Wait For Your Financial Aid Award Letter!

Make sure you wait for your financial aid award letter before setting your heart on a particular college. That is, unless you can pay sticker price for the school without any merit-based aid or need-based aid. I heard a sad story recently about a family who didn’t do that. I want to share that story as a lesson learned.

The student in this story is a smart, well-rounded student with great extracurricular involvement. She is in at least the top 25% of her class and quite possibly the top 10%. She found her dream school and had her heart set on attending this school if she got in. The dream school’s acceptance rate hovers around 25% so she knew it would be a bit of a reach given its competitive nature.

This dream school is a private college with a very high sticker price – over $60,000 per year for tuition, room and board. The school is not on the list of schools that claim to meet 100% of need. The school does provide both merit-based aid and need-based aid. The school requires both the FAFSA and the CSS Profile to determine need-based aid eligibility. There is a Net Price Calculator available on the school’s Financial Aid page.

Here are some financial aid statistics for this school according to collegedata.com:

• About 65% of the school’s applicants apply for need-based aid and about 75% of those are found to have need.
• Of the applicants found to have need, 99% of them receive some amount of aid.
• About 50% of those found to have need have their need fully met.
• The average % of need met for all of those determined to have need is around 75%.
• 85% of those with need receive gift aid (meaning it doesn’t need to be repaid). The average amount of gift aid is almost $24,000.
• About 30% of those with need are given merit-based gift aid.
• 93% of applicants with need are offered self-help aid (meaning loans or work study), averaging about $3,500.
• The average total award for applicants with need, including gift aid and self-help aid, is $30,000.
• About 11% of applicants with no financial need are given merit-based aid, averaging around $15,000.

My take on all these statistics:

• If my student was looking at this school, I would really want to use the Net Price Calculator to get an idea of whether the school would think he or she had need or not. I would also want to talk to someone in the financial aid office to get their take on possible eligibility for aid.
• I would look at the average amount of need-based gift aid and then I would need to determine if I would be comfortable paying everything above that – in this case over $36,000 per year.
• I would think my student would have a very low chance at merit-based aid given that only 25% of applicants are admitted and a low number of applicants are given merit aid (30% with need and 11% with no need).
• I would definitely not count on this school until I had a financial aid award letter in hand and had compared it to the financial aid award letter for all other schools to which my student was admitted!

This student and her parents were thrilled when she got an acceptance letter in the mail from her dream school!

Now, I don’t know if they ran a Net Price Calculator (I am going to assume they knew to do that) and what that calculator told them. Of course, the Net Price Calculator only provides an estimate based on a limited amount of information, and you should never count on the school providing that amount. It should only be used as a gauge of whether or not that school may be affordable, knowing that the school could offer more or less than what the calculator indicates.

The school publishes on its website that financial aid award letters will go out at the beginning of April. Prior to that date, the family splurged on a trip out to this school (it was in another part of the country), thinking that this was going to be the one the student would attend. The student was so excited, until they met with the financial aid office.  (This was before the award letter date.)

Upon meeting with the financial aid office, the family learned that their student was only being offered about $5,000 in aid, leaving over $55,000 for the family to cover per year. They were devastated. They had made an assumption that the school was going to cover everything over the family’s Expected Family Contribution. That was not the case.

The family believes that the school’s website is misleading with respect to financial aid awards.  The website does have a section about how to calculate your demonstrated financial need by taking the total cost of attendance minus the Expected Family Contribution.  But of course here is where the waters get muddy:  Every college can use its own way of calculating your Expected Family Contribution.

• Some colleges only use FAFSA to calculate Expected Family Contribution.
• Some colleges use FAFSA and CSS Profile to calculate Expected Family Contribution.
• And still other colleges use an “institutional methodology” to calculate Expected Family Contribution, meaning they come up with their own way to calculate it.

This college’s website does state that they determine your need based on the information you provide on the FAFSA and CSS Profile.

Remember, the college will determine what your Expected Family Contribution will be, and you may not at all agree with their assessment!

Then here is the kicker – unless the college advertises itself as one of those that meet 100% of demonstrated need, the college is under no obligation whatsoever to meet the entire difference between the total cost of attendance and your family’s Expected Family Contribution!

This is why you need to be fully educated as a parent on how this financial aid stuff works, both need-based and merit-based!

And the moral of the story is …..

This is why you need to wait until the financial aid award letter comes before counting on anything from a particular college!

I feel horrible for the family in this story because they weren’t fully informed.  They counted on something before they had it in writing.  The student was so disappointed that she couldn’t afford her dream school.  However, she will be OK.  There is another fine school out there for her that will be much more affordable.  Luckily she had applied to other schools that she could choose from.  There will still be a happy ending for her.