Financial aid mess begs discussion of government's role in higher education
Families who have sent youngsters off to college have experienced what I am about to explain. As part of this process, most families will complete a process known as the FASFA, which is a government acronym for the Free Application for Student Financial Aid.
The FASFA is completed online, and I have written about this ordeal many times before. I am not going to go over this undertaking today, except to say that it is a major pain in the rear and usually takes two to five hours to complete. The net result of the FASFA is a difficult to understand number called the EFC, which is another acronym for Expected Family Contribution, that colleges and universities use to draft their mandatory "cost of attendance" letter for each student.
This letter, written in nice plain language, details the expected costs the family will incur for tuition, materials, meals and housing and also details any financial aid the university, or the government, is providing in the way of scholarships or grants. In my experience the letter is also accompanied by information on available resources to help the family finance the cost of attendance, which will involve Federal student loan programs.
In my own home, the receipt of cost of attendance letter for my son Sam, from the out-of state University of Tennessee, resulted in a conversation, which depending on who is telling the story is described as either a "ridiculous rant", or from my more "rational" perspective, a reasonable discussion of the purpose and "investment in the future" that is college. I will admit, at some point during the conversation, going to the Marine Corps recruiting office was mentioned. In the end, however, it all played out well as Sam now attends IU with it's nice in-state tuition.
Needless to say, the cost of attendance letter is pretty darn important for most families, and for universities, because it very often drives the ultimate decision of where the soon to be college student is heading and gets both students and schools on the same page.
Which is why this year, a mess of unapparelled scope is unfolding. The source of the mess lies with who else, but once again, the government. The Department of Education, probably responding to previous griping about the FASFA process, endeavored to simplify the process by making the FASFA shorter. Sounds reasonable of course, but as President Reagan once wisely opined, the most terrifying words in the English language are "I'm from the government and I'm here to help".
As it turns out, the new FASFA process is actually easier, and many families are navigating the system in less time. The real problem, however, was with the back end of the FASFA system itself. Apparently, the system was not ready for the shorter form, which ultimately resulted in some critical calculation errors in the information being provided to universities and families. This caused many incorrect letters to be rescinded, and many unissued letters to be delayed. While I don't have a college freshman in the house right now, the stress I'm hearing about from clients, and family members is pretty excruciating, with some high school seniors in my life still not sure where they are going in the fall.
I think there is a lesson to be learned here. The lesson being, I think the Federal government just way to involved in discussion and implementation of higher education for our youngsters.
From the confusion the Biden administration is continuing to cause with their loan forgiveness programs, to the completing of the FASFA being pretty much required to sign your kid up for college, it seems to me there is too much government, and government money, surrounding this subject.
I certainly understand and appreciate the need for public investment in higher education, especially through the support of those in our communities who truly need a financial leg up to improve the lots of the next generation, but in my opinion any time government money flows into an industry, and make no mistake secondary education is an industry, the results tend to be inefficiency, cost inflation and even corruption. It's impossible to deny all three of these factors are impacting the college and university system in our country today.
Perhaps this mess with the new FASFA will marshal a conversation about Federal government involvement with college itself. I think the conversation is long overdue.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing includes risks, including fluctuating prices and loss of principal. No investment strategy can guarantee a profit or preserve against loss. Past performance is not a guarantee of future results. Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at marc.ruiz@oakpartners.com. Securities offered through LPL Financial, member FINRA/SIPC.
