College aid by the numbers

(Linda Stern is a freelance writer. Any opinions in the column are solely those of Ms. Stern. You can e-mail her at lindastern@aol.com.)

By Linda Stern

WASHINGTON (Reuters) - Financial aid season is in full swing. Most colleges send out their award letters on April 1, and families have until May 1 to let the schools know which offers they intend to accept.

That's why college financial aid officers may have nightmares about ringing telephones for the next 30 days. Parents and students who don't understand the letters call in, as do parents who want to try to negotiate a better deal before they commit their kids. That's why April is called "haggle month" by many in the business.

But families owe it to themselves to haggle away, and to learn how to maneuver in the college aid market. That's more true than ever this year, with record numbers of incoming students, tight money, private lenders leaving the student loan business and schools reconfiguring their financial aid plans to address criticism that they were at best unhelpful and at worst, corrupt.

Here's what to do if you're looking at an aid offer right now and haven't figured out how to answer it.

-- Seek clarity. First, understand the package. It's likely to consist of three parts: grants (free money), self-help (like on campus student jobs) and loans. At most schools, those loans are likely to make up most of the package.

-- Compare all offers for your own bottom line. It's not the size of the aid that matters, it's the amount of cash you have to come up with at the end of the day, and the amount you'll have to borrow. So crunch budgets for all of the schools you are considering, and come up with two numbers for each one: How much will you spend out of pocket each year? And, how much will you have to borrow? You can use the financial aid comparison calculator from private lender Sallie Mae (collegeanswer.com/award) to see which deal works out best for you.

-- Renegotiate. If your favorite school "gapped" you, that means they purposely offered you less than the total amount you'd really need to go there. They are betting that you'll go anyway. Before you make that decision, try for a better award. If there's any circumstances in your financial life now that wasn't there when you filled out the aid forms -- a lost job, a health crisis, an evaporating 529 plan -- call and let them know. Ask for reconsideration. Ask, if they can't come up with a bigger award, if they turn some of the loans into grants.

-- View debt dimly. Even with a credit crunch and many lenders exiting the field, there are still private loans available for families who want to fill the gaps between the bursar's bill and the amount they can raise through subsidized loans and grants. But be very wary of borrowing big for undergraduate school. Kids who graduate with big loans are less likely to go on to grad or professional school and have far less freedom to spend their post-college years traveling, doing nonprofit work or experimenting in low-paying but satisfying fields. The tippy top schools like Harvard and Stanford will give you the money you need to attend. The rest are hardly life-changing enough to justify tens of thousands of dollars of debt for a 23 year old who might have lower-cost alternatives.

-- Shop carefully for loans. Start by asking your school to recommend lenders. Then, just for the heck of it, compare the quotes you get from them with the quotes you get from your own neighborhood bank and credit union, if you belong to one. Check out myrichuncle.com, an alternative online student loan seller. And compare quotes, too, with what's available in the limited direct loan program from the Department of Education, at ed.gov/DirectLoan.

-- Pick and choose. Financial aid offers are not all or nothing prospects. You can take the grants and leave the loans on the table. You can skip the self-help and get an off campus job that will pay better. You can use the subsidized loans and then scrape together gap-filling cash from a home equity loan or other source. And you can change your mind about all of that again next year, when you'll be going through this exercise again.