Author: By Marci Bailey, Globe Correspondent

Date: MONDAY, January 25, 1999

Page: A10

Section: Business

With aid largely distributed on a first-come, first-served basis to those who apply, a late application means less money in the pot when administrators consider your case. While financial aid forms for next year's college freshman require tax information for 1998, parents inclined to wait until they receive their W-2s and 1099s should get to work now.

"It's better to give your best estimates and meet the deadline than to be 100 percent accurate and miss the deadline," says Ryan Williams, director of the office of financial assistance at Boston University. "It's not an infinite pool of money."

If you're not yet at the application stage, understanding the formulas and beginning to employ specific strategies early in your child's high school years can help avoid surprises, and may even increase your aid package. For example, knowing that students are expected to contribute a much greater percentage of their assets than are their parents can help determine in whose name money is saved.

At many schools, the deadline for financial aid applications is in February. At BU it's Feb. 15, but Williams suggests filing your applications as early as possible. Information that colleges consider for financial aid comes from two forms -- the Free Application for Federal Student Aid and the College Scholarship Service/Financial Aid Profile, widely known as the "profile" or CSS. Both resemble tax returns and require much of the same data.

Industry professionals say estimating numbers is OK, but be sure not to leave any sections blank, since missing information is likely to delay an aid award. Also, never assume you're ineligible for aid, even if you have high income and assets.

"There isn't really a cutoff," Williams says, adding that factors including parents' ages and family size figure into formulas.

In 1996, the last year for which data are available, the average award at a four-year public college was $5,200, with 56 percent of students receiving aid; at four-year private schools, those numbers were $8,877 and 70 percent, respectively, according to the 1996 US Department of Education National Post-Secondary Aid Study.

The FASFA gets you in line for federal aid as well as assistance from many states, including Massachusetts. It is used by both public and private colleges. In general, private schools also use the profile, which provides them additional information, such as the amount of parents' home equity.

The two forms ultimately come down to three letters: EFC, lingo for your expected family contribution. The EFC is your out-of-pocket bill: the total annual college expenses less the amount of financial aid received. Students need to reapply for aid each year, and amounts may be adjusted if financial circumstances change.

Financial aid can take several forms -- scholarships, grants, work-study jobs, and loans. What surprises families most is that financial aid packages are frequently less than they expect, and nearly always include loans, according to Kristin Davis, author of "Financing College" (1998, Kiplinger Washington Editors).

"I think most people are disappointed. They think they'll get more," Davis says. "It's not at all unusual for half of the [financial aid] package to be self-help [loans]."

Ted Lawless of Medford harbors few illusions about receiving financial aid. He is steeped in applications for his daughter Meredith, a senior at Arlington Catholic High.

"We're all a little stressed about it," he says. Lawless, a software engineer, and his wife Marilyn, a nurse, thought they "saved diligently" for their daughter's education, but still call tuition prices "scary." Lawless doesn't expect to receive federal aid, but says his "only hope is that one of the schools offers something."

He also wishes he planned a few years earlier for the application process.

"Now we're kicking ourselves," Lawless adds.

With advance planning, surprises do not have to be part of the process.

"You can't hide from this. Waiting for senior year is a mistake," says Stuart N. Farmelant, an attorney with Shane & Paolillo in Newton. Farmelant founded Student Aid Advisors, a financial aid counseling service, in 1996.

Here are some steps you can take in advance:

"The impact of $1 in assets is less than [the impact of] $1 in income," says Jack Joyce, director of communications and training for the College Board.

For example, families may be expected to contribute as much as 47 percent of income above a certain amount, determined by formula.

But with assets, only 5.6 percent of parental assets are expected to be used for college expenses per year. Assets in a student's name, however, are expected to be depleted by 35 percent a year.

While parents just beginning to save for college have time to take into account the formulas and tax considerations when deciding whose name to save in, high school students no longer have the same flexibility. Financial aid administrators may look askance at money moved to another name at the last minute.

Finally, retirement money, annuities, and home equity are not counted as spendable assets by the FASFA. However, the profile form does account for home equity, and individual schools may take into account significant retirement savings when determining an aid package.

While there is virtually no way to legitimately move assets at this time, you can spend them. If your son or daughter needs a computer for college, buy one out of savings in the teenager's name before you have to report the assets on the FASFA or profile. This reduces the amount of assets to be spent at the 35 percent rate. Further, you can buy a new car or make other expensive, but necessary, purchases.

Financial aid administrators say a frequent red flag is significant interest income with comparatively few assets to match. Discrepancies arise "every day," says BU's Williams. The federal government randomly audits 30 percent of FASFA submissions, and schools may further question the data.

Be sure you can provide detailed documentation, much like in an IRS audit, to answer questions.

"We have the right to deny a student financial aid if the data doesn't clear up [discrepancies] to our satisfaction," says Williams.

While using assets for computers and reasonably priced cars is legitimate, aid administrators will be less sympathetic if you spend money on luxury purchases, like a vacation home.

"There is certainly no reason families can't protect that money for necessary needs," he adds.

Funds needed on that short a time horizon shouldn't be invested in equities. And any capital gains showing in your first aid year -- 1998 for current incoming applicants -- will be looked at as income to be spent on college.

"You ought to be out of equities," says Davis. "Cash out before the first aid year."

For income, think about pushing bonuses ahead. While it is too late for those who got a bonus in 1998, parents of current high school juniors thinking ahead to next winter's financial aid applications should eye deferring income in 1999.

Other early strategies include moving money out of children's names to other family members or taking a home-equity loan, which will reduce the amount of home equity shown on your profile form. However, other kinds of debt, like credit cards, do not count against your assets or income and will yield no results when applying for aid.

You can transfer money to retirement plans where permissible under tax law. While some individual schools look at retirement assets, most do not. A word of caution: Be careful not to tie up money you may need to pay for college expenses.

The key question in appeals is "can the family provide a reason," says Michael Wildeman, director of student financial services for Northeastern University.

Be careful if you are tempted to play one school's offer against another. If it works at all, such an attempt is only likely to succeed if the two schools at hand are in direct competition for students.

"People go in and try to play let's make a deal," Davis says. "Aid officers resent that."

Further, at BU, Williams says merit awards are given early in the admissions process to students the university finds particularly appealing. While Williams says an appeal is worthwhile and BU may tinker with offers a bit, there is rarely a substantial revision in aid unless family finances have changed significantly.

A good consultant will have wide-ranging experience in the field but shouldn't be a fortune teller.

"I don't make any predictions to my clients," Farmelant says. "It's fraught with danger."

Farmelant's fees range from $500 to $1,000 for families who come in during the child's freshman year of high school to review financial strategies in preparation for the application. For that fee, he will complete the application and help with the appeals process. For completing the application only, his fee is less than $200.

College financial aid administrators question the need for such services. If you routinely have an accountant handle your finances, you may be more comfortable using a consultant. However, administrators stress they are available to answer questions.

"I hate to see a family pay for what they can get for free," Wildeman says.

The College Board's Joyce agrees.

"I've never felt it should be necessary," Joyce says. "Grab your [high school] guidance counselor by the lapels and make sure there is a financial aid workshop."

The Higher Education Information Center is located in the Copley branch of the Boston Public Library at 700 Boylston St. On weekends through Feb. 14, the center is hosting volunteer college aid administrators to help families with applications. Clinic hours are Saturdays 9 a.m.-5 p.m. and Sundays 1 p.m.-5 p.m.

The center also has a toll-free help line: 1-800-442-1171 in Massachusetts; 617-536-0200 outside Massachusetts. It also posts a variety of information on its Web site at www.heic.org.

Other Web sites to check out include:

- www.nasfaa.org -- The National Association of Student Financial Aid Administrators, an organization of financial aid administrators from 3,200 US colleges and universities.

- www.finaid.com -- The Financial Aid Information Page, created by Mark Kantrowitz, author of "The Prentice Hall Guide to Scholarships and Fellowships for Math and Science Students."

- www.mass.edu -- The Board of Higher Education of the Commonwealth of Massachusetts.

- www.collegeboard.org -- The College Board, an association of schools, colleges, and universities.

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