Every year in April and May, friends, neighbors and other acquaintances ask me to help them understand and negotiate their financial aid award packages as their kids get ready to head to college. I’ve spent the better part of 20 years in higher education administration, and more than that if you consider what I picked up through osmosis with a mother (and all of her friends) who spent her career in that field. Many of my friends are still working in the trenches at colleges and universities, and I have often joked about writing The Insider’s Guide to Doing College. This year, I’ve been approached to do a number of other things as well, including interviews, a webinar and panel discussion. I’ve got lots of other things going on at the moment, though, so let me give you some advice here, and you can post questions on the blog if you have them. I’ll try to answer, and if I can’t, I suspect my college administrator friends will chime in with their ideas.
1. Understand Your Offer
Not all offers from all colleges and universities are the same, and unfortunately, there is no standard way of presenting them. Some schools offer a detailed breakdown so that you can understand what’s being given, what’s being borrowed and by whom and what’s left (aka Expected Family Contribution or EFC). Others present it more like a scam jackpot email, and say things like, “Congratulations! You’ve been awarded $43000 in aid!” without clearly specifying how much of that is coming from government sources, the school itself or a bank of your choosing that will come after you for the money into your dotage. This worksheet is an excellent tool to help you compare apples to apples if the schools who are making you offers have not broken it down in an easily discernible way. It’s important to know how much money you are receiving from the government, how much money is coming from the institution, and how much money you are and your child are expected to borrow.
Government aid comes in the form of grants, and it does not need to be repaid. It’s based on family income and assets as reported on FAFSA, and it’s not negotiable. If you are awarded a Pell grant, that dollar amount should be the same at every school. Student loans — money that your child is able to borrow to apply towards tuition, room and board, and other expenses for school — are capped at a specified amount. Depending on your financial status and your ability to borrow as parents (oh yes, they want you to borrow, too, now), these loans can be subsidized or unsubsidized, and they increase slightly in amount each year that your student is in school. Click here for more information about these loans. These loans are also not negotiable in terms of the cap. You can opt to have your student borrow less, but if you do, you’ll be expected to make up the shortage.
Work-study money is not a gift; they present it as part of an aid package, but it’s money that your child will have to earn over course of the school year from a part-time job. If you don’t plan to have your child work while going to school, or if s/he doesn’t take the job, that’s money that you will need to find somewhere else. Finally, you should also see one or more types of “institutional aid” in the form of “merit scholarships,”, “name of famous alumnae scholarship,” “name of college grant” and various and sundry other ways of applying what we, in higher ed, call tuition discounts. That’s your opening, folks. That’s the one place where there is sometimes room to make a deal that works better for your family. Even if you did not qualify for federal aid or subsidized loans, you can still seek out unsubsidized loans and institutional aid if you are really going to have difficulty paying these expenses. Keep reading!
2. Figure out the Institutional Discount Rate
That’s right. The discount rate. Almost every college and university has a discount rate, which is the percentage of list-price tuition that institutions “give back” to students in some form of grant-based aid (also called merit scholarships, institutional grants and all kinds of other things). It’s sort of like a new car commercial where they tell you that if you buy a car, they’ll give $5000 cash back? But it’s imaginary money that you never give them and they don’t give you back? Only colleges don’t make commercials about it, and they don’t really want to advertise it.
Tuition discounting is how schools offset the astronomical sticker prices with institutional money in order to reach the amount that they actually need to earn from the tuition revenue stream. In 2015, the National Association of College and University Business Officers found that the average discount rate was 48.6% for a college freshman and 42.5% for returning students. In laymen’s terms, colleges were earning about 43 cents on their dollar, and that trend has only gotten worse for schools, not better. You can read more about that study here. If you’re going to research tuition discounting, look at information after 2011 when the economic downturn in 2008 really began to impact schools and discount rates began to climb.
Why is it important to know this? Because understanding the process of tuition discounting is very important if you are going to negotiate a good offer, even if the school hasn’t offered you much at all in the form of aid (much like knowing, generally, how much a car actually costs to produce is relevant to what you’re willing to pay for it). According to the Association of Governing Boards of Universities and Colleges,
“At most public and private nonprofit colleges and universities, even full-pay students are subsidized: the sticker price is less than the average cost of educating a student. The difference is made up through a combination of government subsidies and revenues from endowments and other private sources.”
Schools don’t publish their discount rates for good reason. And they don’t really want to talk about the fact that they need to have one, either. But they do. And as a smart consumer and a savvy negotiator, you need to know what that benchmark is for your prospective school. To calculate your school’s discount rate, you will need the published tuition rate for the school, available on its website. To find the average institutional grant is a little bit trickier, so bear with me. I’m going to take you on a brief tour of the pro-side of IPEDS (National Center for Educational Statistics), and we’re going to bypass the College Navigator.
First, click here and you should see this screen:
We’re going to Look Up An Institution, and you should see this screen:
If you choose provisional data, it will be more current. If you choose final release, it will be one year behind. For our purposes, it doesn’t matter a whole lot. Then press continue.
Enter the name of the school you want to research. I’m going to use Williams College in Massachusetts, a highly competitive, wealthy 4-year degree institution, as an example. Be sure to select the correct school because once you start typing, you will see a drop-down menu.
This is what you should see:
What we’re looking for can be found by clicking on financial aid and expanding it to see the amount of institutional aid granted, and note what percent of students received that aid. For Williams, 48% of their first-year students received an average of $40,777 from the institution alone. Jot down that number. Note that we’re not talking about all of the students at Williams, or all of the students who received aid; we’re looking at the 48% of those freshmen who were awarded institutional aid.
Next, go up a bit and expand Student Charges. Note the published tuition and required fees. At Williams, tuition is $50,070. With room and board and other fees, total costs should be $66,240. If your student is going to be a commuter, factor in commuter costs rather than room and board when you do this. The school should spell out what those expected costs will be for non-residential students. While sometimes the discount rate is a tuition-only number, if the school is entirely residential, all fees are typically considered.
Now we do a little bit of math, and not the Singapore Math that our kids are learning because then the answer would be purple, and it would only make sense to them. This is much more basic.
$40,777/$66240 = .6156
Wait, what? 62%? That can’t be right. Almost half the first-year students at Williams are receiving that much of an institutional discount? Nope. Not possible. Let’s check our math.
Go back up, and now we’re going to look a bit deeper. Click on “reported data.”
You can let the selection stay at 2015 for the year, but this time we’re going to take a look at Finance.
Scroll down through the data until you reach the section on Scholarships and Fellowships. We’re looking at institutional grants. Funded grants are institutional resources restricted for student aid, such as scholarships and fellowships. They have been restricted by an outside source such as a donor or contract (from a grant perhaps, for a research assistant). Unfunded institutional grants are those that are awarded to students from unrestricted institutional resources. That’s where schools have the most flexibility.
According to this data, Williams gave away about $20million in funded grants and about $25million in unfunded grants to their undergraduates. That’s huge. Or maybe not. It’s hard to tell. This data is confusing, right? So, let’s scroll down further, almost to the bottom of that page to the sections called Finance Survey Summary.
Williams reports $64million in revenue from tuition and fees, which is only 15% of its overall revenue (this tells us that this school is not tuition-revenue driven or depending on students’ ability to pay to stay open).
If we look at the combined funded and unfunded institutional grant money offered relative to the overall amount, (estimated $20M + $25M/$64M), we are at an estimated 70% (combined) discount rate for students awarded institutional assistance. The unfunded grant money, the money that is not restricted for use or constrained by requirements, shows an almost 40% discount rate. So that 61% we saw earlier looks to be on target.
What does all of this tell you? If you are a parent with a child who wants to go to Williams, unless you have a degree of wealth that allows you no negotiating room at all, you should be able to negotiate down from at least a 40% discount from that $66,240 or $39,744. That should be where you are starting if you got nothing at all but institutional assistance.
Just about every institution has a discount rate, and they are trending at around 50% right now. The more expensive the school, the higher the likely discount rate. If you see a school with atypically low tuition, it’s probably just an indicator that they have not bought in or they recently bought out of the discounting practice. Calculate the rate for the schools you are investigating.
3. See Where Your Offer Stands in Comparison to Institutional Data
This is a fancy way of saying, figure out if you have received an above-average, average or below-average amount of institutional aid. Why institutional aid? Because other than parent loans, this is where you will be able to negotiate, and this is where you should see the differences in the offers. If your income is high, and the school has already given you an average or above-average amount of institutional aid, you will need to build a strong and specific case to ask for additional funds. If your income is average or lower than average, and you have not received a typical institutional aid package, that is a question to be asked when you approach the financial aid office. Spend some time looking around in that section of IPEDS. Look at College Navigator. There is interesting and useful information there. College Navigator is a snapshot. The raw data sometimes tells a different story. I find myself frequently asking people, “Why are you asking me, is Google broken?” But no, Google is not broken. Google that school. Join some parent groups on Facebook that discuss financial aid (remember, though, that they are mostly sharing personal experiences). Just as you would research a new computer or a new phone before you went to the store to make a purchase, research the financial aid situation at the schools you are going to approach.
4. Prepare for Your Call
When you call to speak with your Financial Aid Counselor, you want to have all of your information gathered, sorted and organized in front of you. Make a list. Have your copy of FAFSA, along with your last income tax documents and the colleges’ award letter. Make a list of expenses that you may not have been able to report but factor into your ability to contribute the Expected Family Contribution. Colleges absolutely expect for there to be a gap between need and ability to write a check. That gap is where you need to explain your need for more assistance. What matters? A parent or grandparent who has become a financial dependent, a child with a disability that is either expensive financially or that keeps someone from working. An unexpected illness. A job loss. A divorce or separation. A catastrophic event of some sort. An inability to secure a parent loan. A business that closed. What doesn’t matter? If one of your investment properties needs a new roof or you want to send your other two children to Europe for the summers the way you did your first. Those things are not going to move the average financial aid officer.
If your offer isn’t reflective of the tuition discount, have that information ready and be prepared to ask. It’s not an “insider secret.” That you know about it suggests that 1) someone in higher ed is advising you and/or 2) you are being a smart consumer. Have all of this information sorted and at your fingertips so that when you make the call, you can answer all questions quickly and accurately. Another place you might be able to carve out some savings is the meal plan. Lots of institutions force first-year students onto meal plans with 21+ meals a week. That’s a profit-center for schools. That’s negotiable. Your child is not going to get up for breakfast every day. Nor is she going to have dinner there every night. Colleges that contract dining services through Sodexho or Aramark or other large-scale operations need to cover that cost, and they pass it on to students usually most forcibly in their first year. At other schools, the catering is done by the school. Whichever it is, it’s good for you to know if you can find out, and try to negotiate away from the most expensive meal plan. It does not hurt to ask, and that might be a place where exceptions can be made and money saved.
Have all of this information sorted and at your fingertips so that when you make the call, you can answer all questions quickly and accurately.
5. Sell Your Student
Not literally, though the price tag for this may make the idea cross your mind. Prepare a list, in writing, of the things that set your child apart from the others in the incoming class. Speak to how well s/he lives the institution’s mission and what s/he will contribute to the overall campus life. Talk about his/her career goals and how an education there is integral to that plan. They’ve gotten in, so you don’t need to review all of the admissions information. Instead, discuss how your kid is going to do the weird, quirky thing that sets the school apart. Or how she’s always loved some tradition. Or how he’s so looking forward to being in that club. Make your child (who for the financial aid office is one of many unknown qualified candidates) a real unique, interesting good person that belongs on that campus. Sometimes there is money for a goofy hobby that a wealthy alum shares. At the very least, it makes your child memorable. I joke that you should pull a bedroom photo from Pinterest showing a room done completely in the college’s swag and say “What will I do with all of this crap if she goes somewhere else?” That’s extreme, but you want to make sure that the financial aid officer knows that this is your child’s first choice if s/he can come up with additional money for you, the deal will be closed. They don’t want to go to bat for a “maybe if you meet my demands and no one else does better.” Which brings us to my next point…
6. Don’t (Openly) Comparison Shop
One of the questions I hear a lot is “Should I tell them that XYZ is offering us a way better deal?” or “Do I want to show them the offers we have from other schools?” My answer to that is an unequivocal NOPE for several reasons. First, if you are negotiating with the school, they are going to assume it’s because they are your child’s first choice school. Even though you may be shopping offers (and lots of parents do that now), the financial aid office does not want to “know” that for certain. They are going to do their very best to meet your needs and bring your son or daughter to campus. Telling them that a competitor school, or worse a completely different type of school, is doing more to meet your needs is only telling them that you’re keeping your options open and is likely going to make them work harder for another student who might want to be there more. Second, schools operate on different revenue streams with different resources. Unlike businesses, higher education finance is complicated and differs a lot from school to school. It’s always apples to oranges. This is not the time to use the same strategy when you pitted Ford and Chevy against Subaru and got a great deal on a Forester! And finally, higher education is two degrees of separation. And we’re friendly to one another. Any one at any school can pick up a phone and speak to his/her counterpart. We all know which schools are generous and which aren’t, which have money to spend on what and which don’t, and we usually know why. There are not a lot of secrets.
And yes, it’s okay to send a deposit to one school to secure a space if you are still negotiating with another. Classes are never filled on May 1. That’s a dream we have, like hitting the lottery or wearing a bikini again. It would be nice, but it never happens. If you can afford to lose the deposit, you can keep working on a deal.
7. Be Nice
Some folks think that being tough is the way to go when you negotiate, and that strategy certainly has its place. A willingness to walk away from a real estate deal or a car sale may just get you what you want. I’m not certain, though, that if you are dealing with an even remotely competitive college, that such an attitude will serve you well. I advise parents, and students, to be someone that the staff will want to help. What kind of people make you want to move mountains for them? People who are kind, respectful and willing to work with you, right? The folks who understand that there are some limitations to what can be done and allow for space to work within them. The ones who make a case for needing some assistance but don’t act like they are entitled to become your full-time job. If you head into the process with an attitude, you’re going to walk away with the original offer. Financial aid officers are mostly some of the most helpful, “customer service” oriented staff members on the campus. They deal with people who are unhappy about finances all day, every day. They have to keep complex records and report them to all sorts of picky internal and external people throughout the year, wrangle bewildered students to come in to sign paperwork, go to meetings where they’re told to tighten belts and deal with families experiencing sudden financial crises. They hate it when they lose a student because they can’t put together a sufficient package. They worry about that philosophy major who is going to graduate with $50K of debt. They feel terrible telling a 68-year-old parent that he’s going to have to borrow to finance an undergraduate degree. They are frustrated when students don’t come to workshops about managing debt. They show up and try every day, though.
Some people want to know if it helps to speak with the Dean or Director or Chief Financial Officer. I’m ambivalent about that, so you do you. Chances are, if you are working closely with a staff member, the higher ups are aware that you are a family seeking additional funds. If you feel that you want to speak to someone in charge, and you want to make your case there, be open about it. Tell the person who has devoted his or her time to you that you are grateful for all that s/he has done and that you appreciate it and explain that you would really like to close the loop on things with a conversation with his or her boss or the person in charge. Be gracious. Allow them the opportunity to hand your file over to the person in charge and explain what’s been done already. Believe it or not, that works to your advantage. It engenders goodwill, and it allows the next person with whom you speak the ability to review your data and information ahead of speaking with you and to seek out ways to help or find alternatives. And thank their boss when you speak to him or her for the work that person did for you. I can’t stress enough that you want to be someone they want to help.
If the school can find extra money for you, ask if it will be in place for all four years or just the first. And think about that. If they can offer you a one-time grant to get your student there as a freshman, you will be in the same place next year without a dramatic shift in finances. Weigh that in your decision.
Knowing all of this, and one last time for the people in back…be one of the people from whom they are happy to hear and for whom they will “go to the mattresses.” Thank them for looking into things every time you speak to them. Offer to get back to them in a few days if they’re looking into something so they don’t have to remember to call you and so you’re not fuming when they get distracted or busy and forget. Follow up your call with a brief, grateful note that summarizes what you discussed and next steps so s/he can put a tickler on it as a reminder to do whatever was promised. In other words, do whatever you can to make that person’s life a little bit easier, and it might pay dividends for you. Do it because it’s nice and the right thing to do, too. It’s good stuff all around.
8. Understand What’s Going On Behind the Scenes
At this point in the semester, financial aid offices across the country expect parents to call to negotiate offers. Not everyone talks about it; almost everyone does it. There is money reserved for it. Don’t let the thought that you’re the only one stop you. Everyone negotiates. Worst case? Your offer stays the same. By now, it’s April or May, and the Admissions Office has sent out their letters. Other offices on campus are wrapping up the semester and preparing full-tilt for final exams and graduation, and all anyone wants to know is “the count.” How many of the first-choice, first-year students have committed? “What’s the count?” matters to everyone from the folks in Housing to the folks in Finance. They hear it multiple times, in multiple contexts, every day. So there is lots of pressure is on Admissions and Financial Aid to bring that class in as close to the target number with as many first-choice students as they can. Yes, some schools have wait lists, but they really don’t want to start moving down them and dragging the process into May or June or July if they can help it. So, time is working for you. Academic work is seasonal, and this is a busy time for Financial Aid. Those staff are dealing with the whole of the school, not just the incoming class, and right now, the graduating seniors, some of whom they are literally stalking to do something (sign a form, pay a library fine, pay a bill) if they want their degree, are taking up a lot of time, too. They’re really busy. Ideally, administrators want to wrap up graduation and the spring semester, and take a break in June or July before prep for the new year begins. They can’t do that if they are still recruiting and trying to bring in reluctant students who may have committed to other institutions. Having things in order works for both sides of this equation.
9. Establish Boundaries and Find Your Limits
You should know what you are and are not willing to do in pursuit of your student’s undergraduate education. I would never, ever advise any parent to take out a PLUS or parent loan to finance an undergraduate education. In this day and age, the return on investment is just not there for any school, and I say that as someone with some pretty fancy degrees. No one ends up in therapy because she had to go to her third choice school because it was most affordable. No one dies from going to community college for two years before transferring. Those 2 + 2 programs are pretty impressive, and some awesome schools participate in them. I know. You feel like it will crush your student because all of his friends are going away. It IS the end of his world, and you ARE ruining his life (he only thought you were those other times) right now. And it might be unpleasant for a couple of months. You know, until everyone actually goes to college and makes new friends and high school becomes a distant memory because really? At graduation, all of the high school stuff ceases to count or matter anymore anyway. Lots of kids will be at the community college after one or two semesters “away” that go “awry.” Trust me on that.
Look at the economics and workplace predictions. Chances are good that your child is going to need your financial assistance not just while in school but for a while afterward as she tries to get started. Can you provide that if you’re paying back loans on that education while s/he is, too? Is this school going to sink your entire family’s financial ship? You are going to need to be able to live when you retire. Don’t jeopardize your financial future for an “undergraduate experience” that rarely lives up to its hype. It’s okay to draw the line at “not paying that much” and “not borrowing for this.” You will not be the only parents who say that. It might feel like it at the time, but you will not be alone.
Finally, we all know that it’s much better to be at a place where you are really wanted than at one where you had to fight tooth and nail to be. It’s tough to try to put “old heads” on “young shoulders,” but it’s a conversation worth having with your student. If there is a college that is ready to go above and beyond to get your child on their campus, it’s a good indicator they’ll do the same to keep her there.
10. Plan B
If it comes to a point where you cannot afford the school where your child wants to go, the school cannot budge on money and your child has his/her heart set on going, you need to come up with a Plan B. Be honest with the staff in Admissions and Financial Aid about your efforts and your disappointment and hear what they tell you. If they truly cannot do more for you, they may be able to find you a space in a class at a similar school that’s less costly. As I said above, we all know each other in some regard, and if you are someone they want to help, they will help you if they can. It may involve a gap year where your child works full-time to make a dent in the cost and you re-evaluate your finances. It may be that starting somewhere else and finishing at the school of choice is an option. Many students transfer after the first or second years. If that is going to be something you consider, make sure that your student takes courses that will transfer. The last thing you need is a fifth year of study to finance. Get creative. Think outside the box.
There is incredible pressure on graduates and their families at this time of year, but remember, it’s going to pass. This is not a life or death decision. I know it feels like it is. I know you are hearing from your child that his or her whole future hinges on where s/he goes to college. But you know what? It doesn’t. Remember that. Know that it feels that way to them, but don’t buy into that pressure. At some point, they believed Batman was real and a fairy who collects teeth leaves money under their pillows. Most 20-somethings will tell you that it didn’t really matter much where they went. They made friends. They learned some stuff. They matured. So much of high school is devoted to getting into the “right” schools that sometimes we forget that almost any of them can be the “right” school and few schools live up the expectations that we build of them when we’re dreaming.
My best advice for affording college? Go work at one with great tuition benefits. I have a list of them. Send me a message 🙂
If you’d like, and if this post has value to you, you can make a small donation to The Kraken Relocation Fund to help us land in another home and not on someone’s sofa!