BY MARK MCLAUGHLIN, FIDELITY INTERACTIVE CONTENT SERVICES — 05/14/10
Colleges are boosting financial aid for higher-income families whose balance sheets have been hit by the recession. Here’s how you can benefit.
A year ago, Leah Wolterman didn’t hold out much hope that her son, Cody, would attend a private, four-year college. The San Jose, Calif., accountant and her husband earn about $175,000 a year – yet they had set aside only $17,000 for Cody’s college education.
But after attending a seminar given by a college planner, the family investigated private colleges that matched Cody’s interests. Not only was Cody eventually accepted at what Leah described as five previously “out of reach” private colleges in California, but the schools matched or beat aid offers from comparable state colleges.
The result: Cody will enroll this fall at Loyola Marymount University in Los Angeles – with a $27,900 aid package
Colleges both private and public are pulling out all the stops to increase financial aid for higher-earning families whose personal balance sheets have been hit by the Great Recession, high unemployment and losses on their investments.
While competition for aid has never been greater – federal aid applications for fall 2010 are up 17% over last year – families shouldn’t let their financial situation, good or bad, take them out of the running. That’s the key message of financial aid experts who helped us craft a game plan for keeping college affordable.
1. Don’t let high income deter you
Parents with the most education (and presumably the highest income) are the least likely to apply for financial aid, according to a new National Center for Education Statistics survey of families with children who were high school seniors in 2004.
The trend continues today: 54% of families earning $125,000 to $250,000 don’t even bother to apply for aid, according to Manuel Fabriquer, founder of San Jose, Calif.-based College Planning ABC, the college planner consulted by the Wolterman family.
College officials also have noted the trend.
“The assumption that you won’t qualify [for aid] because you make over $100,000 doesn’t make sense,” says Alison Rabil, director of financial aid at Duke University.
Williams College in Massachusetts awarded aid to 67% of applicants in the current freshman class from households earning more than $100,000. Williams offered an average award of $35,434 to families earning up to $125,000 and $22,199 to those above $125,000, according to the school’s financial aid office.
Those awards are up from $28,642 and $17,854, respectively, for the class that applied for the 2007-2008 school year. The school pointed out that awards increase annually based on fee increases as well as need.
Public schools also are embracing higher-earning applicants. UCLA offered so-called fee grants this year to families earning up to $100,000, a threshold that will rise to $120,000 for the incoming freshman class. Fee grants help cover increases in tuition and fees during a student’s tenure.
“A lot of middle- and upper-income earners think it’s a different [financial aid] process for them and they miss out by not going through the standard practices,” says Jessica Hipp of the Massachusetts Educational Financing Authority, which administers the Massachusetts 529 college savings plan advised by Fidelity and provides loans and college planning assistance to state residents.
That means every family should start their search for aid by filling out FAFSA, the Free Application for Federal Student Aid, a form from the U.S. Department of Education’s Federal Student Aid office. While used for need-based aid, FAFSA is a prerequisite for a multitude of other awards.
2. Choose the right schools to target
Targeting the wrong colleges can leave money on the table. Lynn O’Shaughnessy, author of The College Solution Blog (thecollegesolutionblog.com), researched the “financial fingerprint” of colleges in helping her son Ben apply to eight liberal arts schools that offered an average of $19,000 in aid.
With the award they received he’ll attend Beloit College in Wisconsin this fall for less than the cost of the University of California campus near their home in San Diego. To gauge the potential for aid, research the health of a school’s endowment and ask the admissions or financial aid office three things:
- What percentage of aid applicants receive assistance
- What percentage of aid is in grants versus loans
- If they give to higher-income families
For state schools, analyze funding sources and how budget deficits could impact programs. Oregon, for instance, promised $10 million more in aid than they budgeted for this year. The University of Virginia, on the other hand, will award $14 million more in need-based aid to 43% more students in the current school year and has launched a fundraising campaign specifically for financial aid.
Private colleges have more flexibility to boost aid by drawing on large endowments or delaying capital improvements, says Kal Chany, founder of the New York financial aid consultant Campus Consultants. In 2008, these schools awarded incoming freshman aid amounting to a 53.5% tuition discount, according to a survey by the National Association of College and University Business Officers.
Some private colleges, like Davidson in North Carolina, have moved to no-loan financial aid packages that include grants and work-study programs.
To maximize your financial aid potential, college counselors recommend avoiding “reach schools” in favor of those where your children are regarded as applicants the school can’t afford to lose. A desire for geographic diversity can also mean a few extra dollars for students from different parts of the country.
3. Get creative about scholarship sources
Families needing to fill in the gaps beyond college and federal grants have a plethora of scholarship options. These awards often draw on very specific criteria, so be prepared to do your homework and stay on top of different application deadlines.
Websites like Fastweb.com can streamline your search by mining its scholarship universe based on hundreds of different inputs you select. An informed search could turn up a scholarship like the one for left-handers at Pennsylvania’s Juniata College or another for writing the best essay on Ayn Rand’s “The Fountainhead.”
Beyond the Internet, UCLA director of financial aid Ronald Johnson recommends tapping on-campus scholarship resource centers and financial aid offices in specific departments or professional schools. UCLA’s Henry Samueli School of Engineering and Applied Science, for example, awards more than 70 scholarships to students majoring in one of its programs.
Students applying to schools ahead of the general population can maximize their potential for aid by choosing “early action” instead of “early decision.” Early action allows the deferral of acceptance until a school’s regular spring deadline and enables students to apply to multiple schools. Early decision, conversely, binds a student into accepting admission at a single school and leaves less room for negotiation.
Accepted students not happy with an initial award may be able to negotiate a better deal by telling their first-choice school about scholarship offers from similar schools. And don’t be afraid to revisit an aid package if your financial situation has changed dramatically. With unemployment the highest in 27 years, schools are often willing to adjust an award if provided the proper documentation.
Nicholas Tucker, who recently lost his health insurance job in Chicago, submitted a revised FAFSA to the School of Visual Arts in New York City as well as award details from the other two colleges that accepted his son. Tucker is researching private and local scholarships and student loans as he awaits a decision on a revision to his son’s initial $10,000 aid package.
“We’re hanging in limbo,” he says. “Something [good] will happen but it’s very frustrating.”
The tough economy has also increased the likelihood of “summer melt” when incoming freshman decide at the last minute not to attend college, putting their aid package back into the pool. Stay in touch with your school’s financial aid office over the summer to find out about newly available aid.
5. Consider options beyond aid
Colleges strive to offer the most assistance possible, but financial aid officers warn it’s not their job to make up for reckless financial behavior. Duke’s Rabil suggests parents shore up their finances by planning more carefully, spending less and saving more.
When aid packages fall short, high-earning families may be able to save in other ways. The FAFSA determines the expected family contribution at a given school – but you don’t simply write a check for that amount. Inquire about the availability of monthly payment plans or work-study programs.
In addition to 529 plans and Coverdell accounts, assets in a parent’s qualified retirement account may be eligible to pay for college costs.
Hipp, of the Massachusetts Educational Financing Authority, suggests evaluating such personal savings sources before resorting to loans. If you have to take out loans, federal Stafford loans issued in the student’s name defer interest until graduation. Find out more about the best options for saving for college.