The Truth About Financial Aid: Why Some Families Pay Less for College Than You Think with Jack Wang

Parents, is your teen college ready? Are you feeling overwhelmed, stressed out, or excited about your teen applying to college? Do you know what colleges are looking for? And if your kid gets in, do you know what you'll pay for it? College admission has never been so competitive or expensive. Shellee Howard will take you on a journey to help you and your teen get college ready. Now here's your host, Shellee.

Hello parents, this is Shellee Howard coming to you from Parents, Is Your Teen College Ready? I have another wonderful guest I cannot wait to share with you, Mr. Jack Wang. Please introduce yourself.

Shellee, thanks so much for having me on. I really appreciate you being here. So I'm actually what I call a college financial aid advisor. So I focus on the financial side of college, paying for college. How does aid work? Maximizing aid, things like that. I don't focus as much about on the admissions side, right? Writing essays and test scores and things like that, though I have to understand it. To the extent that understand how those factors influence money, right? I don't do test prep and I'm not going to read your kid's essay, but I understand how those schools view those things in terms of how they determine who gets what for aid. And I love doing what I do. I've been doing it for almost 20 years. I originally got into it for my own kids as a result of a divorce situation. I need to figure it out and And one of my things is that I'm super passionate about this work and just getting information out because I see on the parent side, there's so much confusion, so many misconceptions, right? Because it can be complicated. True. But at the same time, I see a lot of advisors and financial people spout nonsense. I just, there's no other way, nice way to put it, just mistakes because they don't really understand. They're just trying to do business and get clients. But because they don't really understand, it's a lot of blind leading the blind. And, and as a result of that, I see people get put into not so great situations. So I'm super passionate about clearing that kind of stuff up and getting the correct information out to people.

So good. So parents, if you're listening, be thinking about each of your children. If you have one, this is going to be a lot less painful. If you have multiple or twins or triplets, you really want to listen to this because it's going to really impact your future Your Financial Family. And so we're going to go ahead and get into it fast and furious. I love to do. So, Jack, can you start off by just giving us an overview about how does aid actually work? For a lot of families, they are just mystified of how do people get money and others don't. So how does it even work?

Right. So I, I get this question, right? This is the absolute number one question I get from people because you hear stories out there, people saying, oh, I'm too rich to get financial aid, right? That's a pretty common misconception. Or you hear families like, my kid has these grades and this test scores and got into school, but the kid across the street has basically the same information. They got into school, but they got a huge scholarship, right? So it becomes the perception that it's this giant mystical black box. So first things first, there is a rhyme and a reason to all of these things, right? Nothing happens by accident. And so oftentimes parents think about aid in two different buckets, right? The merit bucket, which parents think is based on grades and test scores, which it really is not, right? Those things help. It's not based on only those things. And then there's what's called the need-based or the financial aid bucket, which parents figure is based on the FAFSA or the other financial aid form, the CSS Profile. And this is where I get a lot of the, I'm too rich to qualify for aid. The reality is that it's really not two buckets at the university level or the college level. It's really one massive bucket. And there are some monies are more merit component, more merit-based, some other money that's more need-based. That is true. But the line between those two is really blurry. And so it's not a hard and fast, it's only this, or it's only that. But at the end of the day, people ask like, is there some magic code I press on the FAFSA form to make my college, you know, kids' college for free or something. There's no magic form. There's no dance you gotta do or anything like that. At the end of the day, you have to remember that colleges are businesses. And while they are looking for students, they are looking especially for certain types of students, whether that's certain majors or boys versus girls or, or where you're from in terms of geography from California or from Massachusetts where I am or, or whatever, right? Or all of these factors combined. And so the more your student helps the college meet the college's goals, the more likely you are to get aid. And that's bottom line. We can get into how much grades and test scores help and extracurriculars. And yes, those do matter, but at the end of the day, right, are you helping the college achieve its goals? And the more you can do that, the more aid you get. Period. But most families don't approach it that way, right? Most families, and same thing when my kids are applying to college, it's all about my kid does this, my kid does that, my kid does this other thing and they won this award. And again, all important things, but we forget to think about the colleges. We're selling our kids, if you will, right, to the college. Does the college actually want to buy them? Right. We may love our kids, but, but the college may not want to buy them. Right. So there's a lot of parallels in the employment world when you're applying for jobs. And, and the, and the analogy I like to use especially is the NFL draft. Right. Lots of football players want to get drafted. Only a certain number do. And the, and the players who get drafted in the first round get much bigger contracts than the players who get drafted in the second, the seventh round.. But in the first round, if you don't need a quarterback, you don't spend the money to take a quarterback, right? You sort of get what you need. So that analogy really, really fits. And I tell families all the time, there's a difference between being accepted and being wanted. Colleges will accept lots of kids, but they only want some of those kids, right? And, and the way you tell is the kids who are wanted are the ones who get the biggest aid packages. So So it's really not about like, what does the FAFSA say? Or, or, or do I have to put this bank account on the form or that bank account? Or do I have to report this or report that? Again, those things in detail do matter, but really the bigger picture and what truly matters is, are you helping the college meet its goals? And by the way, I've had families make over half a million dollars a year, right? Which is not poor in any stretch of the imagination., but I've had these high-income families, high-asset families also get need-based aid. Oh my goodness. They're not poor. How does that happen? Well, because we found the college where the student checks a lot of boxes for the college, right? That's it. That's it.

So, so true. So parents, in a nutshell, what's important to know, what Jack just said, is that there are rules to the game. Just as if you were applying for a job or a promotion. And if you understand those, it all makes sense. If you don't, it's a big mystery. So Jack actually does the work where he meets with families to help demystify this. As a CEO of CollegeReady, we're focusing on the big money, the merit money, picking the right schools, getting them accepted so they need the scholarships. And so I brought on Jack so you can have a financial side of things where you can hear directly from somebody who specializes in this, that one, it is possible. And two, it doesn't always make sense to you, the parent, but it does when you're in this industry. So thank you for that. Second question I have is so many families are worried they make too much money to get need-based aid, but they don't make enough money to want to write a check. Is there money for this type of family?

So absolutely. And, and So certainly this is really the type of family that approaches me, right? Is the, the too rich to get aid, they think, but too poor to just write the check. As I joke around, if you are rich enough to bribe your kids' way into college, right? As there was that scandal years ago, if you're rich enough to write that check to bribe your kids' way into college, you don't, you don't need to talk to me, right? Just write the check and just be done. They do it legally, but they don't go to jail, but, but just do it right. And don't worry about it. There are, there are different ways. And so whether it's external scholarships, which are scholarships from local organizations, chambers of commerce, foundations, companies, whatever, industry associations, also alumni associations, there certainly are those, but there's also, there are student loans. And so a lot of people talk about, well, I don't want to take on student loan debt. That's bad. That's bad. And I understand that. But, but sometimes it can actually be a really worthwhile tool. So for example, if your student is going into a, a major in a career field where they would eventually get Public Service Loan Forgiveness, it might be worth taking on the debt knowing that they're going to get the loans forgiven. So that's not a bad thing, right? So you're getting a scholarship of sorts, but just in a different form. Also, one of the things that people also tend not to think about is is the cost beyond the sticker price, if you will, right? We're all familiar with tuition and housing and food and books and travel, miscellaneous fees and whatever. But in terms of how families actually pay, there are other costs, for example, like loan interest, right? Which might, which again might be worth paying if you can get all the loans forgiven anyway. But there's also taxes. Remember, college is an after-tax cost, right? We earn our money, we have taxes withheld from our paychecks. Right. And then what's left over is available to pay for college, buy groceries, pay for electricity, whatever, right? Pay for our cell phone bill. So a lot of times families can utilize tax strategies and something I talk to my families about all the time. And so they might not have gotten a lot of aid at that particular college because they insisted on going somewhere that maybe wasn't that generous. Fine. But if we can realize significant savings on the tax end, I call that a tax scholarship. So if you were going to pay the taxes anyway, right? Why, why do you want to pay for college and taxes? Why not pay for college and then use the savings on taxes? If, if you can pay a lot less and use that to help offset the cost of college. Right. You can. So there are a lot of different strategies, whether scholarships or loans or tax strategies or other things that can be out there. Yes, you still have to pay the college, but you can do so in a very financially efficient way so that it minimizes the long-term financial impact of paying for that college. Right. So, because sometimes we're so wrapped up on why I didn't get any aid from that college, but there are other ways to still save on college costs. Even though that college did not give you a scholarship or grant or whatever. Having said that, most people don't think that way. Most people just think about student loans, student loans, and student loans. And student loans again, are not necessarily a bad thing. And oftentimes if you have a financial strategy, student loans can represent a bridge of time, right? If I borrow a student loan that I don't need to start making payments on for 4 years. Yes, interest accrues, fine. But during that 4 years, something else is happening, right? My investments are still growing or hopefully growing or something else is happening. Then when my kid graduates, I might be able to just write one big check and just pay off the loans. But I might end up with more money because I let, I gave my other stuff time to work, right? So loans can represent a bridge of time. Loans are not always the bad thing that people say they are. If you use them strategically, right? Yes.

It's so important, parents. So again, it's knowing the rules of the game. It's not yes or no. There are many strategies using your IRA. There's using real estate. There's using— there's all of these strategies that you can use because if you have an average student and they are applying to a school that is significantly looking for a stronger student and they get in, that's exciting, but they're not gonna get the big money because there's other students who are academically or socially, or there's many things that could happen from there. So understanding what Jack is saying is if you are in that situation and you are wondering, hey, I don't make enough money, but my student aid index is not where it needs to be. First is you need to know your student aid index. That's the important thing. We can definitely help you get that. But once you know that and you pick yourself off the floor because you don't think you can pay your student aid index, then you start to have to think, what are we going to do? And it comes down to completing the FAFSA. So my next question is—

so, Shellee Howard, before you get to the next question, I'll just share a quick Quick thing about student aid index, right? This is knowing the rules and knowing the strategies because, because one of the misconceptions out there all the time is like, oh, don't save in your kid's name. Don't save in your kid's name. Right. It hurts financial aid more if you save in your kid's name. Well, if your student aid index is so high that you're not on paper, you're not going to qualify for need-based aid anyway on paper. Right. You might want to save in your kid's name because presumably your kids are at a lower income tax rate than you are. So it's okay. Right. So, so that's just an example of understanding the rules and how things work. Right. And so I apologize for interrupting, but, but that's, that's a real simple example because I hear all the time, don't save your kids' name. Don't save your kids' name. I'm like, okay, but why not? You want to pay extra taxes that badly? Look, I'm not going to stop you.

Right.

If that's what you want to do, the US government appreciates it, but I'm not a fan of having to pay any more than I absolutely have to. Right? I don't want to go to jail, so I'm not cheating taxes, but, but I don't want to pay a penny more than I have to, whether it's taxes or college.

So speaking of taxes, the FAFSA doesn't look at anything that you haven't already given the government. So can you talk for those people who are thinking they don't want to complete the FAFSA or they don't want to share any more with the government than they already have? Can you talk just really brief about who should complete the FAFSA and maybe why should they complete the FAFSA?

So this is the advice that I give, which might be a little bit different than someone focused strictly on the admission side. So the FAFSA is the Free Application for Federal Student Aid. It's a free form. Some schools use what are called the— what's called the CSS Profile, which is a supplemental form in addition to the FAFSA. My advice always is this, is families, no matter what, should always be filling out the FAFSA, the financial aid form. Couple of reasons. Number one, if you don't fill out the form, you're telling the college you don't need the money. You're ready. You're telling them you're ready, willing, and able to pay full sticker. And if you are, then good on you, right? Go for it. That's number one. Number two, filling out the FAFSA specifically gets you access to federal student loans. So that's, that's to your student. All right. And so it's a great way for students to build their credit. It tends to carry extremely low interest rates, very preferential terms. Parents do not have to co-sign. It's not a lot of money, granted, but, but it's a nice way to start helping your kid build their credit profile and credit history. It helps them down the road. Again, you can always help them pay it off later, write one big check to pay it off later. It's no big deal. It just. Helps them that way. There are also a lot of schools I've run into that require financial aid forms to be completed, even for merit scholarships. And again, that goes back to, if you don't fill out the form, you're telling them you don't need the money. And the other reason, and I've run into this a couple of times where parents have— they weren't my clients, but they somehow got my information and came to me. If you don't fill out the financial aid form, you Basically can't appeal. So I had a family years ago come to me say, hey, my income dropped. So, so my kid got into school, this college or university. So we want to appeal for more money because my income dropped. And I said, well, did you fill out the FAFSA? In this case, CSS Profile, send me what you filled out first and I can advise you from there. And they said, oh, well, we didn't fill anything out. All right. Well, if you didn't fill it out, the school doesn't know how much your income is or was, and therefore would not know how much your income dropped. Right? So that door is closed. Right? So, so obviously we don't want that to happen. People like having your income drop precipitously is not a fun thing, but, but that's why you fill out the form. The form itself is based on tax returns. There's a 2-year lookback. We call that prior prior year. The important thing to know is that Your base year or the first year that you're, that the FAFSA looks at is the calendar year that spans the spring of sophomore year of high school through the fall of junior year of high school. Right. That's known as the base year. So do whatever the heck you want before then. Right. It doesn't matter because it won't hit. After that, you might have to be careful. And this is also where knowing your SAI is really important because if your SAI again is so high that you're not going to qualify for need-based aid on paper. Then again, who cares? Do whatever you want. Save me your kid's name, blah, blah, blah, whatever. Right? But if your SAI is low enough to where you do qualify for need-based aid on paper, then you have to be extremely careful about what you do. I've seen so many instances where people have done financial things that ostensibly don't look like they have anything to do with college, but yet they destroyed their own chances. And they come back to me like, Jack, I don't understand why this grant disappeared. And you can pack it. It's like, oh, it's because you did this thing. You didn't need to, right? So, so knowing your SAI, critical, but, but you also understand the timing. So again, so if you fast forward, once you hit kids, once your kid hits spring of junior year of undergraduate, assuming it's a 4-year graduation, but once they hit the junior year of undergraduate, you've now filled out your final FAFSA, right? So. Do whatever you want after that. Right? Like it doesn't matter. Right? Unless you have another kid coming, they might have to be careful, but, but that's, you have to understand the timing there too.

So good. That was a lot of information. So parents, if it's the first time you're hearing it, it's like drinking from a fire hose. And it's so comfortable for Jack and I to talk about this because this is our world. This is what we live in. If you are feeling like, I have no idea what Jack just said, you're not alone. Again, there's a vocabulary that we talk about so comfortably that an average parent may be a little bit confused. So I just wanted to let you know, if you are in question, don't guess. I can't tell you how many FAFSA forms that I look at where people are like, I didn't get a dime. And these are truly need-based families. And I said, then why did you put down that you own a home and it's worth this much money? It didn't ask. You to put your home on there or how much money it's worth. So just be really, really careful when it comes to your finances. Make sure that you have a good team. CollegeReady brings in these strategists to help navigate this with you. For our final question, can you talk a little bit about the appeal? Right now we're in the big appeal season, and I have families that are not clients yet, will be, that are panicking because they're saying, I can't afford that. And I don't want to say, well, why did you apply there? But the big question is, can they appeal and what does that look like?

So appealing is, in a nutshell, simply asking the college for more money. And so the short answer is yes, you can always appeal. And even if the college denies your appeal, you don't lose anything that they've already given you, right? So you're not really risking anything other than just a little bit of taking up a little bit of time. But appeals really fall into two categories. One is when there is a demonstrated change in circumstance, a divorce or death in the family or a job loss, right? Those are legitimate documentable changes that have occurred. Most colleges will work with you on that. A couple of things on that though. Number one, it has to have already happened. So I, something I get is someone, a parent will get Notified at work that they're going to be laid off in 3 months. So they want to appeal. I understand you got notified, but things can change and it hasn't happened yet. And not to mention, by the way, you might find another job that starts the day after you get laid off from this one, right? So you cannot appeal for something that is going to happen. It has to have already happened. Also, it had to create a hardship. So, so I had a situation where the family had a lot of, they had like unanticipated medical expenses. Someone in their family got hurt really bad. I don't even remember what for, but spent a lot of time in the hospital, whatever. But they had a ton of money, so they had a lot of extra hospital bills, which is terrible, but they had a ton of money saved up in a health savings account over the years. So they covered all those bills with the health savings account. So yes, it was a tragic situation and yes, it led to a lot of bills, but it didn't actually create a hardship. Because they actually have the money saved, right? Good for them, right? With the foresight on that. But it's like, but you, you guys, aside from this person being in the hospital, nothing really changed about your life financially. So, so that kind of appeal would get denied because it didn't create a hardship, right? So those two things have to be there for an appeal to be granted. The other type of appeal is what I like to call the just because appeal. Again, you're not risking anything that, that the school's already giving you, but you're asking just because. So you didn't lose your job, you didn't get divorced, nobody died, nobody got hit by bus. You're just asking just because. Can you do that? Yes. Can you use other schools' offers to negotiate? And by the way, never use the word negotiate, but can you use other schools' offers to negotiate against your target school? The short answer is Yes, how successful you are going to be depends on how the target school views these other schools, right? As parents, we might say, well, we don't care if our kid goes to School A versus School B, but if School A does not view School B as a competitor, then School A is less likely to give you extra money if you use School B's offer against School A, right? It's not about what we think as parents is what does the school think? So, so while, so sometimes when I work with families, they might get a list of colleges from somebody like yourself, Shellee Howard, or, and your team. And they might say, well, our target school is this, right? We really want to go here. I might then say, you know what? I might encourage the family to throw in an application at another school for the sole, knowing that that other school is viewed as a competitor of the target school. And the whole purpose of that is to generate an award letter from this other school that we can then negotiate against the target school because I know that they're, they view this other school as a competitor. So your odds of getting somebody increase, right? Even if the kid has no desire to go there whatsoever. But that, that, that wasn't the point of it anyway. So, so yes. Can you appeal? Yes. I remember one time this family, they appealed a fin— they appealed an offer from a school and it's because they spent a lot of money because they took an extended vacation on a cruise. So they did not have a lot of money and they appealed on that. And I told them like, you're not, you're not going to win that appeal. They're like, we're going to ask anyway. I'm like, hey, you can always ask, right? They— this is pre-COVID and stuff. They essentially got laughed out of the financial aid office. You got to be kidding me, right? They're trying to help people who legitimately lost money because of something and they're like, oh, we don't have any money because we won this huge cruise around the world. Give me a break. Don't, don't. If that's your situation, that's why you appeal. Don't, don't ask.

And that's why a balanced list is so important. If your student is just applying to dream reach schools, that financial negotiation is going to be limited because your child, if they get in, is just going to be amazing in itself because based on their GPA, test scores, so on and so forth, may not make sense, but they may need your, your child, or that, that major's not full or There's things that happen all the time. So what Jack's saying is it, it won't hurt you, but it does take time. And if it really doesn't make sense, you wanna think about the time versus the reward. I have a lot of families right now who are looking to get off the waitlist. Same situation. If you just ask to get off the waitlist, that is not gonna get you off the waitlist. If you have earned another award or you've accomplished something amazing or passed a higher test score or something else, that's when it comes down to what has your student done and continued to do that is going to impress the university. So Jack, so much great information. I could talk to you all day long, but if you could leave any last words of encouragement to our students, to our families, what would that be? And then you can share how they can find you.

I would— I think that families first need to really figure out how much they are willing to pay for college per year, which is different than what they can afford, right? So if you have multiple children, you might be able to afford $50,000 a year, but you have 2 kids. So you're only willing to do $25,000 a year because you love both your kids. Right. But I would encourage families to really think about and figure out what that number is for them first, because so often, and I know you see it too, Shellee Howard, in your travels around the college planning universe, families, their kids will get into whatever school for, but didn't get aid. So now it's $80,000, $90,000, $100,000 a year. The, of course, the student's really excited and they want to go. The parents are really anxious because they don't want to write that check or they can't write that check. That's a, that's a terrible situation to be in because somebody's going to have to end— what I say is somebody ends up crying, right? Either the kid ends up crying because they can't go, or the parents end up crying because they know they're going to be eating ramen noodles morning, noon, and night for the next 20 years. Figure that out before you end in that situation. And it's different for every family. People can actually— so I have a podcast also. Didn't mention that at the beginning. My podcast is called Smart College Buyer, available on all major platforms, and parents can listen to that and learn all the ins and outs about the financial aid, paying for college, how student loans work, etc. So more the financial side of everything. And people can also connect with me on social media platforms, LinkedIn, Facebook, Instagram, particularly LinkedIn, Jack Wang. And I post a lot of short-form video there as well on more timely topics. So once a week I'll post something because some question kept coming up or something. So trying to, just trying to get good information out to the world so people can navigate this process and hopefully graduate college without debt.

So good. So families, I always say it takes a village. Right, to raise up this young teenager into that adult who's ready to start their career. And so when you think of all of the steps that need to be, you want to get clear on what is the best academic fit, best social fit, best financial fit before your child applies. And so if you have any questions, feel free to reach out to Jack at college ready plan.info, set up 30 minutes with me where I could speak to you Exactly what your strategy can be. And with that, I thank you so much, parents. Until next time, you've got this.