Decide If You Need a Private Financial Aid Consultant
When Brad Lyons' oldest son was a junior in high school, he decided to contact Fred Amrein, a college funding expert.
Knowing that he was on the cusp of a whirlwind of college tours, applications, Free Application of Federal Student Aid forms and tuition bills -- and with three more kids to get through college -- Lyons wanted some advice on where to put his resources.
"He's done this enough times with other families that he can advise us on what we should and shouldn't do," says Lyons, who lives outside Philadelphia in Phoenixville, Pennsylvania.
Given the complex college funding landscape, families can pay private financial aid consultants to help them through the process of navigating the FAFSA , figuring out which assets to put toward tuition, and weighing the pros and cons of different types of loans.
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"I like to tell people you don't need to hire anybody to assist you with your FAFSA, but you don't need to hire someone to mow your lawn either," says Karen McCarthy, senior policy analyst for the National Association of Student Financial Aid Administrators. "But for some people that's worth it."
Consultants and advisers offer a range of services, McCarthy says. Some may offer a holistic college planning service that includes college selection advice, while others may have a more limited focus on finding scholarship money and maximizing financial aid eligibility.
The services aren't free, and experts say no matter the price, make sure the adviser doesn't make unrealistic promises and that you know how he or she will be compensated.
"Don't pay people who guarantee a certain type of return in terms of the financial aid that you would receive or who charge a fee based on the percentage of financial aid that you would receive," McCarthy says.
If your family does decide to hire someone, be clear on what you're getting, she says. For instance, if a consultant offers to do a scholarship search, make sure it's not a simple internet search that you could do on your own.
She adds that families should know that there are free resources, such as high school guidance counselors, local college financial aid offices or the Department of Education website. There are also free workshops, like those offered by the nonprofit Form Your Future, a national program that helps families fill out the FAFSA.
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Amrein, the founding principal of Amrein Financial and College Affordability LLC in Wynnewood, Pennsylvania, says that financial aid directors and loan servicers are often swamped and may not be able to give families the range of options for paying for college the way that a private consultant could.
As an example, Amrein says, a financial aid director wouldn't be able to help a family weigh whether taking out a home equity loan makes more sense than a p arent PLUS loan. Likewise, he or she wouldn't be able to help a family figure out how to disburse their assets based on whether their student is planning to attend graduate school or not.
"Everyone talks about free," Amrein says. "Free is what it's worth."
Lyons, whose son is now a rising senior, says he likes that Amrein's software program allows him to compare schools, both public and private, to figure out which ones are financially realistic for his son.
"Even more important was being able to show my child the liability, or amount of debt, he's going to come out of college with, depending on the choice of school," Lyons says, adding that he plans to continue working with Amrein through the entire financial aid process.
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If you are thinking about hiring a financial aid consultant, consider the following:
-- Amrein says the two most important questions to ask are: Will you act as a "fiduciary," or in the client's best interest? How are you compensated? "It's OK if they are going to recommend a 529 plan or a strategy where they're going to earn a commission, but at least you know that's part of their recommendation," says Amrein, a fee-only adviser, which means he doesn't receive a commission for products he recommends.
-- Don't agree to a fee based on the percentage of aid that you receive.
-- Be wary of consultants who guarantee that you'll receive certain grants or scholarships.
-- Request references and check them.
-- Never give your FSA ID, which is used to sign the FAFSA, to anyone else. "It should be protected and not be shared with anybody, so red flags should go up if a consultant says, 'Give me your FSA ID and I will file your FAFSA for you,'" McCarthy says. "That is absolutely not OK."
-- If someone helps you fill out the FAFSA, he or she should sign it as "preparer."
Trying to fund your education? Get tips and more in the U.S. News Paying for College center.
Deborah Ziff is a Chicago area-based freelance education reporter for U.S. News, covering college savings and 529 plans. You can follow her on Twitter.