Befuddled by college aid

Parents and students face complex system even as national scandals spur reform.

For a group focused on higher education, families of college-bound students know frighteningly little about the world of financial aid. Many know the difference between grants and loans. Some know that recent loan scandals are spurring reform. But most are simply befuddled by a complex and shifting system of rules and regulations.

As thousands of students return to campuses and parents worry about rising costs, they are finding that lawmakers and regulators made several changes in recent months -- and more are expected.

"You almost have to spend full time on it to understand it," said Pat Callan, president of the National Center for Public Policy and Higher Education. "One of the reasons there is so much room for ripoffs of the consumer is because it is so complicated."

Sherry Frost of Raleigh counts herself among those who don't get it. With her son set to graduate from Leesville Road High School this spring, family discussions have shifted toward finding a college. They visit campuses. They discuss options. They find themselves doing research on the Internet to find out more.

But when it comes to financial aid, Frost offers a simple summary: "I am probably in the fairly clueless category."

Her challenge is the same one faced by most families.

Parents and students typically don't research financial aid until after a college is selected. The first form they are given -- the Free Application for Federal Student Aid -- is eight pages long, with 101 questions involving family finances.

If they have the stamina to continue, they quickly realize there are dozens of state, federal and private programs with countless requirements and standards. Private lenders represent a different world of options. There are more than 3,000 private lenders that offer student loans.

'People's finances are complex'

Lenders and university officials understand parents' frustration, but they say the sheer size of the $85-billion-a-year industry makes it complex.

"The flip answer is the system is complex because people's finances are complex," said Steve Brooks, executive director of the N.C. State Education Assistance Authority. "That's not a complete answer, but it gets at the heart of the issue."

As they sort through their options, families typically turn to a financial aid officer once a student is enrolled. But even that option was tainted this spring, when the New York attorney general produced documents showing that some schools were steering students to specific lenders in return for loan kickbacks and lavish gifts.

At that point, even universities with nothing to hide knew they had a problem on their hands.

"Families must be able to trust us to help them make the best choices," said Julie Rice-Mallette, director of financial aid at N.C. State University. "Everyone is much more sensitive about the relationships we have with lenders now."

Those who oversee the University of North Carolina system have made it clear to the 16 campuses that dealings with lenders must be transparent. Schools are required to offer families a choice of at least three lenders, along with reasons for their recommendations. They are prohibited from taking gifts from lenders. If they are asked to serve on lenders' advisory boards or attend their conferences, they must pay their own way.

Similar regulations are being drafted in Congress and the U.S. Department of Education.

Simplifying the process

Congress is also debating ways to increase financial aid options for parents while simplifying the application process.