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.

‘Rich’ families get a sweet financial aid deal at the most selective universities

For students who win the college admissions lottery and get in to the most selective universities, high income may not be a barrier to receiving financial aid.  Here are some examples.

HARVARD

2011-12 School Year:  About 240 families earning $180,000-200,00 received financial aid.

Beginning with the Class of 2016, families with incomes between $65,000 and $150,000 will contribute from zero to ten percent of income, and those with incomes above $150,000 will be asked to pay proportionately more than 10%, based on their individual circumstances. Families at all income levels who have significant assets will continue to pay more than those in less fortunate circumstances.

PRINCETON

2011-12 School Year:  99% of families earning $180,000-200,000 who applied for financial aid received grants that averaged $23,600.

Applicants receive aid based on their families’ financial need. We do not use income cutoffs when determining whether to award aid.  Any student whose family feels unable to afford the full cost of attendance is encouraged to apply for aid.

YALE

2011-12 School Year:  99% of families earning $150-200,00 who applied for financial aid were approved.  Grants for those 505 families averaged $26,500 each.

• Families whose total gross income is less than $65,000 are not expected to make any financial contribution towards their child’s Yale education. 100% of the student’s total cost of attendance will be financed with a Yale Financial Aid Award.
• Families earning between $65,000 and $200,000 (with typical assets) annually contribute a percentage of their yearly income towards their child’s Yale education, on a sliding scale that begins at 1% just above $65,000 and moves toward 20% at the $200,000 level.
• There is no strict income cutoff for financial aid awards. Many families with over $200,000 in annual income receive need-based aid from Yale.

UNIVERSITY OF CHICAGO

2012-13 School Year:  59% of families with incomes above $120,000 who applied received financial aid.

The average University of Chicago aid applicant receives $37,500 in scholarships each year.

$160,000 income puts you in the top 10% of families in the United States.

Related:

• Can rich families qualify for college financial aid? (Cost of College)
• Berkeley will offer financial aid to ‘middle-class’ families (Cost of College)

In their college search, students need to look beyond ‘average net price’

Even with its flaws, the Net Price Calculator (NPC) offers low-income students a better indication of college affordability than the College Scorecard does.  However, sometimes finding a college’s NPC is not easy.

Limited value in using a college’s average net price

Because it uses average net prices as a measure of affordability, the recently introduced College Scorecard may discourage low-income students from applying to high-priced schools.  Low-income students do not pay “average” prices.  For that matter, high-income students don’t either.

There’s just one problem: no student is average.

Consider a low-income applicant to the University of Pennsylvania, a school with a high sticker price. At Penn, a full-price student pays $59,600 (including tuition, room & board, and other fees) and a low-income student with a full scholarship pays $0. The average net price across these two students is $29,800. (As it happens, Penn’s reported average net price is $20,592.) Just like high sticker prices, high average net price can mislead students from modest circumstances looking for affordable college options. Many colleges – particularly prestigious schools with high sticker prices – are committed to building socioeconomically diverse student bodies. At such schools, students’ individualized net prices can vary significantly depending on their financial circumstances.

NPC figures offer a better measure of affordability.

… Like the College Scorecard, NPCs offer key financial information to students and families prior to application and matriculation. The College Board’s 2012 study revealed that more than half of college-bound seniors from lower-income and middle-income families still rule out colleges on the basis of sticker price, but with the advent of NPCs, students from all backgrounds can identify affordable college options before they decide where to apply.

… Instead of discussing financial aid after students have received acceptance letters in senior spring, counselors can help students build application lists in junior spring that take financial aid into account. With the Scorecard’s average net prices, high schools students are left with yet another one-size-fits-all ranking of affordability; in short, it is not much better than the starting “sticker price.”

For low-income students like Cristina, the College Scorecard misses the mark – sometimes by a big margin. As with sticker prices, these average net prices can indicate to low-income students that they will find neither financial support nor a warm welcome at selective schools.

But NRC calculators are often not user friendly.

A report issued by The Institute for College Access and Success (TICAS) in October 2012 asserted that “net-price calculators are still not reliably easy for prospective college students and their families to find, use, and compare,” noting (among other issues) that many schools post NPCs on obscure web pages.

Although NPC links are included in both the College Scorecard and the Department of Education’s College Navigator, it turns out that many do not connect to the right location.

A solution:  College Abacus will soon have a consolidated set of links to all NPCs for U.S. colleges and universities.

At College Abacus, we are closing the gap between legislation – and its goals – and the actual needs of students, parents, and counselors around the United States. We are taking on the task of aggregating the net price calculators into a single, student-friendly tool. With the help of a grant provided by the Gates Foundation’s College Knowledge Challenge, we expect College Abacus to expand from its current group of 4,000+ schools to include all US colleges and universities by September 2013.

Related:  ‘Tips for Using Net Price Calculators’ (Cost of College)

More colleges are becoming ‘need aware’

Do your chances of college admission decrease if you need financial aid?  The answer is a qualified “maybe”.  According to Paul Sullivan writing in the New York Times, more private colleges are becoming “need aware”.

Still, the vote by the board of trustees at Grinnell, a liberal arts college in Iowa, reflects a broader trend in financial aid. The college counselors I spoke to this week said the majority of colleges had already downgraded their policies to “need aware” — meaning that the colleges accept most of their students without looking at their need for aid but will consider financial need for some percentage of the applicants. Others are already considering a parent’s ability to pay in many of their admissions decisions.

This issue matters the most for marginal students, who should understand that their ability to pay could factor into how attractive they are to a school.

As colleges continue to deal with losses in their endowments from 2008, they have less money to offer as financial aid….

So while more colleges are considering the financial need of their applicants, highly qualified students, no matter their finances, will still be admitted. And wealthier families, an education consultant told Paul, should realize that their children are competing against students of similar wealth.

Applicants can signal their ability to pay full tuition to a college, which may give them an edge in gaining admission.

… Admissions officials can usually figure out fairly quickly who needs aid and who doesn’t.

“It will be obvious because they didn’t file a financial aid form,” Belinda Stern, an education consultant on Mercer Island, Wash., said. “Some people are a little more brazen and want to make it clear to the college that they are willing to pay the full ride and come right out and say it.”

All this is irrelevant for most applicants since they have no choice because they simply need the financial aid, as this comment explains.

… Who ignores financial aid? Only the very wealthy. Only if you have saved over $200K per child. Only if your income is consistently over $250,000 or so.

The rest of us don’t have the option of “ignoring” financial aid. We fill out the FAFSA and the profile in the hopes that the financial aid gods will smile on us and offer our children some money for their education. We don’t wonder if the “full-pay” kids have a better chance of admission–we know they do!

My 3 children chose their colleges based on who offered them the best aid package, period. And they are doing fine.

Related:  Will checking ‘no financial aid needed’ help your admissions chances? (Cost of College)

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)

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)

How did the last-minute fiscal cliff legislation affect college financial aid?

How did the American Taxpayer Relief Act of 2012, AKA as the last-minute fiscal cliff legislation, affect college financial aid?  Mark Kantrowitz gives an update.

• The American Opportunity Tax Credit, which helps defray undergraduate college education expenses by allowing borrowers to deduct up to $2,500 in student loan interest, has been extended for five years, through the end of 2017.
• The Tuition and Fees Deduction, which allows taxpayers to claim up to $4,000 in tuition expenses, has also been extended. The deduction, which was set to expire at the end of 2011, will continue through the end of 2013.
• Some changes to the Coverdell Education Savings Accounts have been made permanent. This means that the contribution limit has been increased to $2,000 from $500 and that the account may be used for elementary and secondary school expenses. Higher income phaseouts have also been made permanent.
• The deal permanently repeals a five-year limit for deducting up to $2,500 via the Student Loan Interest Deduction. This means that students and families can claim on their tax forms student loan interest beyond 60 months.

What happens if no further action is taken to prevent across-the-board cuts of 8.2% in student aid that would be part of a delayed sequestration?

Unless Congress acts before March 1, Mr. Kantrowitz said, fewer students will be able to get work-study jobs and Federal Supplemental Educational Opportunity Grants, as these programs would experience cuts. Fees for federal education loans would go up, he added, and the maximum Pell Grant would be cut by as much as $400.

Related:

• Fiscal cliff would hurt education tax benefits (and employment prospects) (Cost of College)
• Tax season reminders about education tax benefits (Cost of College)n

Quick Links – more homeless young adults; reports on trends in college financial aid

◊◊◊  Growing number of homeless young people is tied to high unemployment rate.

Across the country, tens of thousands of underemployed and jobless young people, many with college credits or work histories, are struggling to house themselves in the wake of the recession, which has left workers between the ages of 18 and 24 with the highest unemployment rate of all adults.

Exact numbers are hard to come by, but some cities have tried to measure the trend.

Boston also attempted counts in 2010 and 2011. The homeless young adult population seeking shelter grew 3 percentage points to 12 percent of the 6,000 homeless people served over that period.

In some cases, a reluctance to move in with parents seems to be the reason for living on the street.  One homeless shelter director describes this group as “high functioning but who’ve been unable to stay on their feet” and “not been able to launch themselves into a successful young adulthood”.

After Recession, More Young Adults Are Living on Street (The New York Times)

…
◊◊◊  Trends in Student Aid 2012 – College Board

Trends in Student Aid, an annual College Board publication since 1983, is a compendium of detailed, up-to-date information on the funding that is available to help students pay for college. This report documents grant aid from federal and state governments, colleges and universities, employers, and other private sources, as well as loans, tax benefits, and Federal Work-Study Assistance. It examines changes in funding levels over time, reports on the distribution of aid across students with different incomes and attending different types of institutions, and tracks the debt students incur as they pursue the educational opportunities that can increase their earnings, open doors to new experiences, and improve their ability to adapt to an ever-changing society.

Selected Highlights

• In 2011-12, undergraduate students received an average of $13,218 per full-time equivalent (FTE) student in financial aid, including $6,932 in grant aid from all sources, and $5,056 in federal loans.
• Federal grant aid almost tripled in constant dollars between 2001-02 and 2011-12, increasing from 20% to 26% of the total 185.1 billion in undergraduate aid.
• Only 2% of students who first enrolled in 2003-04 had borrowed more than $50,000 from federal and nonfederal sources combined by 2009. Over 40% did not borrow and another 25% borrowed $10,000 or less.

…
◊◊◊  Merit Aid for Undergraduates: Trends from 1995–96 to 2007–08 (National Center for Education Statistics)

This Statistics in Brief uses nationally representative data from 1995–96, 1999–2000, 2003–04 and 2007–08 to examine trends in merit aid to undergraduates by student and institutional characteristics and in comparison to need-based grant aid.