morphed into an advice site about all things related to college, money, jobs, and occasionally even bigger issues like what you should do with your life and how to be happy.

I’m cool with all of that, and let me thank you once again (because I don’t do it enough) for entrusting me with these important questions you have, many of which will determine the direction of your life. I promise to keep giving you the best advice I’ve got, whatever it is you’d like to know about.


Why do opera singers always have beards?
And on the subject of our ever-expanding topics, I’m getting more and more questions recently about the financial aid process itself — FAFSAs, EFCs, awards, financial aid offices, strategies, etc. I’m learning FAST that this is one of the most, if not THE most, critical issue on your minds.

You’re in luck, because I have a fair bit of experience with the financial aid system, and not just as a student. When I started my Google Adwords agency back in 2001, things were going so poorly and I was so broke that I had to donate plasma twice a week just to keep my house out of foreclosure. To make ends meet, I took a job as a call-center rep for FAFSA, and was trained by the government on the ins and outs of the financial aid system (so that I could intelligently answer the frustrated calls of folks like you/your parents).

Later on, after business picked up for me and I quit that job, I co-owned a FAFSA service that completed many thousands of financial aid apps for students. ANYWAY — my point is, please feel free to fire away with any financial aid questions you have. I’ll get them answered. And to that end, today we have Debbie:

Dear Mr. Barsch,

I admire your frank communication with the students and I’m hoping you’ll be able to guide me out of my dilemma.

I’ll do my best!

A few years ago my husband was laid off from his job, during the time he was out of work, we ended up using all of our resources (IRA’s, savings, etc) and went into debt to keep from losing our house. Our daughter is an opera major at UC Irvine and loves school, her friends and her life. Even though my husband is back to work and I am working full time, our combined salaries tell FAFSA that we earn too much to get any scholarships or grants.

First of all, congrats to you for pulling through those difficult times without losing your house or having to pull your daughter out of school. The headlines, unfortunately, will always belong to those who DID lose their houses and everything else during this time, but I know sometimes it must feel like cold comfort when you’re now having to start over from square one with savings and fallback money.

The UC system is raising their tuition this coming year plus she’s going to have to pay extra for voice lessons and housing is $850/month! not including food.

That doesn’t surprise me, unfortunately. If the predicament itself wasn’t enough, Debbie’s also a victim of California’s epic budget deficits, where the state is pinching everyone they can, everywhere they can, just to stop bleeding money.

I’m afraid our debt that we’ll be paying for is going to take about 20 to 30 years to pay off plus our son is going to go to college in another 3 years.

I don’t know how much the debt adds up to or how much you and your husband make or what your lifestyle expenses are like, but I’d be lying if I said I disagreed with you. I could (and probably will, soon) make a blog post on a collection of ways to save, say, $5,000 per year (and then put that $5k toward your existing debt). But otherwise, yeah, that’s definitely a possibility.

If there’s any upside to the above, it’s that the feds will expect less money out of you when you have multiple kids in college and reduce your EFC.

My question is, is there any way at all of getting our debt information into FAFSA to change their final financial decision?

Unfortunately there’s not. The government does not count consumer debt against your assets when determining your EFC. They just count the assets. Now, you can help yourself out by taking whatever cash and savings you have and paying down your debt with it — that way, the assets aren’t there anymore and the government can’t count them against you. However, a) it sounds like you may not have recovered much of your savings just yet, and b) that’s always a risky proposition anyway, especially if you’re paying down cards or lines of credit that have since been closed out by the lender (since any cash you put toward them now isn’t offset by an opening/easing of a credit line for life’s next emergency).

My daughter is extremely talented, she’s a favorite of her teachers and her grades are getting the attention of Rhodes and Fullbright for her masters.

Sincerely,
Debbie

Well, that brings up another point that I’m sure you’ve heard others say, and I’d be screwing you over if I didn’t at least make mention of it myself. Your daughter is an adult now, and situations like this are why God created the unsubsidized student loan.

I know you want to help her, and when my daughter is that age (she’s only 6 now), I’m probably gonna need someone sitting in my current chair telling me the same thing I’m telling you. But you’ve gotta avoid the temptation to throw yourself under the bus financially when there’s another solution tailor-made for this, and that’s the usage of student loans.

Yeah, she’s probably a broke college student, and she probably won’t make millions the minute she steps out of college with an opera degree. But she’s got the power of time on her side. She’s 20-some years younger than you with a lot fewer needs and responsibilities. She’ll be able to hack the payments over time even better than you will, possibly. (Of course, let’s hope she wins a Rhodes or Fulbright gig and this becomes a non-issue).

Plus, like you said earlier, if things go south financially again during the next few years, you don’t want to be stretched so thin that you can’t help your son out at all, even in an emergency or something like that.

That’s my best advice for the day. What about you — what do you think Debbie should do? Let us know in the comments below. Oh, and if you haven’t already, please fan/like me on Facebook if you’re so inclined. I’m sick of getting my butt kicked