Paying for College

Cracking the Financial Aid Code

We watched one college hand out money -- and discovered why some families get a larger share.

Wander Ursinus College and you’d think you had stepped into an Ivy League idyll. Stone-clad buildings overlook a sweeping lawn, which slopes to a picture-perfect small-town Main Street. Winding paths skirt carefully tended gardens. Outdoor statues gaze raptly at midair as students stroll by, chattering on cell phones.

But Ursinus College, in Collegeville, Pa., lacks the wealth and status that allow the real Ivies to choose from among the best students in the country and to cover their full financial need with no-loan financial-aid packages. Like the vast majority of colleges, Ursinus must not only troll for top students but also calibrate exactly how much money it will take to bring them to campus and keep them there.

In college-speak, it’s called enrollment management -- a way of slicing and dicing admissions policies and financial aid to attract a strong and diverse student body while bringing in enough revenue to keep the doors open. Whereas elite colleges take merit as a given and extend financial aid only to those who need it, Ursinus offers sizable scholarships to outstanding applicants from every economic strata, including the wealthiest.

Surprised? Consider your own college search. As a parent, you look for the best academic program for your student at a price you can afford -- the same basic process that colleges use to attract the best students, but in reverse. The better you understand how colleges conduct their deliberations, the better you can go about yours.

Measuring merit

Ursinus’s academic reputation once relied heavily on the sciences, especially its pre-med program. When John Strassburger arrived as president in 1995, he broadened the focus to include liberal arts and boosted academic expectations. Says Strassburger, “We believe outstanding students make other students outstanding.”

About the same time, Richard DiFeliciantonio, who was then admissions director, began reexamining Ursinus’s financial-aid policy, which focused almost entirely on need. “The college was enrolling a lower percentage of low-need students and a high percentage of high-need students. It was laudable but not sustainable over the long haul. We were making the college commitment really lopsided.”

Hoping to attract stronger students who could also pay a higher portion of costs, if not the whole amount, Ursinus moved from a need-only financial-aid policy to one that includes scholarships for top applicants. Other colleges, faced with a similar financial crunch, did the same. “We haven’t thrown need out the window,” says DiFeliciantonio, “but we’ve introduced merit into the equation.”

To define what constitutes merit at Ursinus, DiFeliciantonio (now vice-president for enrollment) devised a system that rates applicants according to their grades, standardized-test scores and accomplishments. Students who score 1300 or more on their math and verbal SATs and rank in the top 10% of their high school class are typically assigned the highest rating, a 1. Those with at least 1100 total on their math and verbal SATs and who rank in the top third of their class rate a 2. Students who fall somewhat below those criteria rate a 3.

But numbers don’t represent the whole picture, says DiFeliciantonio. “We read each application twice and have the latitude to bump a student up or down.” The school recently made reporting SAT scores optional for students in the top 10% of their class, and it considers their other strengths, including the number of Advanced Placement classes on their high school transcript and any leadership roles.

Admissions counselors use the ratings not only to decide which students to admit but also to determine how much merit aid, along with need-based aid, they will receive. Not surprisingly, students who rate a 1 generally elicit the best scholarships -- $13,000 to $20,000 or more. Number 2s might be offered $10,000 to $13,000. The 3s are less likely to get merit scholarships but can still qualify for need-based aid.

Discomfiting as it may be to think that your child is being assigned a number, much less a dollar amount, such calculations go on across the country as colleges build their classes and parcel out their money. “Not everyone is a 1, by definition, and every school has its 2s and 3s -- they are just at different levels,” says DiFeliciantonio. “We’re ultimately trying to match the quality of our programs with the potential of our students.”

Knowing the formula

Once Ursinus decides which students to accept and how much merit money, if any, to offer, the financial-aid office takes over. Like every college, Ursinus uses the Free Application for Federal Student Aid (FAFSA) to dole out federal money, such as Pell grants, and to give students access to federal loans, including Staffords. The feds pay the interest on Staffords for students with need while they are in college. Unsubsidized Staffords are available to anyone who applies. (Use our interactive college-aid letter to learn how to distinguish the various types of aid offered to you.)

Public colleges generally rely on the FAFSA to calculate how much families are expected to contribute. Many private schools, however, also have you fill out the CSS Profile, a more-detailed financial-aid application that uses a different calculation -- called the institutional formula -- to determine how much you are expected to pay. Some tailor the Profile to suit their criteria or ask that you submit a third application that bores even further into your finances.

Which formula the college uses can make a huge difference in your potential for financial aid. For instance, the FAFSA considers fewer assets than the Profile; it ignores home equity as well as the assets of family-business owners with 100 or fewer full-time employees. If you have significant wealth in home equity or in a small family business, the institutional formula will penalize you. The federal formula won’t.

But because the Profile gives a fuller picture of your finances and lets you explain special circumstances, it could give the financial-aid officer a reason to bolster your need-based aid. Colleges must follow strict rules in distributing federal funds but can make their own rules for their own money. Private colleges, which set their own tuition and often have endowments, have more freedom than public schools to do as they see fit. “If you have blond hair and blue eyes and they want to give you money for that, they can -- or not,” says Suzanne Sparrow, director of financial services at Ursinus.

Sparrow conducts seminars for the parents of prospective students and encourages them to bring their concerns to the financial-aid office. One family recently did just that, informing Sparrow that sky-high, ongoing medical bills offset their assets, which were significant. She adjusted the financial-aid calculation accordingly.

Assembling the awards

By early February, Sparrow has already put together 500 awards, mostly for applicants who have been accepted through early decision. The software she uses shows how the FAFSA would calculate the expected family contribution, but she uses the institutional formula, with a few tweaks, to come up with Ursinus’s calculation. (Use our interactive college-aid letter to learn how to distinguish the various types of aid offered to you.)

Sparrow pulls up a screen and reviews the application of a student whose parents’ household income exceeds $200,000. Their investments and cash accounts add up to about $150,000. Even before factoring in home equity, they do not qualify for need-based aid.

But the student has been rated a 1 by the admissions office and awarded a merit scholarship of $20,000. Sparrow pulls out a yellow form on which she records the family’s expected contribution and award. To the $20,000 scholarship she adds $5,500 in unsubsidized Stafford loans, which the family can accept or decline. The total award comes to $25,500, about half of Ursinus’s $50,000 sticker price.

The next student, also rated a 1, qualifies for almost $21,000 in need-based aid owing to her family’s modest net worth -- about $60,000 -- and annual income, just over $120,000. Despite her rating, she has not been awarded a scholarship. “Maybe she had good SATs but she didn’t have enough AP classes, or maybe she didn’t visit the campus and didn’t seem interested,” says Sparrow. “It’s not cut and dried.”

According to Ursinus’s guidelines for 1s, she will be awarded a need-based grant of $21,000 -- a good deal but not the best one. “Every year, the student will have to reapply for a grant,” says Sparrow. "A scholarship will never change as long as the student meets the grade-point-average requirements. So for the same amount, it’s better to get the scholarship."

The third application is from a 2-rated student whose family income is $125,000. The family’s biggest asset is home equity, a substantial $172,000. Under the federal formula, which ignores equity, the student would qualify for $25,000 in need-based aid, but the institutional formula qualifies her for only $11,000. Consolation? As a 2, the student receives a merit scholarship of $13,000, and Sparrow adds a $2,000 grant to the mix.

The final application under review for the day is that of a student whose family makes about $26,000 and has no assets to speak of. Rated a 1, this student is the kind colleges fight over, both to fulfill their educational mission and to strengthen their incoming class. In addition to federal grants, Ursinus offers him a $13,000 scholarship, a $19,000 grant and subsidized Staffords, plus a job through the federal work-study program.

But Sparrow cannot come up with a package that meets the family’s full need. Along with most colleges, the school often leaves a gap between award and cost, the better to spread its resources. The award falls short by $8,000. Nonetheless, says Sparrow, “with $32,000 in grants and scholarships, it’s a nice package.”

Sparrow wraps up for the afternoon, having allocated more than $100,000 from Ursinus’s coffers in just a few hours. The college has budgeted $33 million for financial aid for the upcoming academic year, and it will use that money to attract the precise mix of students it wants to enroll. Message to parents? Encourage your kids to study hard. “In almost all schools, the aid package will reflect the strength of the student,” says DiFeliciantonio. “The stronger the students are, the more options they’ll have.”

Use our interactive college-aid letter to learn about the various types of aid offered to you.

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