Getting answers to essential questions about a college’s financial aid policies

College financial aid policies can vary significantly, so be sure to check with each school.

The CollegeBoard suggests an interested student or parent “schedule a phone meeting or an interview with a member of the financial aid staff“ to get answers to any questions that are not answered by information on the college website.

A list of 12 questions to get you started on gathering information is provided.  In my experience, the answers to most of these questions can usually be found on college websites, so be sure to check there before you make a call.

A dozen questions to get you started:

1. What’s the average total cost — including tuition and fees, books and supplies, room and board, travel, and other personal expenses — for the first year
2. How much have your costs increased over the last three years?
3. Does financial need have an effect on admission decisions?
4. What is the priority deadline to apply for financial aid and when am I notified about financial aid award decisions?
5. How is financial aid affected if I apply under an early decision or early action program?
6. Does the college offer need-based and merit-based financial aid?
7. Are there scholarships available that aren’t based on financial need and do I need to complete a separate application for them?
8. If the financial aid package the college offers isn’t enough, are there any conditions under which it can be reconsidered, such as changes in my family’s financial situation or my enrollment status (or that of a family member)?
9. How does the aid package change from year to year?
10. What are the terms of the programs included in the aid package?
11. What are the academic requirements or other conditions for the renewal of financial aid, including scholarships?
12. When can I expect to receive bills from the college and is there an option to spread the yearly payment over equal monthly installments?

If you want to be super organized, you can create a spreadsheet with all relevant data.

Tuition discounting grows to all-time high at private colleges

Tuition discounts continue to climb at private colleges.

The average “tuition discount rate”—the reduction off list price afforded by grants and scholarships given by these schools—hit an all-time high of 45% last fall for incoming freshmen, according to a survey being released Monday by the National Association of College and University Business Officers.

Rising discounts along with the smallest sticker price increases in years have combined to make college more affordable for many families.

“It’s a buyer’s market” for most colleges ”as more families focus on cost and value”.

Some facts and figures:

• 65% of private colleges increased their discount rate in the fall of 2012.
• About one in eight U.S. undergraduates is enrolled at a private nonprofit college, which provided 70% of all grant aid to undergraduates in 2009.
• “The average discount rate at private colleges has climbed for seven years in a row.”
• The median sticker price at about 280 private schools rose 3.9% last year, the smallest increase in about 12 years.
• At four-year public colleges and universities, in-state tuition and fees rose 4.8% last year, also the smallest increase in about 12 years.
• “The discount rate for public universities fell modestly in 2012 … after rising from 2007 to 2011.”
• Last fall, enrollment fell at about half of 400 private colleges surveyed as the number of high school graduates dropped.

Both need- and merit-based aid appear to be part of this trend of growing discounts.

The economic downturn boosted the number of families who qualify for aid. In addition, even those earning too much to demonstrate need under aid formulas “expect to see some sort of merit aid,” unless the school is highly selective, said Trey Chappell, a college adviser in Scottsdale, Ariz.

Is it a “fundamental shift”, or simply the result of a weak economy?

The question of whether the revenue problems facing colleges and universities are a result of a fundamental shift in the country’s attitude toward paying for college – the so called “college bubble” – or whether it’s simply the result of several years of weak economic growth will only be answered if families begin to experience the kind of economic growth they were accustomed to prior to the recession.

Related:  Tuition Discounting: Not Just a Private College Practice (CollegeBoard)

Quick Links – Best and worst areas for job growth; women have a duty to keep working; Cooper Union will charge tuition

Best and worst metropolitan areas for 2012 job growth

The South seems to be enjoying better job growth.

Top five metro areas for job growth, showing number of jobs:

Bottom five:

Check out the complete list.

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‘Female Ivy League graduates have a duty to stay in the workforce‘

There’s nothing wrong with wanting to be a full-time mother, but you don’t need an elite degree to do it

I am not someone who believes that every woman should be made to feel as though they must choose between being committed to their children or committed to the sisterhood of women’s advancement. But I do consider any Harvard Law School degree obtained by a woman who then chooses not to use it in any sort of professional capacity throughout most of her life a wasted opportunity. That degree could have gone to a woman who does want to spend her entire life using it to advance the cause of women – or others in need of advancement – not simply advancing the lives of her own family at home, which is a noble cause, but not one requiring an elite degree….

… There’s nothing wrong with someone saying that her dream is to become a full-time mother by 30. That is an admirable goal. What is not admirable is for her to take a slot at Yale Law School that could have gone to a young woman whose dream is to be in the Senate by age 40 and in the White House by age 50.

The author of this commentary is Keli Goff, a 33-year-old political commentator and former Democratic strategist.

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‘Cooper Union to Start Charging Tuition in Fall 2014‘

Cooper Union only admits 7% of applicants, but that low admission rate may rise after it starts charging tuition.

Cooper Union said Tuesday it could no longer afford to foot the tuition bills for its entire student body, closing a wrenching year-and-a-half-long debate about how to balance economic woes against the school’s core mission to provide a top-notch higher education to talented students, no matter the cost.

The entering class of 2014 will be offered half scholarships to enroll in its prestigious program, putting the price of attendance at just under $20,000 a year….

Cooper Union — named after founder and industrialist Peter Cooper — was established in 1859 as a school for low-income students, offering access to the higher education necessary to participate in shaping public life. Since then, the promise of free education has been as central to the school’s identity as its rigorous programs in architecture, engineering, and the arts, as well as its motley collection of academic buildings — architectural marvels suggestive of the talent of the students inside.

But, like colleges and universities across the country, the college has hit hard financial times in recent years. While the school has relied largely on rent income from land beneath the Chrysler Building to fund its scholarships, that source has not kept pace with inflation rates, Epstein said in his statement.

Reminder – college scholarships that pay for room and board are taxable

College scholarships that pay for room and board are taxable.  Here are more details from IRS Publication 970 on the types of scholarships and fellowships that are tax exempt.

Tax-Free Scholarships and Fellowships
A scholarship or fellowship is tax free (excludable from gross income) only if you are a candidate for a degree at an eligible educational institution.

A scholarship or fellowship is tax free only to the extent:

• It does not exceed your expenses;
• It is not designated or earmarked for other purposes (such as room and board), and does not require (by its terms) that it cannot be used for qualified education expenses; and
• It does not represent payment for teaching, research, or other services required as a condition for receiving the scholarship….

Worksheet 1–1 is used to calculate the amount of scholarship aid that can be excluded from gross income.  If your only income is a tax-free scholarship, you do not need to file a tax return.

Work-study earnings are taxable, included in the IRS category of payment for services.

A summary from the IRS:  Parents and Students: Check Out College Tax Benefits for 2012 and Years Ahead

Related:  Tax season reminders about education tax benefits (Cost of College)

Colleges with highest percentages of students receiving merit aid

Top 10 merit aid colleges for the 2011-12 school year as compiled by US News & World Report

… Merit aid may be awarded for outstanding academic achievement or for other reasons not tied to academics….

On average, 13 percent of students who had no financial need received some amount of merit grants or scholarships for the 2011-2012 school year, according to data reported by 1,084 colleges to U.S. News in the 2012 annual survey.

The top ten list of schools includes some highly ranked institutions.  Unfortunately, Cooper Union may soon end its free tuition policy due to a “dire budgetary situation“.  Rhodes College in Memphis is one of the Colleges That Change Lives.

The entire list of “colleges that report the highest percentage of their students in the 2011-2012 academic year who “had no financial need and who were awarded institutional non-need-based scholarship or grant aid” excluding athletic awards and tuition benefits” can be found on the US News website.  You may want to check it out, especially if you do not expect to qualify for need-based aid.  Be sure to check details like criteria used in selecting recipients and average merit award amounts.

Related:  

• College merit aid is unfair according to some critics (costofcollege.wordpress.com)

Carnegie Mellon University – an example of transparency in financial aid policies

Carnegie Mellon University is unusually transparent in sharing information on how financial aid is awarded.  First, it is clear that awards always incorporate a financial need component.

Carnegie Mellon provides qualified students with need-based institutional grants and scholarships to help fund the expenses of college. Grants and scholarships are considered to be ‘gift aid,’ meaning that neither amount has to be paid back.

Additional details

Grants
… Grants are awarded to students who demonstrate financial need….

Scholarships
Carnegie Mellon offers the Carnegie Scholarship which is a joint need- and merit-based scholarship….

Basic principles

Carnegie Mellon’s financial assistance program is designed to meet our dual goal of helping prospective students who have demonstrated financial need afford the cost of education and rewarding those students who have outstanding talents and abilities. Need-based financial assistance is used to enroll high-quality students. Highest quality students will receive the most favorable financial assistance packages.

CMU is open about their policy of reviewing offers from competing schools and their use of statistical modeling.

We have been open about our willingness to review financial aid awards to compete with certain private institutions for students admitted under the regular decision plan. Unlike most institutions, the university states these principles openly to those offered first-year admission under the regular decision plan. While early decision students are not eligible to participate in this aid review process, we will meet their full demonstrated need as calculated by the university.

We use statistical modeling as an aid in the distribution of limited financial aid dollars. It is a strategic tool that helps us pursue our goal of increasing the quality of the student body while using our resources as effectively as possible. This modeling takes into account a student’s intended college major, academic and artistic talents, non-academic talents and abilities, as well as financial need. This approach to awarding financial aid is unique to Carnegie Mellon and has not been developed with the aid of any outside consultants.

Here are some of frequently asked questions about financial aid.

• How are students considered for the Carnegie Scholarship?
• Is there a way to get an idea of what it will cost to attend Carnegie Mellon?
• Carnegie Mellon is expensive – how will I know if it’s going to be affordable for my family?
• Can I request an estimate of my financial aid eligibility before applying to Carnegie Mellon?
• If I apply for financial aid, will it hurt my chance of getting accepted?
• Is financial assistance available for international students?
• What effect will receiving an outside scholarship have my financial aid package

The answer to the last question makes it clear that students are allowed to “stack” outside scholarships on top of financial aid awarded by CMU.

Related:  Maximizing college revenue through financial aid allocation (Cost of College)

Maximizing college revenue through financial aid allocation

How are college financial aid decisions made?  Some insight can be gleaned from a paper presented at the 2007 Frontiers in Education (FIE) Conference - Deriving Financial Aid Optimization Models from Admissions Data.

… Financial aid is used to achieve a number of enrollment objectives, including diversifying the student population, attracting strong students, and maximizing tuition revenue. While financial aid generally positively affects applicant enrollment decisions, the effect on the probability of enrollment varies across applicants….

Schools obtain as much information as possible from each applicant as this helps them predict how a particular student will react to a given level of financial aid offered.  Schools gather data such as grades, test scores, financial resources, intended major, caliber of high school, extracurriculars, etc.

The expected tuition revenue from any given applicant who has been offered a particular amount of financial aid can be obtained by multiplying the probability of enrollment by the revenue obtained at that financial aid level. As the financial aid increases, the probability of enrollment increases but the tuition revenue decreases. So for each applicant there will be a financial aid offer that maximizes the expected revenue from that student. Our objective is to offer each student the amount of financial aid that maximizes tuition revenue, subject to capacity constraints. Developing such an optimization model requires first developing a predictive model that can determine for any given student the probability of enrollment for each level of financial aid offered.

The graph might look like this for a particular student, with a typically nonlinear relationship between probability of enrollment and financial aid.

Multiplying this curve by the linear relationship between percentage revenue and percentage financial aid generates the expected revenue at each level of financial aid.

For this particular applicant, the maximum expected revenue occurs when 50% financial aid is offered.

They’ve got your number, so to speak.

The goal is to get the most tuition revenue from the existing pool of applicants.  Here’s how Mark Kantrowitz described the sophisticated enrollment management techniques colleges use to attract desirable students and maximize revenue.

“A lot of it is done by computer programs to calculate how much aid they need to offer to each student so they can get the maximum number of desirable students without going over their financial aid budget,” says Mark Kantrowitz, the publisher of FinAid.org and FastWeb.com.

Many regional and religious colleges, he says, also try to “optimize their revenue” by offering partial scholarships to the students who can pay the rest of the tuition — even “B” students with an SAT verbal and math score of 1200 or less. Caution: You’ll have to maintain a grade-point average of about 2.7 to 3.0 to renew most scholarships after your first year.

State college financial aid shifting from need to merit

More than 25 states now award some financial aid for college students based on academic achievement, as opposed to need. Thirteen states award more than half of their financial aid based on merit.

Click the image for state-by-state details.

A shift from need to merit - According to the National Association of State Student Grant and Aid Programs (NASSGAP) survey of state-funded student financial aid, the trend over ten years has been to award more merit-based aid.

Change in state merit aid
1999-00 – 21.8% was merit-based
2009-10 – 27.4% was merit-based

Although it’s unclear how hybrid aid that combines both merit and need is treated in these calculations, usually it is placed in the need-based category .  It can be confusing, as I’ve seen instances where so-called merit aid also considers students’ financial need, and need-based aid often considers some basic elements of merit.  From a 2011 Higher Education Policy Brief, State Need-Based and Merit-Based Grant Aid: Structural Intersections and Recent Trends:

The merit versus need debate will continue.
Given increasing economic pressures on all but the wealthiest Americans, tensions are inevitable between proponents of restricting limited state grant aid to the lowest-income students and proponents of allowing academically strong students to receive state grants regardless of income. State and federal politics will also continue to affect this ongoing debate.

Related:

• College merit aid is unfair according to some critics (costofcollege.wordpress.com)
• College presidents want to reduce merit aid (costofcollege.wordpress.com)

College presidents want to reduce merit aid

Apparently college presidents are unhappy about the trend of awarding increasingly more financial aid based on merit and not on need, so they are taking steps to reverse the trend.

The shifts in aid in the last 15-20 years have been unmistakable. In 1995-96, private nonprofit and public four-year colleges were far likelier to give need-based grants than merit-based ones (by margins of 43 vs. 24 percent at private nonprofit colleges and 13 percent vs. 8 percent at public universities). In 2007-8, 18 percent of public university students received merit-based awards and 16 percent received need-based grants; at private colleges, 42 percent received merit aid and 44 percent received need-based assistance, a 2011 study by the National Center for Education Statistics showed.

College presidents believe the trend has ‘undermined’ the concept of making college affordable.

There is fairly widespread agreement that the rapid expansion of financial aid awarded based not on financial need but on academic (as well as athletic and racial/ethnic) grounds, and frequently to attract students who are able to afford tuition but whose families won’t pay full freight, has undermined the traditional conception of financial aid as a tool to make college possible for students who couldn’t otherwise afford it. Aid awarded based on criteria other than need tends to change where people go to college, not make it possible for them to go.

I doubt that the increase in merit aid has been an important factor in making college less affordable.  College presidents consider this an issue of fairness, but perhaps it’s more a matter of concern about being forced to engage in bidding wars for students.

If Nugent spoke with a hint of frustration in her voice, it was because she so clearly thinks that most presidents know in their hearts that what they’re doing isn’t in the long-term interests of their institutions or of students.

“The merit wars are both wrong and destructive; is a game of chicken the most responsible way to manage our institutions?” she said. “There’s an understandable fear of unilateral disarmament. The question is, can we band together to defend what we think is right?”

S. Georgia Nugent, president of Kenyon College, leads an effort to cut merit aid.  In her presentation at a recent meeting of presidents in the Council of Independent Colleges, she shared news about efforts being made to reach that goal while also ensuring the Department of Justice does not once again investigate the schools for the possibility of collusion

First, Nugent shared with the group a preliminary “statement of principle” (drafted by John McCardell of the University of the South and others) that would represent a “first, baby step” toward reaching some kind of agreement among presidents about eventual actions or changes in financial aid and pricing practices.

And then David L. Warren, president of the National Association of Independent Colleges and Universities, told the group that he’d had a series of preliminary conversations in which officials of the U.S. Justice Department had expressed a willingness to review (and potentially bless) accords in which colleges would agree to take common steps to reduce non-need-based aid that would result either in increased financial aid for students or lowered tuition prices (or both).

The importance of receiving DOJ blessing arises from “a Justice Department antitrust investigation in the late 1980s that brought to an end the practice in which elite institutions’”collaborated on financial aid distribution, a practice the DOJ alleged “was anti-competitive and hurt students”.

Among the principles in the document circulated among the college presidents group was this one:

We will cease, in our publication, on our websites, and in all other forms of admission communication, to use the term “merit aid” to describe non-need-based financial aid (since, they say, all aid recipients are meritorious).

Hmm, “all aid recipients are meritorious” reminds me of the situation where all members of all teams in the soccer league receive trophies.  All those soccer players are also meritorious.

The session included several indications that the outlook for reducing merit aid was positive, leaving the audience of college presidents in an “upbeat mood”.

Related:

• The Rapid Rise of Merit Aid (Inside Higher Ed)
• College merit aid is unfair according to some critics (Cost of College)

Practical New Year’s resolutions for college parents and students

The mother-daughter team of Julie and Lindsey Mayfield offer some money-saving New Year’s resolutions for college families.

For parents:

1. Complete the FAFSA: I bet few people look forward tofilling out the Free Application for Federal Student Aid, or FAFSA. Therefore, it’s something that’s easy to put off—or not do at all….

2. Prioritize communication:…

It’s especially important to communicate about expectations: what you expect of your student and what he or she can expect from you, especially as it relates to financial support.

For students:

1. Use my meal plan to its fullest: Meal plans are prepaid, so it is in your best interest to use them wisely. Next semester, avoid eating out or off-campus as much as possible.

Those frequent purchases can add up …

2. Track my finances: Do you ever avoid looking at bank statements because you’re afraid of what you’ll see? I think this is the No. 1 way to overspend, and can spell disaster for college students who aren’t used to monitoring their own expenses. I am certainly guilty of this….

3. Find at least one new form of financial aid: The search for scholarships and financial aid is usually in full swing during the senior year of high school, but there are plenty of options available for current college students as well. I’ve found these to be less competitive than the more traditional incoming freshman scholarships, so they may be easier to attain.

A little extra cash could also be a great New Year’s gift to you and your parents—so start searching!

I found these ideas to be practical reminders to act upon at the beginning of the year.

Tracking finances
One absent-minded college student I know decided the best way to track his finances was to maximize the use of  his debit card and to stop using his parents’ credit card.  If he remembers to check his bank account periodically he is able to guard against going over his budget.  Meanwhile, his expenses are efficiently tracked by his bank.  He had previously discovered he has little restraint when using a credit card, finding it exceedingly easy to go over his budget on the many enticements that attempt to separate a young person from his money.  So even though his parents would like him to carry a credit card to use in emergencies or for big-ticket items like flight reservations, he decided to leave the card at home.

Related:

• FAFSA deadlines 2013-2014 (costofcollege.wordpress.com)
• Top 3 FAFSA FAQs (ed.gov)