Deciphering the Financial Aid Award Letter

The amount of correspondence your student gets from colleges can be staggering. Before they’re even accepted you’ll be getting mountains of brochures, pamphlets, and other marketing materials. Then, once they do get in, even more information gets sent your way: housing forms, deposit slips, acceptance letters, campus information, and more.

There is one piece of mail you’ll be getting that should be studied carefully, since it will have a pretty big impact on your wallet. That is the financial aid award letter [Be aware that some colleges are moving towards electronic award letters. This means that rather than getting an envelope in the mail, you get login instructions in an email for the college’s website. Keep in mind that lots of email is sent to your student, so keep an eye on their account as well.]

Your award letter may look simple enough, but packed into that piece of paper is information on how much money your student is getting from the college, as well as how much your family will be expected to pay. No, it isn’t the same thing as a college bill, but it does serve the same purpose: letting you know how much college is going to cost.

Award letters will typically contain one or more of the following components: Scholarships, Grants, Work-Study, and Student Loans. How much your student receives depends on many things (Merit, your EFC, Demonstrated Need, Cost of Attendance to name a few) but the goal here is to define each and figure out what they mean to your bottom line.

Scholarships and Grants are forms of “free money”. This means that they do not have to be paid back to the college, the government, or whoever it was that gave them out. Every college has their own criteria for awarding this money, but typically we find that scholarships are Merit-Based (meaning they are contingent upon student grades, test scores, etc) and grants are Need-Based (meaning they are contingent on the family’s financial picture). If a scholarship or grant is Merit-Based, it is important to find out what the criteria is to keep that money. Your student may have to maintain a certain GPA in order to continue receiving those funds, something that is good to know in advance.

Work-Study is a form of “self-help”, meaning you aren’t just given the money up front. In this case, you have to work for it. This is usually done by getting a job on campus and working a set amount of hours every week. The student is paid at least minimum wage either weekly or biweekly. It is important to note that Work-Study does not come directly off the bill. Instead, the student works, gets paid, and is then expected to apply those funds to the college bill. Whether the student does this or not is another question entirely, but this is the concept of Work-Study.

Student Loans are also a form of “self-help”, because in this case the money eventually has to be paid back. The most common student loans are Stafford Loans (subsidized and unsubsidized) and Perkins Loans. These loans are good because they are fixed rate, government guaranteed, do not require a co-signer or credit check, and payment is typically deferred until after the student graduates. It should be noted that PLUS loans, which are parent loans, are NOT a form of financial aid. Some colleges put these loans on their award letters, but don’t be fooled. Sure, the PLUS program is a federal program where parents can borrow for their student’s education, but it is NOT considered financial aid.

While every college awards financial aid differently, these are the four main types of aid that your student could receive. Of course we’d like to see more scholarship and grant money than anything else, but that depends on Student Positioning (for Merit money) and Financial Positioning (for Need-Based money). These are also important topics, but for another day and another blog. Until next time…

About the author: Justin Munio is a Business Development Manager and Financial Aid Consultant with the Smart Track™ Toolkit. Over the past 4 years Justin has been at the forefront of the financial aid process for the families of the Smart Track™ Toolkit.

About Smart Track™ Toolkit: The toolkit is a web based service that assists families with everything from admissions and test prep, to student athletics and financial aid. Our intuitive software and on-demand workshops are key components to making sure students find their top choice colleges, and families can afford to send them there.

3 Critical Questions to Research So You Can Get Grants, Scholarships and Other Financial Aid You Deserve

So how do you beat the colleges at their own game? Here are three areas to research.
 

1. Determine what percentage of financial need each college on your list has met historically. All things being roughly equal, wouldn’t you rather attend a more generous school compared to a stingy one?

2. Determine how that college meets need – i.e. the breakdown between free stuff (grants and scholarships) and self-help (loans/work study.) Two colleges could meet the same overall percentage of need, but your financial aid could be vastly different between the two.

3. Pin down the priority deadlines – some schools require forms as early as November 1! Others may want you to file by February 15th. Make sure you research deadlines for each college on your list, since a lot of financial aid is first come, first served.

Now, a quick word on how to use the information uncovered in #1 and #2, above. The ‘formula’ used by each school to determine your financial aid award is as follows: COA (Cost of Attendance) – EFC (Expected Family Contribution) = Need. Schools award financial aid based on how much need you show. As noted above, once you identify the percentage of need that your college meets, you have a decent handle on what your award will look like. Here is a simplified example:

Assume two colleges with a $50,000 Cost of Attendance and a $25,000 EFC. Your Need is $25,000. If “College A” meets 100% of need, you’ll receive an award of about $25,000 and your cost will be your EFC of $25,000. However, only the most elite, competitive colleges in the country will meet 100% of need. Most do not. If “College B” only meets 80% of need, you may only receive $20,000 in aid, and you’ll have to pay about $30,000 (this is your EFC + the 20% unmet portion). So your total out of pocket for one year at the second school is $5,000 more than the first school, even though their sticker prices may be the same.

How can you obtain these facts? The first place is to look on the websites of each college. Understand that you will have to click around for a while – colleges don’t make this information easy to find. You can also call the financial aid office but you may end up frustrated by the lack of responsiveness, according to most of the parents we work with. Another great resource is College Board - www.collegeboard.org. The information on there is trustworthy for the most part, but you have to really dig at it. You’d be well-served to consult a qualified college finance specialist. For example, our firm has all of this information at our fingertips and we get a lot of it directly from the colleges and some from the Department of Education. Our Smart Track™ Toolkit website has the tools (many of them for FREE) to help you project what each college will award within a small margin of error, and suggest legal and ethical ways to qualify for more grants and scholarships than you would on your own. No matter whether you seek out expert help or do it yourself, preparation and research can pay off in a big way. Don’t put it off or you could lose out – on tens of thousands of dollars in financial aid.

MurrayMiller is a financial educator devoted to the college planning space for over a decade.  Murray is the President and CEO of the College Resource Center, LLC.  You may contact him by emailing info@smarttracktoolkit.com or by calling 800-863-9440. For more information, including a schedule of free college workshops, visit www.SmartTrackToolkit.com.

About Smart Track™ Toolkit: The toolkit is a web based service that assists families with everything from admissions and test prep, to student athletics and financial aid. Our intuitive software and on-demand workshops are key components to making sure students find their top choice colleges, and families can afford to send them there.

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7 Surprising College Financial Aid Facts That Could Save You Thousands

Although college costs continue to skyrocket in the face of our economic woes, proactive – even affluent - families will pay less than “sticker price” because they learned how the financial aid system really works. Here are seven facts that could help you pay “wholesale” for college:

1. Some Colleges Have More to Give Than Others. Although most schools use the same financial aid formulas, they differ significantly in how much they award in grants, scholarships and other financial aid. Example: the older, prestigious colleges – Ivies and other private universities– offer significant amounts of aid thanks to their large endowments. Public universities offer very little financial aid as they rarely have endowment money worth mentioning. 

2. High Sticker Price Colleges Can Cost Less Than “Cheaper” State Schools. One year at a state university can run around $20,000-35,000 (tuition, fees, room and board, etc.). A private college can cost more than $55,000. But frequently, the more expensive college is cheaper! How? Private colleges and universities use their endowments to meet 90%, 95% or more of financial need. State colleges meet roughly 50-65%. 

3. “Forgotten Middle Class” Families Receive Generous Grants, Scholarships and other Financial Aid. Recently, colleges and universities have publicly courted upper middle class families – regularly awarding five figure sums to parents with six figure incomes. DO NOT pass on filling out the financial aid paperwork if you think you won’t qualify. One study showed that 53% of eligible families did not bother applying – leaving millions on the table. 

4. Grades Have Little To Do With Financial Aid Awards. Many parents assume that their child must have good grades to qualify for grants and scholarships. This is inaccurate. Most colleges award a majority of their grants based on financial need, not merit. Merit scholarships comprise less than 2% of the total “pot.” Although it’s fun to talk about merit scholarships around the office water cooler, the big money - more than 98% - is in the need-based financial aid system. 

5. Two Families Can Have the Same Amount Saved - But One Will Receive Far More Financial Aid Because of Where They Saved. An examination of the financial aid formulas reveals that some assets count against you more than others. And some don’t count against you at all. In general, money saved in a student’s name will penalize you more than money held in a parent’s name – strange but true. You could be better off shifting assets out of your student’s name, perhaps into an asset class that’s entirely exempt (such as retirement accounts, insurance, some annuities, and some business assets).

6. Graduation Rates Differ – More Than You Realize. Unfortunately, the odds are stacked heavily against getting in and out of college in four years. Take a look at the four-year graduation percentages at your local state university (www.collegeresults.org is a good site). You’ll likely see that about 50% of full-time undergraduate students get out in four years! Why? The answer may surprise you - it’s because kids can’t get classes they need to graduate – not because they’re “slackers”.  Private colleges do a better job at getting kids through school in four years – a typical four year rate is 85% or higher at most prestigious private schools. 

7. The Financial Aid Office may not be your Best Resource …. Most people don’t understand why you’ve got a better shot of seeing Paris Hilton inducted into MENSA than getting meaningful help from a financial aid office. The reason you won’t is related to the nature of higher educational institutions themselves – they are BUSINESSES. I’ll wait for you to recover…yes, I know that they’re ivory-towered, institutions of higher learning. However, they have bills to pay – six figure salaries to pay to most University Presidents, upgrades to their facilities, high wages to pay to tenured professors. So the university has bills to pay and it maximizes its income which can limit your chances for Free money. That’s why asking an employee of that institution for help may be like calling the IRS and demanding that they reveal all their latest loopholes so you can pay less in taxes.

Murray Miller is a financial educator devoted the college planning space for over a decade.  Murray is the President and CEO of the College Resource Center, LLC.  You may contact him by emailing info@smarttracktoolkit.com or by calling 800-863-9440. For more information, including a schedule of free college workshops, visit www.SmartTrackToolkit.com.

About Smart Track™ Toolkit: The toolkit is a web based service that assists families with everything from admissions and test prep, to student athletics and financial aid. Our intuitive software and on-demand workshops are key components to making sure students find their top choice colleges, and families can afford to send them there.

Connect with us

http://www.facebook.com/smarttracktoolkit

http://twitter.com/uchoosecollege

Scholarships

Good vs. Not-so-Good Scholarships

There are three types of college scholarships:

      1.      Merit Based Scholarships

      2.      Private Scholarships

      3.      Campus Based Scholarships 

The most abundant types of scholarships are typically the need-based and merit-based scholarships. You may be surprised to learn that private scholarships can actually work against you with regard to financial aid.

Many students spend countless hours searching and applying for free private scholarships. They locate the sources, gather letters of recommendation, write essays and meet the deadlines. Yet private-sector scholarships make up only about 3% of the college funding awarded annually. We think of this as spending valuable time and energy going after the crumbs. These private scholarships still help pay for college costs, right?  Maybe not!

Many colleges deduct private-sector awards from the money that the school already offered you or would have offered you. Simply put, the money from your private scholarship may go back into the school’s treasury, and is eventually given to another student! The funding package from your college still contains the same proportion of gift aid (free money) and self-help aid (money that student works for or loans that must be paid back), but the college’s “contribution” is now less. Who may really benefit from all of your hard work? That’s right, the college!

Detecting Scholarship Scams

Some college scholarship companies are making false claims regarding their services, such as claiming they can help families receive thousands of dollars in unclaimed free college scholarships.  They assert that there are millions of dollars in unclaimed scholarships just waiting to be awarded.  As you read above, even if you are awarded some of these private scholarships, in some cases it may benefit your college and not you!

Watch out for claims such as:

• We've already secured funding for your college.
• "The scholarship is guaranteed or your money back".
• You've been “pre-selected" by a "national foundation" to receive a scholarship.
• We have you scheduled for an "interview" 

 

Maximize Your Scholarship Opportunities

1. Apply only if you’re eligible! Read all of the scholarship requirements and directions carefully to make sure you’re eligible before you send in your application. Your application can’t win if you’re not eligible for the scholarship.
2. Complete the application in full. If a question doesn’t apply, note that on the application. Don’t just leave it blank.
3. Follow directions. Provide everything that is required, but don’t supply things that are not requested. You could be disqualified.
4. Neatness counts. Make several photocopies of all the forms you receive. Use the copies as working drafts to develop your application packet. Always type your application. If you must print, do so neatly and legibly.
5. Make sure your essay makes an impression. The key to writing a strong essay is to be personal and specific. Include concrete details to make your experience come alive.
6. Watch for deadlines. To keep yourself on track, impose a deadline on yourself that is at least two weeks before the stated deadline. Use this time to proofread your application before you send it off.
7. Make copies before sending. Before sending your application, make a copy of the entire packet and keep it on file in case your application goes astray. Make sure your name (and social security number, if applicable) appears on each page of your application to ensure that nothing is lost.
8. Give it a final “once-over.” Proofread the entire application carefully. Be on the lookout for misspelled words or grammatical errors. Ask a friend, teacher or parent to proofread it as well.
9. Ask for help if you need it. If you have problems with the application, call the funding organization and ask questions. 
10. Remember: your scholarship application represents you! Your ability to submit a neat, timely, complete application reflects on you. It’s your face to this organization. Take pride in yourself by submitting your best application.

Any additional tips to share?  Leave your comments!

About Smart Track™ Toolkit: The toolkit is a web based service that assists families with everything from admissions and test prep, to student athletics and financial aid. Our intuitive software and on-demand workshops are key components to making sure students find their top choice colleges, and families can afford to send them there.

About the author: Laura Guarino is the Student Services Coordinator with College Planning Strategies, LLC. Laura has a degree in Human Development from Boston College and is currently pursuing a Master’s degree in School Guidance Counseling.  She is also enrolled in a certificate program in College Admissions Counseling.  Laura is at the forefront of the college admissions process for the families of CPS and The Smart Track™ Toolkit.

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