Financial Aid Policies – Apples and Oranges

By Joe Messinger, CFP®

July 1, 2015

3 min READ

We all know universities come in different flavors – state schools/ivy leagues, privates/publics, colleges/universities, etc. And we know the different types have different admission standards your student needs to meet in order to get into them.

We also are VERY aware of the different price tags for each. A four year in-state university currently costs around $19,000 per year and a four year private college around $42,000 according to “Trends in College Pricing 2014” published by the College Board.

What you might not be fully aware of though is schools do NOT award financial aid in the same way from school to school.

Some schools award aid based on the merit or academic achievement of the student. Some schools only award aid based on the need of the student and their family. Others have a few scholarships available to issue each year based on outstanding achievement, athletics, or leadership. You need to understand the different methods for determining aid for the schools you are interested in.

Before we start…

One important thing to keep in mind is you should never rule out a school simply based on the sticker price on their website. Savvy college consumers never pay sticker price! Digging a little further into their methods for awarding aid will help you get a clearer picture.

Let’s look at Ivy League schools.

They only award need based aid, and pride themselves on meeting 100% of that need. They do NOT award merit aid to students. Their argument for not awarding merit aid is ALL their students would qualify for merit aid because of the outstanding credentials needed to be accepted in the first place.

Ivy League schools have large endowment funds they can use to ensure they meet 100% of a student’s need. Not all schools who award need-based aid can fulfill 100% of a student’s need so ask to find out how much of a student’s need is met through awards. Here is a list of colleges that are proud to say they meet 100% of need.

Know your EFC!

You’ve read about Expected Family Contribution, EFC, several times in our blog posts now. EFC comes into play again here. If a family’s EFC is below the annual cost to attend an Ivy League school, the school will award the family enough money to cover the difference between the cost and the EFC. 100% of the need is thereby met.  If a student is very talented academically but their family is financially challenged, Ivy League may be the way to go (or other top institutions that meet a high percentage of need).  (To read an important announcement about changes to the financial aid formula for 2016, click here.)

On the flip side however are financially successful families with high EFCs.

Their equally talented student may be accepted but will not receive money from Ivy Leagues because their family doesn’t have the need. These families need to focus on schools awarding merit aid.

An example from one of our recent financially successful clients can help you see the difference. Their academically talented student got accepted into Brown, Cornell, Case Western, and Alabama. Way to go!

Brown and Cornell offered no money in aid. The family would have to pay “full sticker price”. Case Western awarded this student $25,000 in scholarship aid, and Alabama gave them full tuition for all 4 years!

You can see from this example the importance of exploring all options and being familiar with the methods different schools have for awarding aid — knowing where you’ll Get In & Get Aid™. The key is determining your EFC early and knowing what to focus on to get the most financial aid given your circumstances.