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Winning the Financial Aid Lottery

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Winning the Financial Aid Lottery

It used to be that you could try for that reach school and if you got in, you didn't have to worry because everybody who got in, who needed money, got money. Today, however, as colleges are asked to fund more and more of their own operations with less and less assistance from the government, foundations, and families, they are increasingly reluctant to part with their money to enroll students who don't raise their academic profile.
-The Real Deal on Financial Aid," Muhlenberg College Office of Admissions

Sometimes, a school wants a hot prospect so badly that it will twist its financial aid rules into a pretzel. That's got to be what happened when an elite West Coast school reeled in an exceptional student who just happened to be sitting on a $500,000 trust fund. A financial aid administrator could have run the numbers any way he wanted, but this teenager still wouldn't have qualified for need-based aid. But surprise, surprise, the private university, ignoring the trust fund, awarded him a yearly $30,000 aid package.

I mention this story not to make you more cynical about the financial aid process, but to alert you to one of the many ways that you can boost your chances of receiving more than crumbs from your favorite school. Whether you are a trust fund baby or far from it, here's what you need to do:

Always apply for financial aid. The best way to sabotage your chances for assistance is to assume that applying for need-based aid is pointless. Even families with six-figure incomes can qualify for a helping hand from more expensive schools. If you discover that your income far exceeds the income ceiling, you should still complete the forms because it could help your child secure a spot in the next freshman class.

This will sound crass, but some schools could be far more interested in your child after taking a peek at your finances. At some schools, an excellent candidate from a wealthy family will enjoy a better chance of being admitted over a promising student whose dad is on disability and whose mom works as a cashier. You may rightly believe that favoring an affluent student over a poor one is appalling, but plenty of schools make these sorts of decisions.

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Skip the reach schools. If you're eager to capture a great financial aid package, reread the quote at the beginning. Muhlenberg College in Allentown, Pennsylvania, which is a school I greatly admire, posted on its Web site a remarkably candid portrayal about how schools award financial aid today. You can read the piece yourself by typing its title, "The Real Deal on Financial Aid," into Google's search engine.

One of the most important points that Muhlenberg's admissions office makes is that students who require financial aid need to focus on schools where they would be within the top one-third to the top one-quarter of the applicant pool. A child with a 3.2 GPA and a 1050 on the combined reading and math portion of the SAT shouldn't expect a financial aid windfall if the top 25% of students admitted into a particular school have an average GPA of 3.7 and a 1200 SAT. In fact, it's likely that this teenager's aid package would be stuffed with a work study opportunity and loans. In contrast, a teenager with a 3.8 GPA and a SAT of 1250 would be far more likely to receive a package that contains a large grant that doesn't have to be repaid.

If you're in the middle of the pack of kids accepted to a school, what you receive financially can depend on what else you'd bring to the institution. To break ties, schools will look at the extras. Are you a phenomenal volunteer in your community? Did you show leadership in your extracurricular activities? Are you from a state that's a 20-hour drive away? Are you a minority? Do you have special talents, such as music, art, or athletics?

A variety of online and printed sources provide individual schools' range of SAT scores and average GPA, which can help you compare your academic record with others. CollegeBoard.com and Petersons.com, for instance, provide both these statistics, as do various college guides that you can buy at a bookstore. You shouldn't assume, however, that any figures you see are the most current ones. Sometimes enrolled student scores are a couple years old and a school's standards might have risen since then.

Finding schools where you will be among the top bananas is a far cry from the approach that a lot of kids favor. Many students, as well as their parents, are eager to see how prestigious a school they can finagle their way into. Aiming for a reach school is fine if you don't mind when the financial aid office stiffs you. If you cringe at paying full price, include financial safety schools on your list.

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Know where the money is. Some schools are more generous than others. The schools with the most money are typically private ones, which sit on their own institutional pots of financial aid. The Ivies and other wealthy schools have large endowments that allow them to provide generous aid packages. Schools that don't share the same star wattage but want to compete for high caliber students will sometimes ante up even more cash. They understand that some applicants will reject a fabulous financial package if an Ivy League institution welcomes them without giving up a dime.

In contrast, public schools typically don't have as much discretionary financial aid to toss around. At public schools, financial aid packages will often be filled with federal loans. Lower income families, whether they attend a private or a public school, will often qualify for a federal Pell Grant, which doesn't have to be repaid. Typically, these grants are reserved for families with income under $40,000. Public and private institutions will provide subsidized federal Stafford Loans to low to middle-income students. Eligibility is determined by a federal formula.

A student who doesn't qualify for a Pell or subsidized Stafford, can obtain a regular Stafford, while parents can take out a federal PLUS loan. Once again, you can obtain these regardless of whether the school is public or private. Unlike private schools, state institutions can't always offer financial aid beyond the federal program. Ironically, while families who expect their kids to go to state schools worry about being qualified for financial aid, the assistance will often be strictly loans.

Be leery of the numbers. If your child gets accepted into a school that brags that it meets 90% or 100% of its students' financial need, you may feel like celebrating. But hold off on the confetti. You need to know what's behind those numbers.

You're not going to be happy if a school meets 100% of your financial need with a package of loans. It's far better to find schools that back up their promises with grants, which don't have to be repaid.

You can learn whether a school is typically miserly or generous by looking at its profile on CollegeBoard.com. Once on the site, type the name of a college in the College QuickFinder and then click on the Cost & Financial Aid link. Using Muhlenberg College as an example, College Board indicates that the school meets 91% of a student's financial need. The breakdown was $19,116 in grants and $3,398 in loans.

Action Plan

You should enjoy better success at capturing a tuition price cut if you look for schools that represent a good academic fit.

Don't let the price tag fool you. Plenty of families assume that expensive schools are superior to cheaper ones. That belief is so pervasive that some schools have jacked up their prices to generate more foot traffic.

Higher tuition, however, doesn't mean that a school is sinking more cash into its academic programs. Some schools inflate their price as part of what insiders call the Robin Hood admission strategy. The school boosts its sticker price and then uses the excess cash to offer more assistance to the candidates it covets. While private schools use this strategy, some public colleges and universities try something similar for nonresident students. Often the out-of-state tuition is much higher at public universities, but a school will offer to cut the price in the form of a scholarship for the most desirable nonresidents.

In contrast, other schools, particularly those that serve a region, keep their prices lower and offer less financial aid because of the more reasonable cost of an education there. They use their cost advantage as a selling point.