Many colleges do a horrible job of presenting their financial aid awards in an easy-to-understand way.  As I’ve been explaining in my last two posts, I believe this is largely intentional:

What’s Wrong With This Financial Aid Letter

Evaluating a Financial Aid Award

Recognizing this shameful behavior, the federal government has created a financial aid template called the Shopping Sheet. If you receive a financial aid award that uses the Shopping Sheet as a model it will be far easier to understand whether a school is being generous or stingy.

George Washington University

I am not surprised that the vast majority of colleges and universities have rejected the Shopping Sheet.

Just today I was reading an article in the student newspaper at George Washington University that focused on why this extremely expensive university was not using the model award letter despite student interest.

GWU’s associate vice president for financial assistance told the student newspaper that the federal government’s model financial aid letter would be confusing. Seriously????

I find it laughable that the GWU administrator is worried about confusing families. A GWU financial aid award that  l saw last year did a superb  job of  M-I-S-L-E-A-D-I-N-G the recipient! Please read the post that I wrote about the GWU award letter in 2012 and then decide for yourself  what GWU’s true intentions are:

Is this a Good Financial Aid Award?

Financial Aid Shopping Sheet

Currently less than 10% of schools in the nation are using the federal Shopping Sheet, but you don’t have to wait for the schools on your child’s list to take advantage of this model award letter. There is a new service from College Abacus that can help you recreate any award letter into a easy-to-understand one. I’ll explain this service in my next post.

Below you will see what the federal Shopping Sheet template looks like.

The Shopping Sheet Features

Unlike nearly all college financial aid awards, this model document does not mix loans with scholarships and grants. It lets you know what your net cost will be by subtracting just the free money from the total cost of attendance. All awards letters should be doing this, but most don’t.

Below the net price on this template, you will see federal student loan options and work study. The document also mentions other ways to pay such as borrowing through Parent PLUS Loans and private college loans.

You will also see what your Expected Family Contribution is which is extremely important. I just wish the Shopping Sheet would have identified it as the family’s EFC rather than just labeling it as Family Contribution.

Your EFC, which is determined by financial aid methodologies, is what you would be expected to pay, at a minimum, for one year of school. If you have a low EFC, the school should be giving you a higher amount of aid. If the school didn’t, then you were gapped.

Without knowing your EFC, you won’t be able to determine if the award is a good one or not. Colleges,  however, typically do not provide a famil’s EFC on theirs award letters.

Other Features of the Shopping Sheet

I also like the fact that the model financial aid award also includes the graduation rate of the institution and compares it to its peers. It’s frustrating, however, that the form only includes the six-year rate. The four and five-year rates should be included too.

It’s also helpful to share what the average student is borrowing to attend this school. Keep in mind, however, that this doesn’t include parent borrowing.

Schools Using the Shopping Sheet

As I mentioned earlier, most schools have not adopted the Shopping Sheet. I want to applaud those that have. You can see the entire list by clicking on this Shopping Sheet Excel Spreadsheet.

When I looked at the list, most of the participating schools were for-profit schools such as the University of Phoenix.

State schools that are participating include University of Texas-Austin, Arizona State, University of Delaware, University of Iowa, Iowa State, many, if not all, SUNY’s in New York state, Auburn, Boise State, many Penn State satellite campuses, Georgia State and University of Virginia.

Private, nonprofit schools that I saw on the list include Smith College, Cornell, University of Miami, Rollins College, University of Rochester, Coe College, Lawrence University, Stonehill College.

I want to applaud all the schools that decided to simplify their financial aid forms and I hope many more institutions join these trailblazers before next year’s admission season!

This is the second day that I’m devoting to evaluating financial aid letters.

If you missed it, here is the first post that I wrote on this important subject: What’s Wrong with This Financial Aid Letter?

Today I’m sharing another financial aid award that I obtained from Paula Bishop, a CPA from Bellevue, WA, who received this letter from a client.

This financial aid award comes from Gonzaga University. Bishop added everything that you see in the two red boxes. Take a look:

How Good is This Award?

It’s award letters like this that helps explain why I am such a higher-ed cynic.

This is a poor financial aid award and yet at the top of the award letter Gonzaga brags that the award provides a total commitment of $62,360 over four years.  I assume the school is trotting out a four-year figure because it will appear more generous than the terrible one-year award this student actually received.

The four-year award wouldn’t look so good if the letter also noted that the four-year cost of the school will easily exceed $188,000.

Gonzaga University

A Close Look at the Gonzaga Award

The student who received this award is an excellent student (3.9 GPA) and is also poor. In fact, the student’s Expected Family Contribution is $0. A family’s adjusted gross income is automatically $0 if their adjusted gross income is $23,000 or less.

(This post explains what you need to know about Expected Family Contributions.)

The cost of attendance at Gonzaga is $47,000. With an EFC of $0, this family’s demonstrated need is $47,000.

Gonzaga is giving this child grants/scholarships worth $15,590  for the child’s freshman year. The school also inserted into the package the full federal Pell Grant for low-income students that’s worth $5,550 and a work study job (the screen shot doesn’t show the work-study job).

When you add up the three grants and the subsidized Stafford Loan (Gonzaga referred to it as Direct Sub. Loan), it pencils out to just $24,640. (It’s okay for colleges to include a subsidized Stafford in a package because it is geared toward low-income students and has special features compared to the regular Stafford Loan.)

When you add up the institutional and federal grants, subsidized Stafford Loan and work study, Gonzaga only meets 52% of this family’s financial need.

What’s Missing

Here is what the Gonzaga letter didn’t mention:

Expected Family Contribution.

Since the letter doesn’t include what the family’s EFC is, the parents would have no idea whether the award is a good one or not.

Cost of Attendance.

This is another glaring omission. If you don’t know what the total cost of the school is, how is any family expected to know what their total outlay would be?

Bottom Line:

This is a textbook example of a student being gapped. In this case, there is a huge gap between the financial assistance that the child neeeds to attend Gonzaga and what the school is willing to provide.  I’d suggest it would be financial suicide for this low-income student to attend this school.

An Excellent Financial Aid Award

Now that you’ve seen two poor financial aid awards, in my next post I’m going to show you what an excellent financial aid award looks like.

Many financial aid letters  — heck almost all of them –  are confusing.

I’ve always wondered why award letters are so difficult to understand. Perhaps the staffers generating these letters in the bowels of universities have been conversing in financial-aid speak for so long that they have lost their ability to communicate in standard English.

Of course, the cynical explanation for unhelpful financial aid awards is that many schools don’t want families to know when an offer is pathetic. Obfuscation is an effective way to keep parents off balance.

This week I got the opportunity to listen to a great webinar on deciphering financial aid letters that was sponsored by the National College Advocacy Group.  The presenter was Paula Bishop, a CPA in Bellevue, WA, and a friend of mine, who has looked at hundreds of financial aid awards for her clients.

What Should Be in Every Financial Aid Award Letter

Here are the basic components that Bishop says should be in any financial aid letter:

• Full cost of attendance. This should be broken down into such expenses as tuition, room and board, textbooks, travel.
• Grant and scholarships. This money doesn’t have to be repaid.
• Types and amounts of loans. The loans should include the interest rates.
• Net amount student will have to pay after financial aid is deducted.
• Parent and student’s expected family contribution.

What was particularly helpful about the webinar is that Bishop shared examples of aid awards she has reviewed. I wanted to share one example today and I will provide more in my next college blog post.

Once you see actual award letters,  you will have a better shot at understanding what your aid letters mean.

Chapman University

Today’s award letter comes from Chapman University in Orange County, CA, which has become a very hot school. As the school has grown more popular, the financial aid awards have gotten worse.

Take a good look. Does this appear to be a good award letter? Do you see anything missing from the award?

Oops. What’s Missing

At first glance, this might look like a generous award. It appears that the family will be getting $42,150.  The letter, however, fails to include information that is necessary to know  if this is a solid offer.

The letter doesn’t include  Chapman’s full cost of attendance, which is a hefty $60,573. The letter  provides the tuition/fees and estimated room/board of $12,000 to $13,500, but not books, travel and personal expenses. Some schools omit mentioning any costs including tuition!

The Chapman letter also doesn’t include what the family’s Expected Family Contribution is, which is a huge omission.  The EFC is what a family, at a minimum, will have to pay to attend a school. If you need it, here is an EFC backgrounder:

What Is Your Expected Family Contribution?

You can’t determine if an award is  good unless you know what your EFC, based on a financial aid formula, is.

Chapman University

This family’s EFC is $12,617.  Ideally, the family would only have to pay $12,617 to attend any school. Realistically, however, most students will have to pay more than their EFC, but the closer to this figure the better. In this case, the family’s need was $47,956.

The Chapman award also included an item that schools should not be inserting in their packages, but typically do — the federal unsubsidized Stafford Loan, which in the letter is referred to as the Unsubsidized Direct Loan.

Any student can qualify for the unsubsidized Stafford Loan (interest rate 6.8%) and it hardly should be used by aid packagers to reduce a family’s obligation. The subsidized Stafford and the Perkins are more attractive loans that middle and lower-income families can qualify for so it’s legit for those to be in the package.

Chapman also inserted the Parent Plus Loan in the package ($4,000). Schools often put this loan in the package, but this is a misleading. The Parent PLUS Loan is a federal loan for parents with a 7.9% loan. And parents must pay an additional 4% for any amount that is borrowed.

Paula recently called Chapman’s financial aid office to ask why the PLUS Loan was included in this package and she was told that the school wanted the family to know about the existence of PLUS Loan. Gosh, I could think of a better way to tell parents about the PLUS. How about a supplemental sheet that lists loan possibilities along with interest rates?

Crunching the Numbers

When Paula removed the unsubsidized Stafford and PLUS loans, as well as work study from the package, the award dropped to $36,150. Remember, the student’s financial need is $47,956. Chapman  met 75% of this student’s financial need and 18% of the package was in loans and a work-study job.

Botton Line:

This is not a good award for the girl who received it, but she might never have realized that without an expert’s help.

Unfortunately, you can’t count on many colleges and universities to provide a clear understanding of what they are offering in their aid awards. They are, after all, businesses.

Lynn O’Shaughnessy is the author of the Shrinking the Cost of College workbook and the second edition of The College Solution: A Guide for Everyone Looking for the Right School at the Right Price.

More From The College Solution:

•  The Nation’s Tuition Hogs
• Questions to Ask A Career Services Office
• Another Look At Merit Scholarships
• Where the Full-Ride Sports Scholarships Are

What does the financial aid look like for a school that is generous?

In my last post, I illustrated what a stingy university looks like using statistics that you can find on the College Board. If you missed the post, here it is:

Is This University Stingy?

Today I’m going to use the same tools to illustrate what a school that provides generous financial aid packages looks like.

As I mentioned in a post that I wrote last week  – Where’s the Financial Aid Cash? – it’s primarily the most elite schools in the country that provide the superior financial awards.

Washington University

Unfortunately, most of these institutions accept very few students who need a tremendous amount of aid. An extreme example is Washington University in my hometown of St. Louis, which which provides great need-based aid for its students, but few low-income students attend this institution.

Just 6% of students at Wash U. qualify for Pell Grants, which are primarily reserved for students whose families make $40,000 of less.

There was a damning story in The New York Times on Sunday that explored the underwhelming efforts of elite schools to recruit high-achieving, low-income students.

Where the prices aren’t as crazy

As an example of how you can use College Board resources, I am focusing on St. Olaf College in Minnesota because it is a school that accepts the majority of its applicants (about 60%) and offers excellent aid.

The Midwest is one of the regions of the country where you can typically find better values (i.e. lower prices) than at schools located on the East and West Coast, which tend to be the most expensive.

Exceptions to this affordability rule are Midwestern schools that enjoy extremely high U.S. News rankings, such as Wash U., University of Chicago, Northwestern U., as well as Kenyon, Oberlin and Carleton colleges. They can charge more money  because these institutions, due to their rankings, can attract plenty of wealthy families that will pay $60,000 or close to it for one year of school!

In addition to the Midwest, other more “affordable” regions are the South, Mid-Atlantic and interior West.

St. Olaf Financial Aid Stats

To access St. Olaf’s financial aid statistics, I type the name of the school into the College Board’s search engine and then click on the school’s Paying link.

That’s when I see that the school meet 100% of need, which is the ideal number.

To find additional  financial aid statistics, I click on the Financial Aid by the Numbers link. You’ll see here that 76% of undergrads applied for aid at St. Olaf and 90% of them were determined to have need. All 90% received help. All of these students got their full need met, which is excellent. Finally, you’ll see on the same page what the average need-based loan is. I don’t put a lot of stock in this figure because nearly all schools will include the maximum Stafford Loan for students seeking financial aid, which is $5,500 for freshmen.

You’ll also see what the average need-based scholarships ($28,491). You will also discover that St. Olaf gives merit scholarships to some rich students. In this case the typical scholarship is $12,670.

Bottom Line: When researching schools, the College Board financial aid statistics are a handy resource.

If you require need-based financial, you should hunt for schools that are generous with their aid packages.

This is the advice that I shared in my last college blog post: Where Is the Financial Aid Cash? If you didn’t read it, I’d suggest that you do before continuing on with this post.

If money is an issue, students should be aiming for schools that will meet a higher percentage of their financial need. One site where you can gather this information for individual institutions is at the College Board.

I’m using Santa Clara University in California as an example. I picked Santa Clara U. because it happens to be on the federal government’s hall of shame list. It is in the top 5% of  four-year schools with the highest net price (cost minus typical scholarships).

Santa Clara University

On the College Board home page, type in the name of any school and its profile page will show up. To access the school’s financial aid statistics click on the school’s Paying link.

Cost of Attendance

Once you click on that link, you will see the school’s sticker price. What I find curious about Santa Clara’s numbers is that it doesn’t include some of the expenses college students will incur such as transportation and books.

Also curious is that the school didn’t include any room and board costs for students who live off campus. The cost to rent an apartment in the Silicon Valley will be high.  I can only assume that the university wants to appear less expensive than it is.

Financial Aid by the Numbers

While you’re on a college’s cost page, look up at the top and click on the Financial Aid By the Numbers link. This is where the numbers start getting interesting.

Here is what I see next for Santa Clara U.:

Sadly, this Jesuit university, like many Catholic universities that I have researched, meet a low percentage of need for its students. It typically meets 73% of need and that figure will usually include a loan. The closer this number is to 100%, the better the deal for a student. At nearby Stanford University, which is admittedly a much richer school, the average students do get 100% of their need met.

A middle-class or poor student who receives such low financial support would graduate with a ton of debt. I would not recommend this school to someone who needs a lot of financial help.

By the way, I don’t put much stock in the pie charts that I see on the College Board; they often seem out of whack with the numbers. Also, I’ve put an “x” by the other statistic which I find to be wrong for all schools. This is a College Board glitch that I believe surfaced when the organization redesigned its website last year.

More Financial Aid Statistics

In the chart below you’ll find what percentage of students applied for aid (67%) and how many were judged to have need (78%). Ideally all the students who need help will receive it, but that’s not the case at Santa Clara. Seventy eight percent of those who applied for aid were judged to qualify for help, but only 67% of students received any.

What is really important, and illuminating, is what percentage of students had their full need met. At this school, the figure is 24%.

On the right hand side, you’ll see that Santa Clara’s average need-based scholarship or grant is $19,450, which is low for a school that costs more than $52,000. For families that won’t qualify for need-based aid, however, the average merit scholarship (non-need-based aid) is $10,357.

The average indebtedness of a student who borrows at Santa Clara U. ($28,672) isn’t much above the average of $26,000 or so. I’m not sure what to make of this. The figure could be wrong. I see a lot of figures on the College Board that look strange. Or many of the students at this school are wealthy enough that they don’t have to borrow heavily.

Often I see the average indebtedness figure left blank at schools with lousy financial aid. Unlike Santa Clara, some schools with dreadful financial aid such as New York University, Pratt Institute and Drexel University don’t have ANY financial aid data on the College Board site. Shame on them!

 In my next post, I will return to the College Board and show you statistics of a school that is generous with its students.

This is the time of year when students are receiving their financial aid awards. I’m sharing a letter today from a mom who is unhappy about financial aid letters that her son has been receiving. Lynn O’Shaughnessy

Hi Lynn,

I’m a parent relatively new to the financial aid process and I have a question.

 Once you have completed the FAFSA and the gov’t establishes your EFC, what does that number really mean?

I initially believed that it represented what the government thought a family could afford for a child to attend college (ie what our annual contribution should be to their education for the upcoming year).  I also thought that colleges then used the EFC to gauge funds that might be made available to the prospective student.

My son has applied to some schools where the aid packages being offered do not bring us anywhere near that EFC number since we are left with balances of $10,000 to $15,000 higher than our EFC.

Is there a standard for EFC interpretation and the financial aid packages schools offer?  It seems like every school’s answer is to take out a 7.9% interest Parent Plus Loan for whatever your balance might be, which is simply not a financially feasible option. My son has very good solid academic credentials and is in the upper half of the accepted student profile for each school he has applied to.

Denise

Answer to Mom’s Questions

I sympathize with this mom. Like a lot of parents, Denise assumed that the family would only have to pay their Expected Family Contribution. Usually that’s not the case.

Most people will end up paying more than their EFC because the vast majority of schools do not meet 100% of need.  Here’s an example of a school meeting 100% of need.

School’s cost of attendance: $50,000
EFC: $15,000
Demonstrated need: $35,000
Financial aid grant: $35,000

There are only about five dozen schools that say that they meet 100% of need for all or most students. Unfortunately the federal government doesn’t ask institutions this important question so you can’t find these schools through the federal database that can be accessed through the federal College Navigator.

You can look for schools individually on the College Board and COLLEGEdata for this important stat.  U.S. News also asks schools what percentage of need they typically meet and here is the rankings giant’s latest list of schools:

Universities That Claim to Meet 100% of Need

Most of the schools that meet their students’ full need are elite institution that reject the majority of their applicants. Schools with gold-plated financial aid policies include Emory, Georgetown, Northwestern, Haverford, Notre Dame and the Ivies. Of course, as I mention in my book, the majority of students at these schools are rich and are paying full price.

Beyond these elite schools, the generosity of colleges and universities vary significantly. I picked some schools at random to show you how different the aid policies can be:

• Wabash College (IN) 98% of need met, 74% of students have full need met
  

  Wabash College (one of just 2 men’s colleges left in US)

• College of Wooster (OH) 95% of need met, 54% of students have full need met
• Lehigh University (PA) 94% of need met, 53% of students have full need met
• Rhode Island School of Design 70% need met, 3% of students have their full need met.
• University of Colorado, Boulder 87% of need met, 42% of students have full need met.
• Canisius College (NY) 85% of need met, 24% of students have full need met.
• Huntingdon College (AL) 66% of need met, 17% full need met
• Heidelberg University (OH) 80% of need met, 19% of students had full need met
• Pepperdine University (CA) 78% of need met, 20% of students had full need met
• University of Texas, Austin 78% of need met, 14% of students had full need met

 Bottom Line:

If you want your childen to get the best packages possible, they should aim for schools that meet the highest percentage of need. The higher the child is in the admission pool, the more likely he or she will receive one of the best packages.