Colleges Meeting 100% Student Aid Needs – Pay Attention to the Fine Print
November 25th, 2009Today it is not uncommon for a college to claim it will meet 100% of a student’s financial aid needs. The result is that the “meeting 100% of need” phrase is tossed around liberally.
When a student hears such a claim, he or she must do a little digging to determine what the school is actually offering. Meeting 100% of need does not exactly mean you will be able to attend college debt-free.
The Chronicle of Higher Education recently offered a startling data table that helps clarify the issue. Sadly, the writer summarizes the table this way: “The poorer the family, the larger the unmet need for financial aid.”
In summarizing the data, The Chronicle noted that “many poorer students seek supplementary help from relatives other than parents and from private loans. In contrast, students from wealthier families enjoy, on average, a surplus of financial resources compared with need.”
To get a sense as to what that means, let’s look at families with earnings of less than $40,000 per year and examine two scenarios: application at a public four-year school and contrast it with a private four-year school.
In the first scenario, the average financial need for families totals $16,496 while the average aid package totals $11,754. That leaves the average unmet need for a family at a public four-year college at $4,742.
At private schools, for those same families with earnings of less than $40,000 per year, the unmet need averages almost twice as much, $8,417.
But the real kicker comes from the aid package itself. In most instances, schools consider federal Stafford loans as part of the aid package. In other words, the aid package is often not 100% grants and scholarships, it also includes an expected level of borrowing.
In fact, when we return to The Chronicle numbers we see the real issue. For those families earning less than $40,000 per year, the expected total student work/loan burden is over $4,000 per year making the unmet need plus student commitment a robust $8,800. For those students considering a private school, the total student work/loan burden plus unmet need is almost $15,700 per year (for a family with similar earnings).
When schools consider Stafford Loans as part of their aid package, the borrowing can be significant, especially over four years. Students must understand that these loan amounts are currently $3,500 per year for freshmen, $4,500 for sophomores, and $5,500 per year for juniors and seniors for the subsidized portions alone.
So a quick run of the numbers reveals that students could be expected to borrow as much as $19,000 through the subsidized Stafford loan process. Yet, at the same time, the school will insist that these loans guarantee meeting 100% of student financial aid needs.
In sum total, when it comes to the 100% need met, students and their families must read the fine print carefully.
Some Examples
Let us consider one of the finer state universities, the University of Michigan. It is an institution that states it “is committed to meeting the demonstrated financial need of undergraduate students who are Michigan residents.”
Though that statement is true, it is important to review the sample on their aid site. As but one example they provide, for a cost of attendance of $22,729 against an Expected Parent Contribution of $8,300, a total need for aid is listed at $14,441.
For the financial aid offer, the school lists in its hypothetical example a grant of $6,082, work study of $2,500 and loans totaling $5,859 to complete the $14,441 aid package. In such a case the school is ensuring funds are available but to complete the aid package a student would need to borrow the $5,859 in year one. Over four years, the sum borrowed would exceed $23,000.
As another example, consider Wellesley’s Enhanced Financial Aid Policy that was activated in February of 2008. The Wellesley plan goes so far as to eliminate loans for students from families with calculated incomes under $60,000. And for those families with incomes between $60,000 and $100,000, borrowing is capped at $8,600 over four years.
In other words, while Wellesley may require some borrowing, the school will not require a student from families of limited or even middle class means to max out their federal Stafford Loan borrowing each and every year.
Another great example is the University of Richmond, a best buy among American colleges and universities. First, the school adheres to a truly need-blind admission policy. Second, the school’s claim that it will meet 100 percent of each admitted student’s demonstrated financial need results in the school capping need-based loans and work-study aid at $4,000 a year.
Yet another school, Williams College in Williamstown, Mass., provides some very specific scenarios on its financial aid site. One is most telling.
A Texas student, the eldest of three children, is from a family where the father is the sole breadwinner, earning $55,000 per year. The family has very little equity in their home and likewise limited savings.
The aid package by Williams in this situation is extraordinary. The school will provide the student with scholarships and grants totaling $37,710. It will also provide the student a work study opportunity so as to earn $1,550 over the course of the school year to be applied towards tuition and fees. The school is therefore awarding the student a serious aid package of $39,260.
And while the school claims no loans will be required, it must be noted that the cost of tuition, fees, etc., totals $43,460 per year. That means the school will expect a yearly parental and student contribution of $4,200.
At less than 10% of the cost, the aid package is truly generous. But if the family is living paycheck to paycheck because of house and car payments and everyday living costs, the $4,200 could be tough to come up with. The end result is that a family still could wind up borrowing in the long run.
Examine the Fine Print
College costs can be lumped into three distinct categories: parent and student contributions, grants and scholarships, and loans. When it comes to the idea of meeting student’s financial needs, some schools will insist on all three categories playing a significant role.
If a school insists on factoring in loans, then that borrowing should be thought of as part of the expected family and student contribution when considering an aid package. Schools that take this step may be able to say they meet 100% of a student’s financial need, but in reality it is simply arranging for the student to take on debt as part of the aid package.
Clearly, a student and his or her family must do some serious homework regarding a school’s claim that it will meet “100% of a student’s financial need.” A failure to do so could result in a significant surprise when the financial aid letter arrives.
please how can i be part of this scholarship? want to know much please. thank you.
By leonard on December 2nd, 2009
As much as I agree that lower income families have a hard time affording college, whether their choice be community college or a university. My huge debate is that just because a students parents make a great deal of money does not mean they are willing to help them out. In my current situation my father alone makes over $250,000 a year yet he will not help me pay for my college tuition. He has a reason for doing that though. He wants me to learn my own responsibilities and believes that if I pay for my college tuition my self that chances of me earning higher marks is more likely.
I applied to over 15 scholarships with a 3.45 overall GPA from the Plymouth-Canton Education Park and a 24 on my ACTs, and got denied every single one of them. This lead me to pull out student loans which now put me in debt about $10,000. Why do people who come from a lower socio-economic status, whom receive the same grades and ACT score as me, deserve a scholarship instead of me. I find this such a difficult topic to discuss because a lot of people do not understand the fact that the parents are the ones with the money not the student.
A person is considered an adult at the age of 18, in some cases now 17, and every thing then falls upon them including legal problems and most insurance, etc. My question there is, why at the age of 18 do I need to put my parents income down on my college application?
As you talk about in the blog a lot of schools are telling their students that they will pay all of the student’s financial needs yet they are scamming them. This leads to another problem of even if I were to get a scholarship, would it even cover my expenses? How much would it really cost to go to school? Colleges are going to start losing the trust of their students if they keep promising them things and not following through with them. If someone tells me that they will cover 100% of my financial needs then I expect nothing less.
I hope everyone can relate to how I feel about this topic because I know that as a college student myself that tuition takes the pay from both of my jobs. I have no left over money for extra expenses. I cannot imagine how frustrating it must be for all of the students who thought their scholarships were going to pay for their entire schooling, and ended up having to pay still.
By Amanda on December 12th, 2009