READ THE FINE PRINT ON COLLEGE AWARD LETTERS
TAKE A HARD LOOK AT WHAT’S REALLY BEING OFFERED: IS IT A FREE RIDE OR A BUNDLE OF COLLEGE DEBT?
Parents and students can find it tricky to read and decipher award letters. Pay attention to terms such as “direct costs” and “gift aid.”
Many times — maybe too many — high school seniors are just so happy to be accepted to their dream school that they don’t give a second thought to the financial implications of their college choice.
Then reality sinks in when they start digging into the details of college award letters.
Karrington Baisden, 18, a senior at the International Academy in Bloomfield Hills, Mich., had several college offers on the table by late April — the University of Michigan Ross School of Business, Pepperdine University in southern California, Emory University in Atlanta and Howard University in Washington, D.C.
“My parents are pushing Ross a lot and Howard,” said Baisden, who has a 3.8 gradepoint average. She received a full-tuition scholarship offer from Howard, but she really wanted to go to Emory. She attended a LEAD Summer Business Institute program at Emory’s campus one summer and fell in love with the campus.
“I love Atlanta. I have family out there,” said Baisden, who lives in Beverly Hills, Mich., and wants to study marketing. But Emory was soon out of the running, once Baisden received a revised financial aid package this week that the family didn’t find attractive.
So as of Wednesday, Baisden said she’s going to Pepperdine. “I really love Pepperdine and what it has to offer me,” she said.
Earlier this week, Baisden had no idea of how much money she’d have to borrow and pay back. And she wasn’t clear on the tuition costs at each school. She plans to talk over the financial packages with her parents Friday and then go out to dinner to celebrate the final decision.
May 1 is what’s known as National College Decision Day — the deadline that more selective public and non-profit colleges want students to meet for making deposits to attend school beginning in the fall. But it’s not a deadline for all schools. Many community colleges and some four-year institutions do not have firm cutoff dates.
The big college decision, of course, should be influenced by where you think you’d be inspired academically. Ideally, you’d want to pick the college where you can confidently begin the journey toward obtaining a degree and later a job. Maybe, as some suggest, you pay attention to the quality of the cafeteria food or the dorm rooms. Maybe not.
Financial experts say you want to take a hard look at what’s really being offered in an award letter. Is it a free ride or a bundle of college debt? Some questions to ask: WHAT’S YOUR ACTUAL PRICE FOR A SCHOOL? One mistake that some families make is focusing on the total dollar amount listed for the aid package on an award letter, said Karen McCarthy, director of policy analysis for the National Association of Student Financial Aid Administrators.
And then, they compare that number across institutions.
“But a $10,000 award from one school that’s offering a grant or scholarship is very different from a $10,000 loan,” she said.
What you want to know is your out-of-pocket cost. How much money will the family need to pay using savings, money earned from working during the year and by tapping into loans that need to be paid back? “The net price is the true bottom-line cost that you can use to compare college affor- dability,” said Mark Kantrowitz, publisher and vice president of strategy for Cappex.com.
Net price takes into account your cost after any grants and scholarships.
“Net cost and net price do not necessarily show up on the award letter,” Kantrowitz said. “That’s one of the problems.”
About 2,000 colleges have adopted the financial-aid shopping sheet, which includes the net price, he said.
The net price is lower than a published price because it’s the cost of attendance minus grants or scholarships. So if the school cost $40,000 and you got $10,000 in scholarships, your net price would be $30,000.
By contrast, the net cost can look smaller when it’s really not. If the school cost $40,000 and you got $10,000 in loans, your net cost would be $30,000, but you’re really paying for those loans somewhere down the line.
Kantrowitz noted that net cost can show up in bigger print on some websites and make it look like the school is more affordable when you’re really taking on loans.
“It is always best for families to calculate the net price themselves, to make sure it is actually the net price and that the allowances for the components of the cost of attendance are complete and accurate,” Kantrowitz said.
Colleges and universities have been required to provide net price calculators on their websites since October 2011. Such calculators can be helpful to give an estimate earlier in the college application process.
The net price calculators are useful when considering where to apply, but not when considering where to attend.
“The net price calculators are based on averages, not actual figures. When you’re deciding where to enroll, you should determine the net price based on the actual financial aid award letter,” Kantrowitz said.
Make sure you take time to understand whether the school practices front-loading — where you’d get more grant money in the first year of school than in future years. Kantrowitz said about half of all colleges practice frontloading.
It’s also essential to understand the rules of the game. What’s the minimum grade-point average that you’d need to keep a grant or scholarship? WHAT ARE THESE AWARDS LETTERS REALLY SAYING? Brush up on your vocabulary words here.
The National Association of Student Financial Aid Administrators, which represents more than 20,000 financial aid professionals, has even come up with a “Glossary of Terms for Award Notifications.”
Parents and students can find it tricky to read and decipher award letters, according to NASFAA. Pay attention to terms such as “direct costs” — what the student and family pays directly to the college. And “gift aid” — money awarded that would not have to be repaid, unless the student fails to meet certain terms, such as a service requirement.
Gift aid can be awarded based upon many factors, including ( but not limited to) financial need, academic excellence, athletic, musical and theatrical talent, affiliation with various groups or career aspirations. WHAT WILL MAKE YOU HAPPY? My son worked hard enough to be admitted to both Big Ten colleges in Michigan, among other universities. And last spring, he lined up a bunch of baseball caps with college logos on a table, sat down to film a quirky interview with a friend and posted his decision in late April on Twitter. He began simply: “In the fall of 2016, I will be taking my talents to East Lansing.”
I love my son’s video for two reasons. One, he made his own decision. Two, he decided to go to Michigan State University even when others might have suggested a different school. He decided to do what made him happy. And, not surprising, his first year in college was a good one. He’s looking forward to returning to the same campus in the fall.