For college students, a sudden drop in income can mean the difference between staying enrolled in school or dropping out. A parent or self-supporting student who has their hours cut, gets furloughed, or gets terminated mid-semester might suddenly have no way to make their next tuition payment. You’ve already submitted your Free Application for Federal Student Aid (FAFSA) — but it no longer reflects your circumstances. Any loans, grants, and scholarships you already have aren’t enough.
This situation is a stressful one, and no one wants to find themselves in it. But because so many students do, colleges and universities have a process for dealing with it. You might be able to get extra financial aid by requesting a review from your school’s financial aid office.
“Some colleges call it a financial aid appeal, some call it a professional judgment review, and some call it a special circumstances review,” said Mark Kantrowitz, publisher and vice president of research at SavingforCollege.com and author of “How to Appeal for More College Financial Aid.”
These tips may help you maximize your chances:
- Act immediately
- Follow your school’s procedures
- Stick to the facts and be specific
- Provide supporting documents
Financial aid administrators cannot change the federal financial aid formula when a student’s circumstances change, according to FinAid.org. But they can change the inputs to the formula if you give them the information they need.
Act immediately to increase your chances of securing more financial aid
Your school may only have so much financial assistance it can award each year. So the sooner you act, the more likely you are to gain access to those funds. This tip might be especially important if a major event has lots of students scrambling for more financial aid simultaneously, such as widespread layoffs during a shock to the local, national, or global economy. (Learn more: Weathering a financial disaster)
Talk with your financial aid counselor or your school’s financial aid office right away about how to stay enrolled while awaiting a decision.
Follow your school’s procedures for requesting a special circumstances review
Call the financial aid office and check your school’s financial aid website for forms and instructions explaining how to request a review of special circumstances. You may find something like this statement from Carleton College: “We recognize that a family’s financial resources may change unexpectedly after the initial financial aid award is calculated. In these situations, we will conduct a thorough and personal review of the family’s individual circumstances upon written request.” (Related: Your family budget and an unexpected expense)
Your school’s website will likely provide a link to the right paperwork (including household budget and estimated income worksheets), tell students and parents what to do before submitting a review request, and provide details on where to mail, email, or fax the request.
A review request will typically need to include the following:
- Student and parent names and contact information
- The student’s school ID number and class year
- The reason for the request
- An explanation of your special circumstances
Stick to the facts and be specific
Provide specific facts about your circumstances. Schools will consider financial hardships like these:
- Job loss
- Significant loss of income
- Medical expenses not reimbursed or paid for by insurance
- Extended family support (helping an aging parent with long-term care costs, for example)
- Natural disaster losses
- Loss of benefits
- Parental divorce or separation
- Parental death
Don’t make emotional, long-winded, or vague appeals for more money when you explain your special circumstances. Make it easy for the financial aid counselor to review your situation and determine your new financial need.
“Yes, there are processes and formulas — but there are people behind them,” said Sabrina Manville, a former university administrator and the founder of Edmit, which advises families on financial decisions about college. “The financial aid office is made up of people whose job it is to help students afford college. They will be working with you every year you are enrolled. So, make sure you are treating them with respect.”
Provide supporting documents
Of course, colleges will need some verification of your situation. Here are some documents you might provide to demonstrate your change in circumstances and additional financial need.
- Estimated income worksheet
- Household budget worksheet
- Most recent pay stub showing year-to-date income
- Employer termination notice
- Employer letter regarding termination or reduced hours/pay
- Severance pay statement
- Proof of unemployment claim/benefits
- Child support and alimony information
- Medical bills/explanation of benefits statements
- Doctor’s note about a medical diagnosis
- Parent’s death certificate
- Parent’s divorce decree (Related: Busted marriages and college financial aid)
“Be crystal clear on what you need and why you are asking for college financial aid assistance now,” said Colleen Krumwiede, cofounder of Quatromoney, a fintech platform that helps families optimize their college financing. Give detailed explanations of what has changed: For example, your mother’s monthly income went down by 35 percent; your dad’s unemployment compensation equals $450 per week; or your share of the bill for emergency surgery is $7,000
It probably goes without saying, but if your household budget includes discretionary expenses such as vacations, hobbies, cable television, and other nonessentials, your financial aid office will wonder why you haven’t cut these items from your budget and may be unwilling to help. (See: What to do when facing a financial emergency)
Evaluate personal assets you could draw on
Even if you do everything right, you may not get the money you need.
“Unfortunately, not every college will be able to honor your request or provide enough additional aid, Manville said. “If you need to make ends meet another way, speak to the aid office about other options, such as loans, on-campus jobs, or payment plans that could be more feasible for you. Don’t get in over your head, though — if you’re nervous about making it all work, you may need to consider a transfer or a semester off.” (Related: Is student debt worth it?)
If those options don’t work, your family might have other sources of funds. Each of these options entails risks and trade-offs that may not be worth it. But families might consider tapping the following personal assets for college, at least as a short-term solution to get through the semester or school year.
Another way you might be able to pay college tuition in an emergency is with a loan from the cash value of your whole, variable, or universal life insurance policy. The benefits of taking a policy loan include being able to use the money however you want, not needing a certain income or credit score to qualify, and flexible repayment terms. In fact, you do not have to repay the loan at all.
But there are consequences to borrowing against your cash value. Doing so increases the likelihood that the policy will lapse and may result in a tax bill if the policy ends before the death of the insured. Also, any outstanding loans and interest reduce cash value and the death benefit to your heirs when you die. So, it’s important to understand the risks and possible outcomes before borrowing against your cash value. A financial professional can help you understand the implications of a policy loan. (Learn more: Life insurance: Treat cash value with care)
Tapping your home equity through a home equity loan or line of credit may be an option. You’ll need good to excellent credit and proof of income, in addition to sufficient equity. If one parent has been laid off but the other is still working, home equity borrowing could be an option. However, using the family home as collateral to pay for educational expenses could turn out to be a bad move if your financial situation gets worse.
Private student loans
Private student loans could also be available. The lender will consider your credit history, your income, and your debt-to-income ratio, so if you’ve recently lost your income, you won’t qualify. If a working relative with good credit is willing to accept the risks associated with cosigning — which include being fully responsible for the loan if the student does not repay it — then a private student loan could help.
Do you have a 401(k)? About half of 401(k) plans allow participants to take out a 401(k) loan. If you no longer work for the company, a loan may not be an option. However, it may be possible to take a distribution or to roll your 401(k) into an IRA, then take an IRA distribution. You could even cash out your account. (Related: COVID-19 prompts changes to retirement plan rules)
Financial professionals consider these options to be last resorts. Retirement plan loans, early distributions, and especially cash-outs can have major effects on your tax liability and your ability to retire when you want. (Related: Borrowing from your 401(k): The risks)
Overcoming the challenge of lost income
A sudden loss of income during college is a huge blow, but completing your school’s process for a review of special circumstances can result in additional financial aid. If it’s not enough, drawing on personal assets, with careful consideration of the risks, may offer a short-term solution.
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This article was published in April 2020. It has been updated.