Financial Aid Dilemma: Should I Apply for Financial Aid?

(MoneyWatch)  Should I apply for financial aid?

I hear this question a lot from anxious parents who are worried that simply filing for financial aid will wreck their teenager's college admission chances.

Parents are starting to worry about this now because their teenagers have begun filling out college applications. These applications ask parents if they will be applying for financial aid.

Parent anxiety is understandable since last year some selective private schools showed favoritism towards richer applicants. With the economy still in a funk, it's likely that the number of teenagers applying for financial aid will rise even more.

To get a handle on this dilemma, I talked with Kalman Chany, a financial aid expert and the author of the latest edition of The Princeton Review's Paying for College Without Going Broke.

Chany insisted that this financial aid fear is "much ado about nothing."

Here is Chany's reasoning: If a family is contemplating whether to apply for aid or not, chances are the parents are going to be eligible for little or no financial assistance anyway. In contrast, families who desperately need a truckload of aid -- which could mean $40,000 or $50,000 -- are always going to seek financial help. The relatively small amount of money the more affluent families may receive shouldn't prompt a school to reject a child.

"People tend to think that if you check the box that you are applying for financial aid, a college will first look at all the kids who don't check the box and then if there are spots left they will look at the other kids," Chany says. But he added, "It doesn't work that way."

Colleges ask the financial aid question in their applications because they need to know in advance if they will have to prepare a financial aid package for an accepted applicant. Assembling a package requires a lot of time, as well as communication between the admission office and a college's financial aid staff in what is a relatively short period of time.

What parents shouldn't do, Chany warns, is to pretend they aren't going to request financial aid when their teenager fills out college applications. Doing this may jeopardize a family's financial aid chances. Being sneaky could irritate the financial aid office so much that a child ends up with nothing. And as a practical matter, the financial aid pot might be empty before the sheepish parents speak up.

So here's the bottom line: Don't be shy about applying for financial aid. Just about everybody does.