Buzz
With student loan debt in the U.S. exceeding $1.5 trillion, it's no surprise that many are looking for ways to make college more affordable and manageable. As tech companies introduce startups with grand visions to change how we finance higher education, potential borrowers may be questioning their credibility.
I spoke with Betsy Mayotte, the founder of the nonprofit The Institute of Student Loan Advisors (TISLA), to get insights from someone who has been deeply involved in financial aid for over two decades.
Here’s an overview of what these emerging startups offer and the important details you should consider before committing to their services.
What Financial Aid Startups Offer
Some platforms claim to assist you in filling out your financial aid application at no cost.
One platform that has garnered significant attention in recent years is Frank, which allows you to complete your Free Application for Federal Student Aid (FAFSA) through its portal. It promises clear instructions in “plain English” (or Spanish). Applicants upload images of their tax returns, and the system filters out irrelevant questions to speed up the process. The average time it takes to complete the FAFSA is “just over four minutes,” and the site has a lower error rate compared to the official FAFSA site, according to spokesperson Drew Kerr.
The FAFSA filing service is entirely free. But how does it make money? Currently, Frank generates revenue in three ways, the first being commissions from schools it suggests to students who complete their FAFSA through the site.
Secondly, Frank offers a membership service. Members pay $19.90 per month to receive a portion of their financial aid disbursement in advance to help cover any gaps in the disbursement process.
Frank also provides a financial aid appeal service for students who believe they deserve more federal aid. The service costs $144.95, and Kerr mentioned that clients receive personalized assistance, including a professionally written appeal letter.
Another service, Mos, claims to streamline the process by applying you to all the government financial aid programs you're eligible for with just one form. However, it's unclear how Mos generates revenue: its FAQ states it doesn't sell customer data, and it mentions a refund policy for “service plans” that aren’t fully explained online. (We’ve reached out to Mos for further details and will update this post if they reply).
How to Apply Without These Services
There’s another free way to apply for financial aid: Simply fill out the FAFSA on your own. Over the years, the application process has become more user-friendly, with deadlines that align better with the college admissions calendar and a more attractive website. You can even apply for federal aid through an app.
“You should never have to pay for help,” Mayotte said. While she acknowledged that most companies offering assistance with the FAFSA are legitimate, she believes they’re unnecessary. “The [FAFSA] calculation is the calculation,” she said.
Mayotte mentioned that every state has a college access office that offers free assistance with completing the FAFSA. Additionally, you can participate in a FAFSA Day in your state, where various locations provide free seminars, help with filling out the FAFSA, and support in applying for scholarships.
She pointed out that users of these services are likely to be targeted with offers for various loan programs beyond the federal student aid they're applying for. Frank explains in its privacy policy how it handles your personal information and provides an option to opt out of information sharing.
You don’t need to pay for an appeal letter.
“It feels a bit predatory,” Mayotte said when I asked her about services that charge a fee to write financial aid appeal letters. “They take advantage of students who are panicking.” She has worked with many borrowers who have submitted appeal letters and reassures them that the quality of the letter doesn’t matter. “What matters is what caused your struggles, what steps you’re taking to improve, and if you’re meeting with academic advisors,” she explained.
Mayotte explained that many students who need to appeal financial aid decisions are those who have changed majors and are taking longer than four years to graduate—hence the need for a sign-off from an academic advisor. However, other students may be dealing with changes in family income, medical debt, or perhaps a more attractive offer from a different school.
If you decide to use a third-party service to file your FAFSA or explore your options for paying for college, “Make sure you fully understand the terms and conditions,” Mayotte cautioned. Additionally, check plenty of reviews and trust your instincts. “Whenever you’re considering a financial product, whether it’s a financial aid app or a credit card, you should always do your research,” she advised.
