A mom emailed me earlier this week and I’ve somehow managed to stretch out the topic of her concern to three posts. If you’re curious, here are the previous ones:
Today I’m going to address her chief question:
What do you do if the financial aid formula considers you affluent, but you don’t have the financial ability to pay full price? I suspect that plenty of people who visit my college blog are grappling with the same question.
This mom’s Expected Family contribution is high. Depending on the methodology, it ranges from $37,000 to $44,000. Many families are shocked at their EFC, but keep in mind that the federal EFC is a creation of Congress.
Paying for College When Your Considered Affluent
Here are a few of my thoughts on this issue:
1. Just because a family has a high Expected Family Contribution, doesn’t mean that they will pay full price.
This mom, or any other family with a high EFC, could look for schools that provide merit scholarships to affluent students. Nearly all schools fall into that category.
It’s far easier to identify the schools that don’t offer merit scholarships to rich students than name those that do. There are probably only two or three dozen schools at most that don’t provide merit scholarships. As I mention in the second edition of The College Solution, the scholarship-free institutions are the nation’s most elite schools including the Ivy League members.
Check the top 10 institutions in US News’ prestigious national university and national liberal arts college categories and you’ll have a great idea of which schools don’t dispense merit scholarships to wealthy students. Many of these schools don’t offer merit scholarship to rich students because they can easily attract these students without help. If their US News rankings ever started slipping (highly unlikely because of how the methodology is rigged), I’m sure they would start dispensing them.
MIT (a school on the dream list that the mom shared) doesn’t offer any scholarships to rich students, which is no surprise because it is ranked 5th in the college rankings. Stanford and CalTech, also tied at No. 5, represent a slightly different approach taken by some highly elite schools. Stanford and CalTech, along with schools like Carleton College ($3,368), Bowdoin College ($1,000) and Northwestern ($2,521) offer very modest scholarships to rich students.
When I checked the Financial Aid section of Stanford’s Common Data Set (21011-2012), only 87 wealthy students out of a freshman class of 1,674 received a merit scholarship (non-need-based aid in higher-ed lingo) and the amount was a modest $4,985. The average merit scholarships for rich students at CalTech was $5,000.
2. A high EFC can still generate need-based financial aid.
This family, assuming that their child got into these elite schools (and that’s a huge assumption), could still be in line for financial aid at schools that are extremely expensive. For instance, the cost of CalTech is more than $56,000. The son could receive need-based aid that would close the gap between the family’s EFC and the cost of the school. If the family’s EFC was $37,000, that would mean an aid package of $19,000.
3. Rich families should broaden their search.
This advice actually is relevant to families of all income. If you are in need of financial help, students should look for schools that would be excited to have them in their freshmen class. Rather than looking for schools where you’d barely get in, search for schools where you’d be in the top 25% to 33% of the incoming class.
Colleges have finite amounts of money and they will reserve their best awards to their most coveted applicants. If you are wealthy, your child’s chances of getting large merit scholarships are much greater if you look beyond…..
4. Consider state universities.
If the cost is too much to absorb, consider your own in-state public universities. If a child receives a merit scholarship at a state school, chances are the price will be quite reasonable. I don’t see the point of going to a private institution if it would require great hardship on the part of the parents and/or the student.
Any other ideas?
If you have any other suggestions on this topic, I’d love to hear from you. Just send your comment in the box below.
And Happy Memorial Day!
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 this month.