STUDENT-CENTERED SOLUTIONS FOR COLLEGE PLANNING

This blog was first published on www.witf.org under Education, Life After 12th Grade on July 13, 2009.

As college costs continue to increase and the norm for private colleges approaches $50,000, there is increasing speculation in education circles about consumer tolerance for such increases. How long can these increases be justified? How much is too much? When will the upward spiral come to an end?

At the risk of sounding jaded, I remember similar concerns as the cost approached $10,000 per year and then $20,000. And now that seems like a long time ago.

Frankly, the question of pricing is centered on the actual cost of producing the goods and services—and the question of price tolerance is market driven. As long as demand remains high and academic infrastructures must be maintained, costs are likely to maintain their current trajectory.

That said, the Obama administration has begun a number of measures to increase access to financial assistance. In my previous posting, I discussed the potential impact of streamlining the process of applying for financial aid (FAFSA). Now, I will take a look at some of the funding enhancements that will potentially benefit students applying to college this fall.

Increased Grant Money The Federal Pell Grant program provides need-based grants to low-income students pursuing undergraduate and certain post-baccalaureate degrees. The maximum grant amount has been raised by $500 to $5,350 for the coming school year. Passage of the President’s 2010 budget will ensure continued growth in this amount.

Low Interest Loan Opportunities The Federal Perkins Loan Program provides need-based, low-interest (5% fixed) loans (up to $5,500 per year) to help low income students finance college costs. President Obama has committed an additional $5 billion to the loan program while ensuring the interest rate remains at five percent.

Eligibility for the Pell Grant and the Perkins Loan is determined by the need analysis utilized by the FAFSA.

Analysis: On the surface, it would appear that these funding measures help ease the pressure on families to meet college costs—and that might turn out to be the case. However, colleges have the discretion to administer these funds to eligible students as they wish.

For example, in awarding financial aid to its applicants, a given college can elect to either use Pell Grant funding to reduce the amount of loan or work-study (campus job) opportunity it extends to admitted students or to displace its own grant funding or to cover a demonstrated “need” that would otherwise be left unmet. Similarly, a Perkins Loan can be written into a financial aid award in place of institutional grant monies. When this happens, the college is, in effect, using the Federal funds to lessen its own burden in supporting a student rather than easing the financial burden on the student.

Depending on the disposition of the college or university in question, then, the increase in Federal funds may actually do little to reduce the burden on the student’s family to cover college costs. Even if a college applies the funds charitably (as it should), the easement experienced by the student’s family will be slight.

It is also worth noting that the Perkins Loan may be extended to students with greater need in addition to the Subsidized Stafford Student Loan. Undergraduate students may be awarded as much as $5,500 per year in Perkins Loan as determined by the institution at which they are enrolled. The amount of the Stafford Loan may not exceed $3,500 in the first year, although an additional $2,000 of optional, interest unsubsidized Stafford Loan may also be borrowed on top of that. It is possible, then, that a low-income student may be expected (by some colleges) to borrow as much as $11,000 in the first year or $49,000 over four years. This is unreasonable and, in my opinion, not the intended outcome of funding from the Recovery Act. While personal debt is to be anticipated, a more reasonable amount over four years would be in the neighborhood of $25,000.

As financial aid officers assemble financial aid awards, they cobble together funds from different sources in a manner that enables them to meet the needs of admitted students while stretching their own budgets as far as possible. The introduction of Federal funds (Pell Grant, Perkins Loan), then, won’t necessarily reduce the out-of-pocket expense for families as they fund college costs if, in fact, those funds are not used by colleges to close the gap between the family’s expected contribution and the cost of attendance.

Ultimately, the commitment of institutional funds in the packaging of financial aid awards is an expression of institutional values. Colleges that place a high value on your attendance are more likely to award you grant/scholarship assistance up to your full, demonstrated need in addition to Federal grants, loans and work study, thus limiting your four-year exposure to debt to a reasonable amount. A careful read of your financial aid award letters will reveal whether you—and not the colleges—are being supported with this additional funding from the Federal government.

For more information go to www.finaid.org.

This blog was first published on www.witf.org under Education, Life After 12th Grade on July 6, 2009.

Over the past several months, the Obama administration has initiated a series of bold measures to improve college access and completion rates in the U.S. Two of the initiatives may have immediate implications for students seeking to enter college in 2010.

On June 24, 2009, U.S. Secretary of Education, Arne Duncan, outlined substantive changes to the Free Application for Federal Student Aid (FAFSA) designed to simplify the application process. This announcement follows earlier moves to reduce cost barriers by increasing grants (free money) and low interest loan opportunities for America’s neediest students.

These are positive signs for families looking for encouragement in the face of rising costs and diminishing means. In a two-part series, I will take a closer look at the real impact each is likely to have on educational access in the next several years.

Streamlining the Financial Aid Application Process
According to the U.S. Department of Education, students applying for financial aid using the Free Application for Federal Student Aid (FAFSA) should find the process easier this year. Starting in January 2010, students completing the online FAFSA can retrieve relevant tax information from the Internal Revenue Service giving them seamless access to information needed to their aid applications.

In a related move this spring, the Education Department began providing instant estimates of Pell Grant and student loan eligibility. Students had previously been forced to wait several weeks for notification. And starting this summer, enhanced “skip-logic” will be employed to make it easier to navigate the online FAFSA.

Analysis
Most financial aid models assume at least three sources of funding with regard to college costs: the family, the institution and the Federal Government. Students attending in-state institutions may also receive funding from their own states. Some students also receive scholarship assistance from various funding sources in the community.

The intent of the FAFSA is to determine the contribution from the family and, thereby, the family’s eligibility for funding (grants, loans, work study) from the Federal government. Unfortunately, that determination of eligibility or “need” does not apply uniformly across all funding sources.

While the Federal government and most state governments subscribe to the definition of need that emerges from the FAFSA, all bets are off when institutions themselves make EFC determinations relative to the distribution of their own funds. In fact, colleges and universities frequently rely on more stringent assessments—including sensitivity to factors such as home equity or the financial contribution of a non-custodial parent in the case of a divorce or separation—that invariably require greater contributions from families. Many private institutions use the College Scholarship Service (CSS) Profile to collect such data. As a result, you might receive mixed signals regarding their respective EFC’s.

On the surface, then, each of these moves to simplify the FAFSA makes sense. Whenever complex data collection relating to family finances can be simplified by eliminating steps or unnecessary information, everybody wins. The big news, however, relates to the access to IRS files. Personal IRS files have always been accessed after the fact in the financial aid process to verify data submitted on the FAFSA. In this case, making the connection between the Department of Education (FAFSA) and the IRS saves steps and eliminates redundancy of effort for families of college-bound students.

Providing links to information that has already been captured (prior year tax returns) early in the process will make it easier for families to complete the financial aid application. Current year tax returns will still be used for verification as family circumstances often change from year to year. The FAFSA may be further simplified if/when the Administration is successful in its efforts to eliminate unnecessary questions from the application.

Lest you see these developments as a panacea in the financial aid process, however, I would raise two cautions. One, the connectivity to data collected by the IRS can only work as well as the completeness of the IRS files for that individual and his/her custodial parents. For example: How will families with IRS files that are incomplete, in dispute or non-existent be able to complete the FAFSA in a timely fashion? And imagine the complexity of determining the appropriate IRS files for students who live in blended families or with unrelated guardians. Ironically, the FAFSA/IRS marriage may fail to make the process easier for those who are in greatest need of assistance.

Two, and perhaps more importantly, the discussion about ease of access with regard to the financial aid application process overlooks an important detail. The outcome of the FAFSA submission—a determination of the “expected family contribution (EFC)”—is not a reliable indication of how colleges themselves will assess the expected family contribution in determining “need.”

Frankly, none of this is new. Colleges have resorted to their own methodologies for determining the EFC for some time. Be cautious, therefore, about making assumptions with regard to the EFC that is reported by the FAFSA as you try to anticipate college costs and the assistance you might receive in meeting them. While you may indeed have eligibility for enhanced Federal assistance, the bulk of your financial aid is likely to come from the college itself.

Make sure you understand from each college how it will determine your EFC and, subsequently, your financial need. The Federal government is but one source of need-based financial aid. The reality is that, across the board, colleges and universities fund the vast majority of financial aid that is awarded each year. Moreover, they are not obligated to meet a student’s full need as demonstrated by the FAFSA or the Profile. While you are not likely to receive any guarantees of funding, it is certainly worth exploring these questions with each of the schools on your list as you visit them this summer.

The middle of March is a time of year when admission decision-making comes into focus at many levels—when the finest distinctions are made with regard to who gets in and how financial assistance will be administered. It is also a time of countless huddles involving enrollment strategists as they seek to refine their calculations of yield. In other words, “What is the right number of students to admit in order to secure the desired enrollments?”

For enrollment strategists (a.k.a. senior admission officers) predicting yield can seem like “booking” a horse race. It’s all about calculating the odds. In this realm, however, getting it right has real implications for any institution that is even marginally tuition driven.

Part science and part instinct, yield forecasts are largely influenced by an institutions’ enrollment experience over time. In fact, actual yield rates are remarkably constant—they fluctuate very little from year to year.

Therefore enrollment strategists are guided by their own histories. If, for example, one out of four admitted students have enrolled at a given institution in the past, it stands to reason that four students must be admitted to get one in the present.

Historically based yield models are wonderfully accurate and highly cherished by enrollment strategists. While they don’t determine, “who gets in,” they provide answers with regard to how many students should be admitted. Such models work very well as long as the schools’ enrollment climate remains constant. However, throw in an event that changes the institutional equilibrium—a national championship, a natural disaster or scandal of major proportions—and the certainty disappears from the yield models.

The current state of the national economy ranks as such an event and enrollment strategists are scrambling to understand how it will affect the yield for their respective institutions. In a thoughtful report in the New York Times this past weekend, Kate Zerniky (“Uncertain Colleges Worry about Who Will Accept Them”) revealed the plausible angst that is felt by those responsible for predicting enrollment yields at their institutions. Perhaps Jennifer Delahunty, Dean of Admission and Financial Aid at Kenyon College, summed it up best when she said, “Trying to hit those numbers is like trying to hit a hot tub when you’re sky-diving from 30,000 feet.”

So what is going on in those huddles and what can you expect as admission decisions are revealed in the coming weeks?

The uncertainty regarding college funding is affecting both families and institutions. Just as families are more inclined than usual to proceed cautiously with enrollment commitments, colleges and universities are trying to stretch their financial aid dollars as far as possible. As a result don’t be surprised to see:

• Colleges admitting more students than usual as a hedge against lower yields this spring.
• More students than usual will be placed on Wait Lists—again, as insurance against lower than anticipated enrollments through Regular Decision offers of admission.
• Active Wait Lists. Colleges have become adapt at managing Wait Lists to achieve high yields. That experience will be put to the test this spring.
• “Gapped” financial aid awards. In other words, students, especially those on the competitive “margin,” will be admitted and offered financial aid that falls short of meeting their respective needs.
• Aggressive merit scholarship offers to students who do not otherwise need financial aid.
• The enrollment process to linger well past the May 1 Candidates’ Reply Date as families continue to explore viable funding options and institutions continue to work their Wait Lists to reach enrollment goals.

The activity surrounding the final choice of a college this spring will be unprecedented in terms of its volatility and, frankly, the opportunities it will present to families that are patient and well-informed about the process.

The next two Web-Side Chats will provide further interpretation of this activity and give strategic advice to families as they sort through their enrollment options. The webcast dates are:

• March 25, 7:00PM (ET)—Admission Decision Letter Preview
• April 13, 7:00PM (ET)—Evaluating Financial Aid Offers

Families with seniors in the throes of making final decisions will find the time spent well worth their while. I look forward to receiving your questions, comments and concerns.

Note for families with younger students in the college planning process: Click here to download a pdf copy of one of my articles, “The Importance of Finding a Good College Fit in a Tough Economy,” from the latest edition of Central PA Magazine. In it I provide a framework for understanding your college search in light of today’s economic climate including six steps to help you manage your expectations and lead you to discover the best college fit for you.

A critical element to college access for most families is financial aid. This was true long before the current economic crisis took over our collective consciousness. Now, however, families of all means find themselves in search of assistance as college costs mount and personal liquidity diminishes.

The good news for families of college-bound students is there is institutionally awarded money to be found. It just might not be where you would expect to find it. You see colleges and universities are not doling out financial aid indiscriminately. Rather, they are directing aid, both need and merit-based, to the students whom they value most.

As a result, the questions of “who gets how much” and “why” loom large on the horizon as families make enrollment decisions.

Historically, the concept of “expected family contribution” was at the heart of the financial aid process. To receive assistance from a college, a student needed to demonstrate that his/her family was not able to cover the full costs of attending. Financial aid was intended to make up the difference—to bridge the gap.

While the basic process for “demonstrating need” remains in place, it is an increasingly bureaucratic exercise that does little more than determine a student’s eligibility for funding from the state and federal governments. The degree to which an institution elects to extend itself financially to a young person is increasingly a function of the latter’s desirability regardless of “demonstrated need.” As a result, many financial aid programs feature hybrid award programs (need and merit-based) that reflect the agendas of the awarding institution.

The upshot of all this for families is that it is harder to anticipate actual college costs. Unless you are able to receive an estimate of your expected family contribution (EFC) directly from the financial aid office of the schools to which you are applying, anticipating college costs will be a guessing game. And, even with such an estimate, you can’t proceed with certainty.

In the final analysis, your EFC is what a college or university wants it to be. The distinction between need-based and merit-based aid is sufficiently blurred at many schools so that it is often difficult to measure the true impact of the EFC in the awarding of financial aid.

I mention this because a lot of families are turning to online tools, including estimators provided by colleges themselves, to begin calibrating their EFC’s. These estimators are constructed with generic qualifiers that don’t reflect the various agendas that come into play as colleges decide whom they want to target with offers of admission and financial aid.

As you begin to develop strategies for anticipating and managing college costs, do so with your eyes wide open. The decision to admit and support a student with financial aid is a calculated decision that is often driven by the student’s desirability to the institution.

In my next “Web-Side Chat” with Best College Fit Members on Monday, February 16 at 7:00 PM (ET) I will take an inside look at the Estimated Family Contribution and provide insight as to how you can position yourself to compete for the best financial aid award possible. You can join the conversation by becoming a BCF Member.

As another year winds down, it seems only appropriate to take stock of a college going process that continues find its course amidst the news of the day. I would like to comment on a number of hot button issues that continue to drive conversations as they relate to access and choice.

1. Despite the difficult economy, there are affordable college opportunities for everyone. They just may not be where you at first want to find them. Target schools where your odds of gaining admission are at least 50:50 and put yourself in situations where you are likely to be embraced for what you have to offer. Schools will continue to give financial assistance, both need and merit-based, to the students they value most.
2. Resist the temptation to load up on “reach schools.” There is no basis in fact to support the notion that applying to more will give you a better chance of getting in.
3. Your ability to pay the full amount has never been more of a credential than it is now. Colleges everywhere are eager to take on as many qualified “full-pay” students as they can.
4. Early Decision (ED) remains a viable option if a clear first choice college has emerged for you. Many selective institutions extend ED Round II options to their applicants. If you have a clear first choice and affordability is not a factor, contact the school to find out how you can compete in the ED Round II admission process. I will discuss your various college application options, including ED Round II as well as the impact of financial need on the ED commitment in the first segment of “Web-Side Chats” for Best College Fit(tm) Members on January 12 at 7PM. (For a description of the Best College Fit(tm) Membership program click here.
5. I am hearing from a lot of students who are still stressing over their essays. If this sounds familiar, relax. Find your voice. Tell your story. One of the biggest mistakes students are making is that they are trying to anticipate the style and content that will appeal to an admission officer. Frankly, admission officers want to see you as you really are.
6. Essay editing tip #1: Make a conscious effort to reduce the word count of your final drafts by 10%. Engaging in this type of exercise will force you to examine both your word choice and the construction of each sentence. More is not always better.
7. Essay editing tip #2: Read your final draft out loud. Your mind can play tricks on you as you proofread silently and it is easy to overlook missing or misused words. Read your essay out loud, preferably to someone, so you can hear how the words sound. Do you hear yourself talking in those words or someone who is reading from a script?
8. Make sure you feel comfortable in your own skin! Don’t let the process of finding and getting in colleges change you or the way you see yourself. If a standardized test score or admission outcome doesn’t match your expectations, it’s not the end of the world. Be happy with who and what you are—and, more importantly, what you can become.

Life as a high school student can be incredibly draining, especially if you are meaningfully engaged beyond the classroom. The next six months won’t be any less chaotic. So, during this holiday season, take time to relax, de-stress and enjoy your time with family and friends.

Happy Holidays!