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.

I’d love to hear from parents who have tried using the net price calculators that nearly every college and university must post on their websites. Have you had good experiences or have the net price calculators tried to trick you into believing that a school is going to be affordable?

I’ll mention why I am asking in a minute.

First I want to emphasize that if you don’t know what a net price calculator is, you absolutely need to.  No student should apply to any schools without his/her parents running the numbers for each school.

The purpose of the calculators is to provide families with a personal estimate of what a school will cost a student. The calculator is supposed to calculate what institutional scholarships and grants the child would be entitled to and then deduct that from the sticker price.

If you need to bone up on net price calculators, I devote a chapter in my book to these tools and I’ve written about them many times on my blog. You’ll see some of the posts at the end of this one.

Findings of a Net Price Calculator Study

I am bringing writing about net price calculators today because of a study released this week from the Institute for College Access & Success. With nearly a year having passed since the federal net price calculator requirement kicked in, the nonprofit set out to see whether these net price calculators were working as intended. Unfortunately, what the institute discovered was too much hanky panky.

The institute randomly surveyed the net price calculators of 50 different institutions. Here are what I consider to be the report’s two biggest findings:

1. Some colleges subtracted loans and work study from their net price estimates, frequently making the resulting lower dollar figure more prominent than the required net price. The official net price cannot include loans — only grants and scholarships. It’s easy to conclude that these schools were being sneaky in trying to make their prices look artificially low.

2. Nearly a quarter of colleges did not have a link to their calculator on the website’s financial aid or costs page. Despite the federal requirement, three schools didn’t even have a net price calculator on their websites.

When I did my own random survey of net price calculators last fall, I found that many schools were burying their calculators on their websites. Here is that post:  Playing Hide and Seek With Net Price Calculators. It’s easy to see why a college wouldn’t want prospective students to use their calculators if theri financial aid is lousy.

Locating Net Price Calculators

One way to find a school’s net price calculator without the hassle is to head to the College Board’s website and call up the profile of any school.  After clicking on the school’s Paying link, you’ll find a blue button under the heading “Financial Aid Distribution” that will direct you to the institution’s net price calculator.

What’s Been Your Experience?

I’d love to do a follow post on this subject, if I hear from parents who have used these calculators.

Have you tried a calculator that has used loans to reduce a school’s net price? Have you been unable to find some net price calculators? I’d also like to hear about  the good experiences you’ve had.  Please comment in the box below.

More on Net Price Calculators:

How to Find Out What College Will Really Cost You

Case Study:  What 66 Schools Would Cost This Family

A New Way to Add Up the Cost of College

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

This is the time of year when parents are stressing about paying for their child’s college tab. I’ve been hearing from parents who haven’t been able to borrow enough for college. I thought I’d share one of these emails.

A Mom’s Dilemma

Here is the mom’s note:

I would like to know what to do if you don’t qualify for a Parent PLUS loan?

Our second son is now in college, and we had quite a bit of money saved for their college (over $60,000, which is phenomenal for people with our early salaries), but I lost my job in 2009 and that put us into a financial pickle. We were able to pay for our oldest son’s first two years of college and our second son’s first year, but we are in the position now where we don’t have enough saved for his entire tuition and need to borrow – but we don’t qualify!

We earn about $150,000 per year, own our house and another house with NO MORTGAGE on it, and STILL cannot get a $9700 loan! We have tried EVERYWHERE. Any suggestions?

By the way – I wasn’t aware that we had any ‘issues’ on our credit. I just purchased a vehicle in March of this year after my car died and I got a 0% interest rate. How is it that you can borrow money to buy a vehicle but cannot borrow money for your child’s education? We are paying for him an apartment near campus and books out of pocket. We are just $9700 short.

 A Borrowing Solution

Before I share a potential solution to this family’s problem, I want to explain what a Parent PLUS Loan is.

The PLUS Loan allows parents to borrow enough to meet the cost of a school’s attendance, which is determined by the college, that isn’t covered by their child’s financial aid package. There is no maximum borrowing limit. Considering how low inflation has been for years, the terms on the PLUS Loan are pricey. The interest rate is 7.9% and there is an additional 4% fee on the loan amount.

You can learn more about the PLUS by reading one of my previous posts:

How Parents Can Borrow for College

Since the mom and her husband didn’t qualify for a PLUS, their child can borrow more via a federal Stafford Loan. A freshman can borrow up to $9,500 via a Stafford of which no more than $3,500 can be a subsidized Stafford. A sophomore, junior or senior can borrow $12,500 a year of which $5,500 can be subsidized.

Student who borrow through a subsidized Stafford do not have to pay the interest that accrues while they are still in school (the federal government covers it) and the interest rate (at least for this year) is 3.4% versus 6.8%.

Stafford Loan Borrowing Limits

The regular borrowing limits are considerably lower for students whose parents who do qualify for the PLUS.

• Freshman: $5,500
• Sophomore: $6,500
• Junior: $7,500
• Senior: $7,500

Stafford Loan Limits When PLUS Loan isn’t Available

Students whose parents don’t qualify for a PLUS can borrow significantly more.  Here are the yearly Stafford borrowing limits for these students:

• Freshman: $9,500
• Sophomores, Juniors, Seniors: $12,500

The family should be able to borrow what it needs through this program.

Bottom Line:

Families who have bad credit (at least in the eyes of the federal government) can take greater advantage of the Stafford, which is a better loan because of its lower interest rates and built-in consumer protections.

Lynn O’Shaughnessy is the author of The College Solution: A Guide for Everyone Looking for the Right School at the Right Price.

The unrelenting cost of college is hitting upper-middle-class families hard.

According to a front-page analysis today in The Wall Street Journal, it’s these families who are experiencing the largest rise in college-loan debt.

In its analysis, the newspaper categorized upper-middle-income as households with yearly incomes in the 80^th to 90^th percentiles that range from $94,000 to $205,000.

Among families with this income, 25.6% had college-loan obligations in 2010, which was up from 19.5% in 2007.  In comparison, 19.1% of families from all incomes had college debt versus 15.2% in 2007. The average amount that affluent families borrowed jumped to $32,869 in 2010, which is up from $26,639 in 2007.

There are now more than three million households who owe at least $50,000 in college loans, which is a dramatic rise from the 794,000 families who owed this much in 2001.

Affluent Family Dilemma

College can be costly for families of all incomes, but clearly affluent families, who are more likely to aim for expensive, private colleges and universities,  should be able to save more for this priority than others.

I have affluent parents email me all the time –this demographic seems to be attracted to my college blog – who are financially unprepared for college costs. Sometimes I think these parents are looking to me for miracle answers.

Just the other day, for instance, I had a dad email me who has a $1 million mortgage on a house with no equity and the family makes about $160,000 a year.  They are looking for a school that will give a lot of money to their brilliant teenager. I was stunned how overextended the family was financially while their child was on the verge of heading off to college.

I got another email recently from a dad with a multi-million-dollar home in California and an income of roughly $250,000 based on his Expected Family Contribution and he said he and his wife only had $40,000 saved up for their son’s college. He also was looking for mega scholarships.

Some affluent families must assume that their kids are so smart or so athletically gifted that they will receive huge awards. Athletic scholarships, however, are way overrated and even though affluent students will often receive merit scholarships for college their parents will still face a substantial tab.

According to a survey by the Human Capital Research, about a third of families of $95,000 to $125,000 (I certainly wouldn’t consider these folks affluent in expensive parts of the country), never saved for their children’s college costs.

Of course, the best way to make college more affordable is to become an educated consumer, which, of course, is what people who are visiting my blog are trying to do!

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

I’ve been linking my posts to the federal student aid sites for years, but I haven’t done it with any enthusiasm.

These websites, which have included information about federal student loans and grants, have been disjointed and borderline unhelpful. The websites reeked of bureaucratic jargon and didn’t provide any context for federal aid programs. I felt sorry for the parents and students who had to slog through them and wondered if many of them found the answers they were looking for. I doubted it.

I was pleasantly surprised on Friday when I visited StudentAid.gov and discovered it was sporting a new look. Thinking I had made a mistake when I landed on this federal student aid home page, I doublechecked the URL.

A Fresh New Look

As it turned out, the federal government rolled out the new look on Friday, but it represented more than an aesthetic change. StudentAid.gov combines content and interactive tools such as the FAFSA4caster from other federal aid websites into one spot and is trying to make the information more assessable. Right on the home page, for instance, are links to information on the types of federal aid, who qualifies for aid, how you apply for loans and how to manage them.

A Dramatic Improvement

The purpose of the remodeled new site is to help students better plan and pay for college in an easy-to-understand format.  It also features videos and infographics to help answer the most frequently asked questions about financial aid. StudentAid.gov is fully accessible on tablets and smartphones.

I think the Education Department’s remodel is fantastic and I hope the drive to make financial aid understandable to families continues. One way the site is helpful is by providing an overview of the vast financial aid system rather than focusing entirely on pieces of it. For instance, in the section on types of aid, it provides a breakdown of the four main sources of aid: federal government, state governments, colleges themselves and nonprofit/private organizations. You can click on links to find out more about each of them.

Room for Improvement

StudentAid.gov’s new look was tested with students, parents and borrowers, and the U.S. Department of Education will continue to make improvements and updates based on users’ feedback. And I’m happy that the department wants to continue to make the site more valuable because there is room for improvement.

The section on Pell Grants, for instance, doesn’t provide families with income information on just who qualifies for Pell Grants, or any other federal grants for that matter. To qualify for the full Pell Grant, for instance, a student must be low-income. If a family makes over $23,000 a year, they can typically forget about qualifying for the maximum Pell Grant of $5,500.

Most families that I’ve talked to aren’t aware that you have to be poor or lower middle-class to qualify for federal grants. You can’t find this information on the new or old federal sites. I have the same complaint about the remodeled site’s explanation of unsubsidized and subsidized Stafford Loans, which are the most popular federal students loans. The site should give families some indication of who qualifies for the more favorable subsidized loans.

Bottom Line:

The Department of Education should be applauded for their efforts and I’d urge all of you to take a look.

More on The College Solution:

9 Steps to Finding the Most Generous Colleges

Will Home Equity Hurt Your Financial Aid Chances? A Case Study

Deadbeat Parents Who Won’t Help Pay for College

Lynn O’Shaughnessy is the author of second edition of The College Solution: A Guide for Everyone Looking for the Right School at the Right Price, which was released in May.

Today I’m sharing an email from a mom from New Mexico, who is understandably stressed about the college bill she is gearing up to face for the third of her four children. I’ve got my own thoughts, but I’d love to hear what advice you might give this family.

A Mom’s Question

Here is the mother’s note:

Do colleges take into consideration the fact that the parents of the student are paying back student loans borrowed for their own and their other children’s educations when determining financial aid?

We have four children, ages ranging from 27 to 15. Our 27 year-old graduated, our 22 year old is finishing this year. Our third child is our most academically hard-working one, and she is on track to graduate next year with a 3.8 GPA, having taken all Honors and AP courses available. She has yet to take the ACT, but an estimated test given her by her high school resulted in a 30.

Daughter’s College Aspirations

She wants to go to school out of state, at a private or public school in Colorado, Arizona or California rather than stay here at our local university in New Mexico. We support her, as we think she has worked hard, is more serious about college, and would benefit from being in an enhanced academic environment.

My husband and I chipped away at our degrees here at our local university, finally graduating from college later in life by using student loans.  When I became a nurse, our income increased enough that we no longer qualified for aid for our second son who had maxed out his Stafford eligibility at 23K, so we borrowed PLUS loan money so he could complete his last year.

Over the past three years, our income jumped from approximately 70K per year to 140K, which I am assuming greatly impacts how much need based aid our daughter will be eligible for. We pay approximately $1,600 a month in total student loan payments.

We still help both boys with certain expenses, and we also have our youngest to think about. Do you have any thoughts or advice for a family such as ours?

Here are My Thoughts…..

1. I sympathize with this mom. Paying $1,600 a month for college loans would be a huge burden for just about any family. Unfortunately, parents who space their kids further apart typically have to shoulder more college costs. Schools routinely give breaks to families that have two or more students in college simultaneously.

2. Most schools only use the Free Application for Federal Student Aid (FAFSA) and this form does not ask about college loans that parents have already incurred. You could, however, request a professional judgment from a school’s financial aid office. You could also contact the school before your child applies to ask how this college debt would be treated — if at all.

3. The CSS/Financial Aid PROFILE, which about 250 schools (almost all private) use does inquire about current loans. The PROFILE asks parents if they are paying back college loans and what the amount is. PROFILE institutions will treat this information differently, but some schools will subtract the yearly loan repayment from parents’ income. This would increase your eligibility for financial aid. Here is a list of the PROFILE colleges and universities.

Just like the FAFSA schools, you should contact schools ahead of time to see whether they give parents a break who are in your situation. You can also request a professional judgment if a financial aid package isn’t enough.

4. I must confess that I cringed when I read that your daughter was interested in public schools in California, Colorado and Arizona. State universities are under tremendous pressure financially as states continue to ratchet down their support.

In California and elsewhere, residents and nonresidents are paying more for less. Students at public universities in California, as well as other states, are cutting back on course offerings, increasing class sizes, reducing the number of academic advisers. They are also cutting back on assignments that actually require deep thinking, such as written reports, because there are fewer teaching assistants to grade them. It’s also more challenging to graduate in four years!

Under the circumstance, I find it remarkable that nonresidents still dream of attending schools like UC Berkeley and UCLA. If your daughter gets into any University of California campus, it will cost you more than $54,000 for the first year and the price will almost certainly rise each year thereafter. The UCs don’t give out any merit scholarships to nonresidents so you would be facing that $54,000 tab.

The University of Colorado at $48,000 isn’t much cheaper. The vast majority of nonresidents at CU do not receive merit scholarships. The top nonresident prize is a $55,000 scholarship spread over four years. And for nonresidents, the University of Arizona is $41,000 and Arizona State is $38,000.

5. If your daughter wants to attend a Western state university cheaply, she should look for schools that aren’t on a lot of students radar. One that I’d suggest she

check out is Western Washington University in Bellingham. The school belongs to the Western Undergraduate Exchange program that many western states participate in including New Mexico and Washington. This school will be far less expensive. From what I hear, it’s got a wonderful honors college.

6. Don’t let your daughter apply to any school without using a net price calculator in advance. You can evaluate state and private institutions with these calculators.

7. Ultimately, you might decide that the most affordable school is in New Mexico. You can obtain a great education anywhere and you can boost your chances by getting admitted into an honors college.  Here is a link to the University of New Mexico’s honors program.

8. A bachelor’s degree is a bachelor’s degree.  I wouldn’t overextend myself any further on college debt. I also would not suggest that your daughter take out more than the maximum Stafford Loan. It’s just not worth it!

 What Do You Think?

If you have any suggestions for this family, please share in the box below.

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