Before College: Games Colleges Play — Financial Aid Offers

The costs of attendance (“sticker prices”) colleges publish are not always what their students pay. In addition to federal and state awards, many schools offer their own gift aid (grants and scholarships) to discount tuition, fees, and even other expenses.

If an institution promises your prospective student a certain amount of institutional gift aid, analyze its offer carefully. It may be designed to “game” your student by discounting his initial sticker price, but then maximumize the tuition he pays in the future.

Here are some tactics to be on guard against:

Bait and SwitchIMG_1387

Institutional aid offers may be part of sleazy bait and switch strategies that even some reputable colleges employ. The most obvious of these is loss leader awards — first-year gift aid without renewal commitments for subsequent years. But they can be part of more subtle and sophisticated schemes, too. For more about the latter, see “Before College: Beware of Bait and Switch.

IMG_1388Wait and See

Be careful if an institutional representative suggests your student pay expensive and non-refundable enrollment deposits now, then hold on to find out if more grant or scholarship funding can be freed up for him later. Your student may or may not get additional gift aid — absent a written commitment, there’s no assurance of it — or the added aid may not match his needs or expectations.

Curbing Comparative Shopping

Thousands of postsecondary schools reportedly provide the Financial Aid Shopping Sheet with their financial aid offers. This document lays out sticker prices and financial aid awards in a common format, making it easy to do a side-by-side IMG_1389comparison of the net first-year prices your student will face at various colleges.

The Shopping Sheet also divulges the median amount borrowed by a college’s graduates, plus graduation and student loan default rates for its undergraduates — the last two being relative measures of institutional quality.

Unfortunately, the Shopping Sheet is voluntary. Some schools don’t provide it, making it difficult to measure them against their competitors. Before your student pays an expensive enrollment deposit to such a school, ask why it isn’t revealing it’s comparative data. In short — what is the school trying to hide?

Even colleges making honest and straightforward aid offers can be expensive. So help your student avoid falling prey to the games some schools play with aid offers so his higher education will be as affordable as possible.

College Affordability Solutions has 40 years experience with strategies that help make education beyond high school more affordable. For a no-charge consultation about such strategies, call (512) 366-5354 or email collegeafford@gmail.com.

Before College: Games Colleges Play — Tuition and Fee Disclosures

No, this isn’t about March Madness. It’s about the Cost of Attendance (COA) figures disclosed on financial aid offers your student will soon receive from postsecondary schools that admitted him. Bottom line — these figures aren’t always precise or accurate.

IMG_1289Federal rules require schools to disclose tuition and fees charged to full and part-time students. But you need to understand exactly what is and isn’t being disclosed, because these may be the largest and most crucial costs your student will incur.

 

Tuition

Tuition varies based on the number of credit or clock hours a student takes. But tuition communicated to prospective freshmen generally reflects the minimum number of hours required for full-time enrollment. At public colleges, it should also reflect your student’s residency status because such schools vary tuition on this basis — i.e. community colleges charge less to residents of their tax districts than non-residents, and 4-year public institutions charge out-of-state residents more than in-state residents.

Some institutions also have different tuition rates for different majors. So make sure the tuition revealed to your student reflects the major into which he’s been admitted.

Because tuition is sensitive to the hours for which your student registers, his residency status, and maybe his major, be sure the aid offer lists the appropriate tuition amount.

Fees

Sometimes the fees charged students actually exceed tuition. However, fees are combined with tuition when schools disclose COA. So if your student’s being offered a tuition scholarship or tuition waiver, it’s important to understand whether or not this award also covers fees.

Also, fees divulged on aid offers are usually the required fees all students must pay. IMG_1294Other, hidden fees aren’t listed. These are sometimes called “discretionary” or “optional” fees. They’re charged for everything from attending intercollegiate athletic events to participating in intramural sports. But they may also be required for essentials such as taking certain required classes or using campus labs.

If the aid offer doesn’t fully explain the tuition and fee amount it discloses, contact the financial aid office for more and better information about this disclosure. Otherwise, you and your student could be in for a rude shock when it’s time to pay the school.

There are four other COA categories besides tuition and fees. Read Games Colleges Play — Disclosing Room, Board, and Other Costs for what to watch for in these categories.

College Affordability Solutions helps parents and students decipher financial aid offers. Call (512) 366-5354 or email collegeafford@gmail.com if you need a no-cost consultation for this purpose.

Games Colleges Play — Disclosing Room, Board, and Other Costs

Don’t rely too much on the Cost of Attendance (COA) figures disclosed on your student’s financial aid offers from colleges to which she’s been admitted. Sad to say, they’re often inaccurate.

Games Colleges Play: Tuition and Fee Disclosures focuses on one critical COA category, IMG_1280 but federal rules also require postsecondary institutions to communicate other sets of costs:

  • Room and board;
  • Books and supplies;
  • Transportation; and
  • Miscellaneous.

Colleges often determine these costs by sampling local prices or surveying current-students. These methods typically cause them to publish average costs, which means some students spend more while others spend less in each category. Hopefully, your student can be often among those who spend less.

Unfortunately, colleges may also deliberately downsize amounts they disclose so their published COAs appear to be lower than those of their competitors. And sometimes institutional administrators simply believe students shouldn’t be allowed to spend what their own research shows students are spending in certain categories.

Here are some commonly played games in COA categories other than tuition and fees:

Room and Board: This is usually based on what the school’s housing and food service department charges to live on-campus with a roommate for up to nine months. Such departments object to giving “extra” financial aid to help students reside off-campus, so colleges often apply their on-campus amounts to students who dine and rent off-campus — largely under leases landlords require to be for 12 months.

Books and Supplies: This category normally divulges average book and supply expenses for all students. But some majors have extraordinary high book and supply costs, so this amount could be way too low.

Transportation: This figure commonly reflects what in-state students spend to travel between campus and home a few times each academic year. It seldom covers long-distance travel expenses for out-of-state students or costs for students who must drive to and from off-campus jobs.

Miscellaneous: This covers personal purchases — clothing, entertainment, snacks, etc. But institutions are particularly likely to “lowball” the costs disclosed in this category.

So determine whether you can actually afford a college even with the financial aid it’s offering. Do your own research about its COA — speak with current students and their parents, examine on-campus dorm prices, sample off-campus rents, independently calculate your student’s transportation expenses, etc. Doing so can avert financial disaster for you and your student!

College Affordability Solutions helps parents and students decipher financial aid offers. Call (512) 366-5354 or email collegeafford@gmail.com if you need a no-cost consultation for this purpose.

Before and During College: Parent Loans — Helpful Today, But a Potential Curse Tomorrow

IMG_1169Federal Direct Parent PLUS Loans. They’re often the way families fill the gap between their resources, financial aid, and costs their undergraduates incur at college. But parent PLUS loans have their pros and cons.

Parent PLUS loan advantages:

 

  • There’s no PLUS borrowing limit other than the cost of attendance for the student for whom you borrow (i.e. your “beneficiary”) minus her other financial aid.
  • The interest rate on each academic year’s PLUS loan is fixed so, unlike this rate on many private loans, it’ll never go up.
  • The only fee is a 1.069% federal loan fee.
  • Amounts you repay within 120 days of disbursement reduces principal and IMG_1150cancels interest and loan fee on that principal.
  • Your payments may be deferred while your beneficiary is enrolled at least half-time and during her 6-month post half-time grace period.
  • Payments may also be postponed under other federal deferment and forbearance programs.
  • Should you die or become totally and permanently disabled, or if your beneficiary dies, your PLUS debt will be discharged.

Parent PLUS loan downsides include:

  • The highest interest rate of all federal college loans. Currently 7.0%, this rate’s expected to rise on PLUS loans borrowed for the next few academic years. But with fixed rates, PLUS interest is still likely to be lower than variable rate private education loans.
  • To borrow a PLUS loan, you (or a cosigner) must have a sound credit history. IMG_1152Your credit history isn’t “sound” for PLUS if (1) when your credit report runs, you don’t owe over $2,085 that’s 90 or more days delinquent, or (2) for five years before your report runs, you’ve had no charge-offs, bankruptcies, defaults, foreclosures, repossessions, tax-liens, wage garnishments, or write-offs.
  • PLUS debt isn’t legally transferable to anyone else unless it’s privately refinanced.
  • Parent PLUS debt isn’t easily forgiven. Bankruptcy generally won’t discharge it, and it’s not eligible for the federal teacher loan forgiveness program. But, in addition to the discharges described above, it is eligible for Public Service Loan Forgiveness.

IMG_1151Borrow parent PLUS loans only as a resort, especially if you’re approaching retirement. Why? The Government Accountability Office recently found 17% of 65-74 year old parent borrowers had defaulted on such loans — subjecting themselves to expensive collection fees and the confiscation of their Social Security benefits and tax refunds. So while PLUS can be helpful today, it can be a curse tomorrow.

Note: College Affordability Solutions will be on “spring break” next week and so won’t be posting a blog. But look here again on Wednesday, March 21, for another post on issues related to keeping college affordable.

Contact College Affordability Solutions at (512) 366-5354 or collegeafford.gmail.com if you’re looking for a no-cost consultation on strategies for minimizing college costs.