by C. Claire Law, M.S., IECA (South Carolina)
The January 30 issue of Chronicle of Higher Education reports that the White House will soon require colleges to offer students and parents a “standard” comparison shopping sheet that will enable parents and students to compare and contrast multiple awards from multiple colleges. This form comes just after colleges had to comply with the U.S. Department of Education and post a “Net Price Calculator” (NPC) on their Web site. Since financial aid awards are part of the communication and marketing stream of a college, every award can look different. This upcoming form, financial aid “Shopping Sheet” (you can see the draft form here) will help families better understand and evaluate the amount of aid each college offers.
The government is aiming for transparency so that parents and students will understand how much federal student aid they are eligible to receive. This encourages private colleges to disclose criteria by which they award their internal institutional aid. The Institutional Methodology (IM) criteria is “private,” which makes it hard for families to gain an idea of whether a college is awarding only federal aid or its own institutional aid. It’s difficult for parents and students to understand that criteria. Do private colleges that award a scholarship or tuition discount do so only when there is a demonstrated federal need? Alternatively, do they award “pure” merit aid based on grades and test scores alone, regardless of the family’s ability to pay? Parents must ask this question outright.
So often when a parent appeals their financial aid award, the standard reply is “you don’t qualify for more” or “others need it more than you,” but parents don’t understand whether the college is referring to federal aid or institutional aid. Financial aid officers can certify parents for PLUS loans (Parent Loan for Undergraduate Students) through which parents can borrow up to the full cost of education. However, while they may qualify for the loan, many parents can take on only so much debt before it starts affecting their retirement. Colleges will likely need to loosen their purse in order to keep themselves competitive, desirable, and affordable.
Over the last few decades, families have accumulated large amounts of student debt, which some say is larger than the amount owed on mortgages. There has to be a limit to the amount of self-help aid, such as loans, that parents take out. I’m focusing on parents’ debt because students can borrow only limited amounts, which seldom cover the cost of college. In his State of the Union Address to the nation on January 24, President Obama indicated that the government will allocate more work study dollars into colleges. He then asked “What will colleges themselves do?” Will they match an equal amount of funds to award on-campus jobs to students who don’t qualify for federal work study?
This financial aid shopping sheet will be a very useful form. However, it still won’t be accurate because public and private colleges don’t post the upcoming academic year’s cost of attendance until a month or two before new students enroll. Try visiting any college Web site at this time. You will not find the exact cost of tuition, room, board, fees and books for students who will enter college this fall. Some families don’t realize that these costs have been increasing on average from 4% to 8% every year. This increase often results in an award letter with a bigger PLUS loan for parents for each of the four years of college. So parents can afford college but they have to be willing to borrow more each year and forgive the fact that the exact cost of attendance is not posted until just before the student enrolls.
Typically, colleges post their new cost of attendance after their governing board has met. Even when I call in late spring of the student’s senior year, the financial aid director is not sure of the bottom line cost of attendance (COA) for my student who will enroll in August/September of 2012. Why should students send in their deposit to a college when they don’t really know the exact cost? I have heard parents say that when the total cost is $58,000, a few thousand here or there don’t make a difference. However, for those parents who are budgeting every few hundred dollars, it makes a huge difference.
In addition, this gives the perception that the college is less expensive than it actually is, because families calculate their future costs based on prior year’s fees and estimates. It messes up the family’s calculations, the Net Price Calculator, and any future financial aid shopping sheet.
In this economic climate when even the middle class feels the economic squeeze, parents need to know the true costs in order to plan their college payments. According to financial aid expert Lora Block (IECA, Vermont), “Public colleges are hampered by the fact that state budgets are done so late and the budgets determine the cost of attendance.” Thus it won’t be easy to obtain that information about public colleges earlier in the year. Parents need to overstate costs of attendance in their calculations. There are, however, some costs that would be easier to estimate, like the cost of books and supplies. We all know that $800 to $1,200 per academic year does not begin to cover the cost of textbooks. It’s hard to convince first-year students to be thrifty when all they can think of is personalizing their dorm room with their favorite rug, bed spread, and curtains. However, if they want to be smart, they will buy used textbooks and shop for them online!
C. Claire Law, M.S., co-authored “Find the Perfect College for You.” She identifies colleges that match the student academically, socially, and financially. She can be reached at Claire@eduave.com