Q&A: Is Financial Aid Negotiable?

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Q: We just received our son’s college financial aid package and were disappointed that there is a big gap between the amount we need and the amount we received. I’ve heard that it’s tough to negotiate with schools over tuition aid, but times are tough and we’d like another shot at making our case. Any help? — N. Cochrane, West Palm Beach, Fla.

A: April has the reputation of being all about taxes, but it’s also the time of year when families receive their college financial aid packages. And these days, more and more families don’t like what they see from their kids’ future alma mater.

That’s for obvious reasons. College endowments are down 18.7% in the last year alone, according to a study of 654 U.S. schools by the National Association of College and University Business Officers. That’s the worst investment returns for colleges since the Great Depression. Simultaneously, 60% of colleges report a decline in gifts in 2009, while the average total long-term debt was $167.8 million in 2009, compared with $109.1 million the year before.

With colleges and universities tossing nickels around like manhole covers, what chance do you have in getting a better financial aid deal than the one in front of you right now? It’s not that bad, actually, if you apply the following tips:

Take stock. Start by checking and re-checking your financial aid letter. If you neglected to mention a job loss, divorce or other personal family situation since you first filed your FAFSA, go ahead and mention it now. Colleges are amenable to beefing up financial aid offers to families that demonstrate a financial need. A letter to the college admissions office stating your case, plus a follow-up phone call should do the trick. Do it quickly, most colleges want a decision to attend by May 1.

Play college offers off one another. If you have a better offer on the table from another college, make sure you let your school of first choice know about it. College admissions offices tend to be competitive over the applicants they've accepted. Consequently, they may bump the money up to make sure your son or daughter signs on the dotted line.

Look at private loans. While the federal government is taking a more prominent role over college loans, getting a private student loan may be a better deal. Right now, the average interest rate on federal student loans is 7.9%, according to SimpleTution.com. But the average interest rate on a private student loan is a much more affordable 4%. Plus, after a lull due to the sour economy, more and more private college loans are becoming available.

While colleges don’t like to negotiate, they are open to a “do-over” if you can make a compelling case. The keys are to be honest, lay your cards on the table, and be diplomatic, even low-key, while you make that case. With the average cost of college at $26,273 (for private schools) and $7,020 (for in-state, public schools), every dollar counts.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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