Some colleges and universities are already sending out financial aid award letters for 2018/2019. That’s…
College award letters are already fairly confusing. What’s worse, they can often be somewhat misleading. This is especially problematic– considering major decisions are made based upon that first award letter; when the next one could be dramatically different. Before you accept a school’s award, there are a few steps you can take to better ensure you won’t be left out in the cold later.
Avoid the Bait and Switch
What you see may not end up being what you get. 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. 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 Schools about Graduation Rates
That line of thinking does not always prove accurate. Many students will transfer if costs become too high, some have no other choice. 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 than that should raise a red flag. It suggests higher transfer rates which can be a sign of the loss of grant and scholarship money. Universities are right in their belief that transferring is a big decision that is not often made lightly or without cause; but if the financial burden is too much, students are left with few other options.
Something else to 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.
Ask Schools about Scholarship and Grant 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 the schools you’re interested in what percentage of students don’t receive renewals on their merit scholarships. The answer to the latter question is far more telling of the reality of the situation.
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 your need-based aid eligibility, which may have been offset by your merit award, may now be available to you to ease the pain of the scholarship loss. While you’re demonstrated need may be higher at one school, that school may offer more gift aid than a school that might seem more inexpensive but offers more self-help aid. How a school distributes its aid can be more important than the sticker price of the school itself. We help you obtain and decipher that information 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 to make an informed decision and not just the ones the schools make readily available.