Before College: Beware of “Bait and Switch”

Bait and switch is a sleazy practice in which some, though not all, supposedly reputable colleges and universities engage. These institutions include some but, again, not all, schools requiring mid-February enrollment deposits from students offered “early admission.”

Here’s how bait and switch works: (1) Unsuspecting freshmen are lured to a school with generous grant and scholarship (gift aid) offers that seem to significantly discount their 4-year cost of attendance. (2) The school manipulates its awards so all thor most of their recipients lose them after a year or two. The cancelled funds are then switched to bait future recruits. (3) Families suffering gift aid reductions must then borrow more or use more of their financial resources to keep their students at the school.

Not surprisingly, colleges don’t publicize bait and switch. You have to look for it before paying your student’s enrollment deposit. Here are some common practices and ways to spot them.

Renewable Non-Renewable Gift Aid

A big grant or scholarship is renewable for 4 years. But its renewal criteria — e.g. GPA, credit hours completed — are so grueling that few students meet them.

The National Association of Student Financial Aid Administrators’ Code of Conduct img_5441requires institutions to disclose grant and scholarship renewal criteria, but the criteria may be obscurely placed or written in a complicated way.

So carefully read the “fine print” on your student’s financial aid award letter or the school’s website, and honestly assess your student’s ability to meet gift aid renewal standards.

The Incredible Shrinking Gift Aid

The overall amount of gift aid awarded drops each year, even if the student’s ability to pay college costs holds steady or decreases.

img_5440To identify this practice, you generally have to pose direct questions to the financial aid staff about whether the school engages in it. Make sure you get clear, comprehensive answers.

Gift Aid Displacement

Gift aid originally awarded decreases as the student brings in other scholarships. They may be outside scholarships, but the financial aid office may also reduce gift aid it awarded due to scholarships from the school’s academic departments. The student typically looses a dollar for every other dollar received.

Federal and state rules sometimes force displacement because they prohibit the receipt of financial aid in excess of cost of attendance. But sometimes displacement is an institutional choice.

Ask the financial aid staff for the order in which it makes reductions if additional scholarships come in. Hopefully it’s unmet financial need first, loans second, and gift aid third. If it’s gift aid first, the school clearly employs displacement.

Need help scrutinizing the financial aid offers you’ve received from colleges and universities? Reach out to College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com. 

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