As college costs soar, ‘every student’ should appeal for more financial aid, experts say

The Department of Education is making it harder for some collegegoers to qualify for financial aid. Now, experts are advising they should appeal their aid packages if they feel they’re being short-changed.

Last year, the federal government updated its Free Application for Federal Student Aid (FAFSA) form to make it easier for lower- and moderate-income students to qualify for federal grants.

But the flipside of the new application process is that students who come from higher-income families could have a harder time qualifying for enough grants and loans to cover their college expenses.

The new FAFSA form “is going to benefit low-income students, less so for wealthier students— that’s kind of the redistribution we would want, to some extent,” according to Menaka Hampole, assistant professor of finance at Yale School of Management.

“There is a good case” for making an appeal, she said, but the problem is not many people know they can.

Bethany Hubert, a financial aid specialist with Going Merry by Earnest, told CNBC: “Every student should anticipate doing an appeal this year.”

A major sticking point in the new FAFSA application process is the end of the so-called “sibling discount.”

As part of the old FAFSA regime, families got a break for having multiple children attending college at once. That has since been eliminated.

According to Hubert, families can kickstart the appeal process by contacting the financial aid office.

“If the new FAFSA impacted you, for example, you no longer qualify for the sibling discount, colleges do have the ability to take that into account. That is something families can reasonably ask for,” she said.

As college costs continue to rise, even wealthier students can no longer rely solely on their parents to cover their expenses, especially if they go out of state or attend private universities.

How much parental support do students receive?

For the 2021-2022 school year, the average parent covered roughly 43% of their child’s college costs through savings and investments, according to Sallie Mae. They also covered an additional 8% by taking out loans.

All said, the average contribution from parents came out to around $13,000 per year.

With college costs routinely outpacing inflation, it’s unclear how much more parents can contribute before experiencing financial strain themselves.

A 2022 study by digital payments provider Discover found that parents with college-bound kids had less than $15,000 saved for their children’s education. The study revealed that a “volatile economy and rising inflation” had made it harder for families to save.

Students are left to foot the remainder of the bill, usually through loans, leading to average debt balances of around $37,700 upon graduation, according to the Education Data Initiative.

Per Creditnews’ real-time student debt tracker, around 9.1 million Americans have student loan balances between $20,000 and $40,000. Americans collectively owe more than $1.73 trillion in student loans.

The Biden Administration calls this a “student debt crisis,” one that cuts across generations, and has vowed to ramp up efforts to provide more comprehensive relief.

Democrats still pushing for all-out debt relief

Creditnews reported in December that high-ranking Democratic lawmakers were pushing for “full scale” debt relief for low- and middle-income Americans.

Last week, the Biden Administration confirmed that the Department of Education will hold another “rulemaking session” on Feb. 22-23 to negotiate the size and scope of broader debt cancellation.

This came shortly after the government fast-tracked debt cancellation for millions of borrowers under the SAVE Plan.

With the clock ticking on Biden’s first term, Education Secretary Miguel Cardona said his department was moving “full speed ahead” to implement more comprehensive debt relief.

Meanwhile, other Democrats are making the student loan crisis a matter of national significance ahead of the 2024 presidential elections. Democratic Rep. James Clayburn described student loans as the “biggest” issue facing Americans today.

Americans generally back debt relief, although their support varies across states, political affiliations, and generations. According to a Bloomberg/Morning Consult survey, 43% of Gen Z voters in swing states believe Biden is doing “too little” to address the student debt issue.