Some colleges and universities are already sending out financial aid award letters for 2021/2022. That’s…
College award letters are already fairly confusing. What’s worse is that they can often be somewhat misleading. This is especially problematic considering you are likely making major decisions based on your first award letter. Even when the next one could be dramatically different. So beware! And before you accept a school’s award, there are a few steps you should take to better ensure you won’t be left out in the cold later.
Avoid the Bait and Switch
What you see may not be what you get in the end. There is a misconception that a first award letter is indicative of what all the rest will be. Barring some substantial change in a family’s circumstances, this should be the case. But unfortunately, a practice known as bait and switch is on the rise. In this instance, a bait and switch occurs when a school offers an attractive first award, chock-full of grants and merit scholarships, to entice you into committing to them. However, when the next year rolls around these grants and scholarships are gone, leaving you holding a substantially larger bill. The psychology behind the practice being, “Once students are settled in, it would be more inconvenient to find a less expensive school than to just pay the additional costs.” There is a significant drop-off between the number of students who receive merit scholarships in their freshmen year and those who receive them in the subsequent years.
Ask About Graduation Rates
While colleges may benefit some from this scheme, not all students will fall in line with the scheme. Many students will transfer if costs become too high. In fact, looking at the transfer rates of a school can be an indicator of these dubious practices. Something to check before committing to a school is their 4-year graduation rate. The national average is 29%. Anything lower then that should raise a red flag. It suggests higher transfer rates which could be a sign that students are losing grant and scholarship money, leaving them forced to leave. Universities are right in their belief that transferring is a big decision that is not often made lightly or without cause. We don’t recommend it! But if the financial burden is too much, students are left with few other options. That is why you need to
Here is something else you should be wary of: the national average graduation time has risen from 4 years to 6 years. Because of this, most school websites only have the 6-year graduation rate. At My College Planning Team, we always tell our clients that one of the most important stats on our college reports are the 4-year graduation rate. Spending fewer year in college will always save you money!
Ask About Grant and Scholarship Renewal
While asking what requirements must be met to ensure renewal of merit scholarships is a good first step, it’s perhaps more important to ask what percentage of students don’t receive renewals on their merit scholarships after their freshmen year. The answer to the latter question is far more telling.
While merit scholarships are based on academic performance, grants are based on demonstrated financial need. Yet, even these can be subject to unexpected reductions after freshmen year. It’s extremely important to ask if that will be the case at your school of choice. It could mean the difference of thousands of dollars.
Most of the college reports we provide show exactly how need-based financial aid has been distributed historically by the college. These reports are critical—especially if you happen to lose your merit scholarship because of your need-based aid eligibility, which may have been offset by your merit award. How a school distributes its aid can be more important than the sticker price of the school itself. While the sticker price at one school might be higher than other, if they offer more self-help aid, it might end being the more affordable of the two. We help you obtain and decipher information like this to make the most informed decision possible.
Understand How Grants and Scholarships Can Affect EFC
Lastly, a painful lesson that families learn is that outside scholarships are often nullified by an increase in their EFC. Realizing this, the Gates Millennium Fund, funded by the Bill and Melinda Gates Foundation, waits until award letters are sent out to its recipients before paying the unmet need. To fully illustrate the difference this makes in the grants available to those same students the next year; the fund picks up the tab for about 24% of a student’s freshman year costs. After the scholarships and grants evaporate the unmet need the fund supplements jump to 43% of a student’s sophomore year costs. Most families won’t have the Gates Fund to rely on when those numbers spike.
Universities are unlikely to volunteer this information; you will have to actively seek it out. A school with an enticing financial veneer could very well possess a more troublesome interior. Visit My College Planning Team and set up a free consultation so we can make sure you have all the figures you need, not just the ones the schools make readily available, to make an informed decision.