February 2020 Newsletter

Breaking It All Down

Dear Parent(s),

If you’re a parent of a high school senior, you’re likely seeing acceptances and financial aid packages coming in now. Some colleges have been forthright in explaining what the award letters actually mean, but some have not.

What you want to see is something that looks similar to the sample letter below. The package should include the estimated cost of attendance– including tuition and fees, housing and meal plans, books and supplies, plus personal or miscellaneous expenses. And although not included in the example, a travel allowance also should be included.

The Nitty Gritty

The awards themselves are not typically explained in detail, so here’s some help. In this case, the package is broken into four sections. First, the college shows its list price. Second, it lists scholarships and grants awarded by the college. Third, it includes a merit scholarship given by the student’s state of residence. The fourth line includes student loans and work-study. This is considered self-help.

About awards: The breakdowns are not always clear. Some scholarships are based on merit, while others are grants based on financial need. As long as your student maintains the required minimum GPA and is in good standing, the dollar amount of merit awards shouldn’t change.

Fortunately, most grants are labeled as grants, but the dollar amount may be variable based on annual changes of income and assets. If a student recieves a financial aid package that seems low, it probably means one of two things: the school doesn’t have the money in their budget OR they don’t have the money for your student.

In the fourth section is Federal Work-Study (FWS). FWS is an on-campus job BUT it’s not guaranteed. Your student has to apply for it just like any other student. In fact, there are more offers of FWS than there are actual jobs so applicants must be aware of application procedures and deadlines or risk losing out! And of course, the student has to work to earn the money.

Lastly, student loans. Federal loan amounts for first-year undergraduate students are in most cases limited to $5,500. They may be broken into two types depending on your family’s need and cost of attendance. These are subsidized and unsubsidized.

To accept these loans, there is no credit or background checks, and no co-signers required. This loan will be the student’s responsibility. For subsidized loans, interest will be paid by the government as long as the student remains in school at least half-time, and for six months after graduation. For unsubsidized loans, interest will accrue over the course of the student’s college years. The interest is compounded– added back into the loan each year. This means that the student will be paying interest on interest.

Finally, if the award letter doesn’t include indirect expenses, I suggest you contact the college and ask. This may give you some leverage when you go to negotiate. Or you could go to the College Board website and look these costs up in the Paying section.

College Admissions

Given the fast-changing admissions landscape and the cost of four-year schools, I think it’s important to understand what the colleges are going through right now, and how you can benefit from this “insider information.” Admissions is still fierce at the most competitive schools. But according to the National Student Clearinghouse Research Center, since 2011, enrollment has decreased by almost three million students.

In fact, according to the bond rating company Moody’s, since 2016, 33 colleges have closed their Ivy Halls due to falling enrollments. So, what’s that got to do with the price of beans? Plenty! Especially when last year more than 400 colleges and universities still had seats available for freshmen and transfer students after the traditional May 1 enrollment deadline, as reported by the National Association for College Admission Counseling.

In 2018, only 38% of four-year colleges filled all of their seats. This represents a golden opportunity for the savvy parent to significantly reduce out-of-pocket college costs! After all, colleges are businesses, and they need to keep the lights on. Think of it like this: you can usually get a better deal on a car at the end of the month. That’s so dealers can meet their quotas and get the cars off their lots. Come May or June 1, admissions at many fine colleges are frantic to meet their quota, and if they have to discount tuition to do it, they will.

Some colleges are doing things that benefit students directly by offering money-saving accelerated programs through which students can get both undergraduate and graduate degrees more quickly than it would take them elsewhere, such as a five-year combined B.A. and M.B.A. Others are figuring out how to increase the number of credits a student can take each semester, so students can graduate in three years.

Colleges like Davenport University offer graduates who can’t find jobs in their majors an additional 48 credits to help them advance their degrees. The proviso is that the job guarantee apply only to majors in the highest demand fields. There are many ways a student can get a reasonably priced and faster college education from an established institution, including community college, online classes, dual enrollment– not to mention AP classes.

Before a college gives their own money to your student, the more selective institutions are requiring more financial information each year. Most colleges are asking you to list the balances in your bank and brokerage accounts!

Colleges are free to ask anything they want. The College Board’s Financial Aid Profile has added, on average, eight new questions each year, making the shortest form 13 pages long… not including dependent verification statements, tax returns, W-2s, 1099’s, non-tax filing forms, business returns, or the worst of all possible forms for the business owner: the Business/Farm Supplement.

There are about a dozen more forms a college could ask you to complete. More questions and more forms multiply your chances of making devastating errors. Those parents who are busy, divorced or separated, have had significant changes in their family and finances, are business owners with students applying to selective colleges, I encourage you to get the advice of a financial aid professional. Often they save you money, time, and frustration.

One last thing, because this year’s financial aid award is based on your 2018 Federal Tax return: if you made substantially less money in 2019 or expect to in 2020, I recommend that make an appeal to the colleges to consider your changed situation. A financial aid professional can help you with this.


Well, that’s it for this month.

John Tillman

P.S. If you find this newsletter helpful to you please share it with other parents like yourself!