Uncovering Secrets Of Financial Aid

U.S. News & World Report Offers Strategies For Making College More Affordable

(U.S. News & World Report) 
College math

They would indeed. Hundreds of colleges are employing Ph.D. economists, demographers, and even rocket scientists to develop mathematical formulas using as many as 100 different factors about each student to calculate the least amount of financial aid necessary to get the most desirable students to enroll.

These enrollment managers analyze such factors as the student's gender, hometown, intended major, parents' education, high school, and applications to other schools to decide the size of grants. They are increasingly able to accurately identify the students likely to enroll without any aid. Some enrollment managers say they can predict within $100 how big a scholarship it will take to attract the kinds of students the college is short on-such as females at engineering schools, rural kids at urban colleges, budding archaeologists at institutions with empty seats in classics lecture halls, and the like.

Colleges typically keep their unique formulas secret to prevent competing schools from outbidding them, to outflank parents who want to game the rules, and to give themselves wiggle room to make exceptions for special cases.

But even enrollment managers concede the secrecy causes many families to end up mistakenly paying more for college. Worse, some experts fear that colleges may be tempted to abuse their information advantage to manipulate students into paying more than they would otherwise. Rupert Wilkinson, a former American studies professor at the University of Sussex, England, who recently published a history of U.S. financial aid, says that most aid officers "came in wanting to do good. But they need to keep their jobs and meet the institution's purposes," which increasingly means raising more tuition revenue and reducing financial aid costs. "As financial aid has become more complex, it grows more vulnerable to being exploited," Wilkinson says. "There are so many things that can be used dishonestly."

Families who've been through the school of hard financial aid knocks say, however, that a few simple strategies can make college much more affordable.

The starting point is the way colleges determine how much aid students need. The government uses the information a family provides on the Free Application for Federal Student Aid, or FAFSA, to estimate how much the family can afford to spend on tuition-the so-called expected family contribution, or EFC. Many middle-income families are shocked to learn that the government expects a family of five with two students in college to spend anywhere from 22 to 47 cents (rising with income) of every after-tax earned dollar above about $27,000. On the other hand, the federal need formula, used by all but a few hundred private colleges, rewards those who save via real estate or other investments. Home equity is exempted from any contribution. And families with two parents in their early 50s are expected to spend no more than 5.6 percent annually of any nonretirement savings over about $50,000.

The difference between the government's EFC and the full cost of attendance is the need that the government and colleges attempt to fill with financial aid. Families with low incomes and EFCs of $3,850 or less, are eligible for federal Pell grants of up to $4,050. More-affluent families with higher EFCs may qualify for need-based grants from states or colleges.

The good EFC news is that because private colleges have become so expensive, even upper-middle-class families with six-figure incomes sometimes get need-based grants from schools. The bad: The vast majority of colleges fail to provide enough grants to make up the difference between a family's EFC and the cost of attendance. Overall, only half of all college students get any kind of grant. Those grants average slightly over $4,000, which leaves the typical student with a gap of almost $6,900. That can be bridged with federal student loans and part-time work.

But students who find schools looking for their particular characteristics can get schools to fork over bigger grants. The U.S. News analysis of 2006 aid awards and interviews with college administrators reveal many surprising factors students can exploit to increase their chances of getting scholarships:

[kpealstrom]

The biggest surprise for this year's students is that they may be eligible for loans, but unable to have them due to changes in the Cost of Attendance [COA] rulings by this Administration. Previously a student could take out loans above the COA, in order to actually have funds for food, transportation, shelter, unexpected class expenses on top of books, tuition and class fees. It is a rude surprise that I'm real sure those collecting on tax cuts don't ever face. In today's America, it is a case of having or doing without -- and the percentage is higher doing without.

[sharncedar]

Hah - a little post-capitalist economics class for the students even before they get into college. These schools create a controlled market with an artificially low supply through government collusion and the "accreditation" system, then raise their prices. Then, in classic post-capitalist fashion, they pretend their mission is to do precisely the opposite of what they are actually doing. So they claim their mission is to make college affordable for students, when their mission is to make as much money for themselves as possible. Or Harvard claims their mission is to give equal opportunity, when their whole college exists as an old-boy network tool for denying opportunity to the excellent in favor of the mediocre with connections. The Cliff Notes are: In post-capitalism, you insist on a public mission which is the opposite of your private mission. In post-capitalism, never, never, never, allow actual free market competition for your products and services while demanding in a sanctimonius fashion free market competition from your employees and suppliers. Any questions?

The joys of education.