Get the best financial aid package: Knowing how colleges calculate need is half the battle

By Kimberly S. Wetzel
U.S. News & World Report


You've drawn up a list of public and private colleges that are a good fit based on everything from academics to ambiance. The price tags vary widely, but don't automatically cross colleges off the list if they seem too expensive. Just because some schools are pricey doesn't mean you can't afford them.

Most institutions determine their aid packages depending on the size of their endowment, a family's financial need, and how much the school wants a particular student. Financial aid can become so generous, in some cases, that the most expensive private school may end up being cheaper to attend than a state university.

Yet how these institutions determine their awards packages can seem mystifying. The same student can apply to colleges with similar tuition rates and yet receive award letters that differ by thousands of dollars. Families "just don't know where to start," says Manuel Fabriquer, president of College Planning ABC, a San Jose, Calif.-based consulting firm. "They don't really understand what happens on the back end."

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Generally, colleges want to attract as many top students as possible, but they have only so much money to go around. Each institution uses its own criteria to determine a family's financial need and adjusts the proportion of grants versus loans in the package depending on how desirable the student is.

According to the nonprofit College Board, the yearly average for tuition and fees for in-state students at public institutions is $7,605. That's an increase of about 24 percent since 2005, while the average annual tuition at private schools has increased 17 percent over the same period. So, even an extra $1,000 in grant money can go a long way. By educating themselves, families can navigate the system effectively and obtain the best possible financial packages.

When offering financial aid, many college and university officials claim to meet a student's "full need." This means that the total package offered to prospective students-which can be a combination of grants, federal and private loans, and work-study money-will fill the gap between the family contribution and the cost.

[Learn all about paying for college.]

But exactly how need is determined, and how much schools will offer in grant money versus loans, is based on several factors. To start, most secondary institutions rely on one of two tools to help determine the "expected family contribution," or EFC. Public schools generally require families to submit the Free Application for Federal Student Aid, or FAFSA, which asks detailed questions about family income, investments, savings, and other financial matters. The FAFSA form includes questions based on the family's tax returns for the previous year.

The second tool, the College Scholarship Service (CSS) Profile, created by the College Board, is more detailed. It's used widely, primarily by private colleges. The form asks about income and liabilities, including family assets, veterans benefits, and child support payments.

The application also includes a blank form for applicants to provide "explanations and special circumstances," such as a family's high medical bills or unemployment issues. During the application process, schools utilize the data to compute the EFC for each prospective student. They then take this baseline information and, using their own internal criteria, weight different factors more than others.

[Make sure you know your expected family contribution.]

For example, some universities might allow families to deduct the cost of K-12 private school tuition, while others pay greater attention to the "special circumstances" section in deciding awards. All this, of course, means offering more or higher "merit" grants to desirable applicants, such as an accomplished pianist or a top lacrosse player.

Financial aid also helps different institutions gain an advantage over their rivals when trying to attract the most diverse, talented, and well-rounded students, says Sandy Baum, an independent policy analyst for the College Board and a senior fellow at George Washington University. On the flip side, students deemed less desirable are asked to foot more of their tuition bill from loans or work-study. "They just don't have enough dollars to go around, and somehow they have to ration it," Baum says.

As you prepare to make your case to colleges, experts suggest following these tips:

1. Get your data in order: Read through the FAFSA and CSS Profile fine print and ask questions so you know what is required when filling out the paperwork. Identifying eligible income exemptions, for example, could mean a difference of tens of thousands of dollars in aid.

One couple recently approached Fabriquer, the college planning consultant, with $150,000 in loans from their son's schooling at Stanford University. The family income was only about $60,000 per year, but the small business owners had mistakenly listed their business assets on the FAFSA. Business owners with fewer than 100 employees don't have to report such assets. It wasn't until after their son had graduated that they realized they would have qualified for need-based grants had they filled out the FAFSA properly. "They should have gotten a free ride," Fabriquer says.

[Follow 7 tips to avoid FAFSA errors.]

2. Contact colleges early: Don't assume that the school knows about all the aberrations in your family's finances. Has a family member gotten sick, diminishing saving accounts? Did an inheritance inflate last year's income? Tell the college or university you've applied to, even before you've been accepted. The sooner schools know, the better.

3. Beat the deadlines: Don't wait until the last minute to contact the college or university and plead your case, says Rod Oto, associate dean of admissions and director of student financial services at Carleton College. Oto says his office gets as many as 20 calls or E-mails daily right before the May 1 decision deadline, overloading his four-person staff.

"You're better off starting the conversation earlier, because it might not be just one conversation you're going to have," Oto says. Furthermore, there are limited funds available, so if you don't get in early, the money could be promised to someone else. "I encourage students to have a rationale, and then share it with the aid folks," says Oto. "We will respond to folks who are having a legitimate problem."

4. Understand the formula being applied: Many universities include extraneous expenses in their cost of attendance calculations, but they're not always easy to find. Tulane University, for example, is one school that does provide cost estimates for books, room, board, transportation, and miscellaneous items on its website. Do your homework to find out whether colleges have omitted or underestimated these extra costs.

[Use a net price calculator to get the real cost of college.]

5. Evaluate each element of the aid package: It's important to educate yourself on what is being given free and what you might be required to pay back later. Some grants may be provided for only one year, others for more. Also, check to see if merit scholarships are tied to maintaining a minimum GPA or a spot on a sports team. "Asking about what the aid package looks like in future years is important," says GW's Baum.

6. Be prepared to appeal: Brian Henson nabbed acceptance letters from California Polytechnic State University-San Luis Obispo, the University of Texas-Austin, and the University of San Diego. But his father was laid off from his job in November, dramatically affecting the family's income. Each school had offered Henson aid packages that were light on grants and heavy on loans. He narrowed it down to Cal Poly, with a cost of attendance of about $22,000, and UT-Austin, with a price tag for out-of-staters at about $47,000.

A few weeks before the decision deadline, Brian's mother contacted both schools to plead for more grant money. "At first, with Texas it looked promising, as they said they could accommodate us and offer the whole amount" in grants, she says. "But then they came back ... and said they couldn't because there wasn't any money left." Brian ultimately chose Cal Poly. But had the Hensons contacted admissions officials at Texas sooner, they might have been able to obtain more grant money. Colleges often have funds to offer to students with extenuating circumstances like Brian's.

7. Go right to the top: Not satisfied with the answers you're getting from an aid representative? Ask to speak with the director of financial aid. "Most of us are open to it and happy to talk to students and parents," Carleton's Oto says. Still, he adds, "Most financial aid offices are equipped to handle most requests. Whom you talk to doesn't matter as much as whether you have a strong case."

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