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Attention senior parents: This is must-know information for you!

Admission decisions have arrived, along with often-confusing (or disappointing) financial packages. What do they mean? What do you do now? And can you appeal the awards?

There are three things you should do right now:

1. Make a decision about a particular school and send in a deposit – or get an extension – by May 1st.

2. Pick up the telephone and make a personal connection with someone in the college’s financial aid office.

3. Start the appeals process.

OK, that leaves everyone a bit breathless. Take a step back; take a deep breath; and realize it will all be fine.

“They Gotta Fill the Plane”

A recent Time Magazine article compared the cost of attending college to airline industry pricing. As Time reported, “No two people going from Point A to Point B paid the same price for the ticket.” That statement is right on the mark relative to the cost of a college education. The only exception might be the (occasional) two “full payers” in a college classrooms.

What does this mean for you?

There are enormous variations in how much and what type of financial aid packages offer families. And colleges have significant discretion in how they compute and award that aid.

I’ve been amazed the past few weeks, as I’ve tried to understand, counsel and explain the differences in financial aid packages my students and their families have received this spring. It’s a valuable lesson for you, for them, and for me. My cardinal principal to my families is that financial aid is always an ongoing process.

Establishing a Personal Relationship

Building a relationship of trust between the family and college is key. That means establishing that relationship with a point person who is sensitive to, and aware of the family situation. And that means being open and honest with that person in all dealings. This is the person with whom you can discuss or appeal your existing package. And importantly, they will become the person you will go to if family circumstances change — such as a loss of job or family illness.

It is important to remember the term “professional judgment.” What that means is that each school has the right to use their professional judgment in establishing the needs of each family. That would explain why School A might award a very different package from School B. One school might look more closely at family assets, such as home equity or a family business, while School B might put a greater emphasis on parents’ ages, noting how close they are to retirement. One school might factor in the cost of siblings in private high schools or parents pursuing an advanced degree in calculating the family contribution. Another may not.

So, yes indeed, just as those seats on the plane are calculated differently – 30-day advance purchase; last-minute availability; package deal – your child’s financial aid package can reflect lots of variables. And your personal “ticket agent” at the college will be that financial aid contact you establish a personal connection with. He or she will not only tell you the rules, but can alert you to “special deals” as well.

De-coding the Financial Aid Package

Financial aid packages are generally comprised of three components:

1. Grants (or scholarships)
2. Loans
3. Work-Study

Within these three broad categories are dozens of specific programs, variations, and nuances. At first they may seem confusing or overwhelming. Don’t despair: it isn’t you. They are confusing! Loans have different interest rates, repayment terms, and deferrals. Grants may be renewable or for one-year only. And work-study jobs may be available or strongly recommended.

We’ve outlined the broad categories below. But you should absolutely ask you new-best-friend-financial aid person at the college for help deciphering the alternatives.

Most aid packages will begin with what is referred to as a “self-help package.” That will be composed of a work-study job and loans. The “best” types of loans – and those usually included in the college’s package whenever the student is eligible — are federal subsidized loans. These have the lowest interest rates no payments are due until after graduation.

Schools try to meet the “full need” of the family. (Not all can, but many do and virtually all colleges will work with families to find ways to finance the student’s education.) Approximately the first $5000 – $6000 of need will fall into this self-help category. The second piece of the “self-help” package is the work-study job. (It is called “self-help” for the obvious reason: work-study reflects students helping themselves.)

The work-study job will allow the student to earn a set amount of dollars (usually in the range of $2000) to apply towards the cost of their education. When a work-study job is part of the financial aid package, I strongly recommend that the student take an on-campus job rather than a slightly higher-paying job off campus. The reason is simple: college-based jobs are typically more flexible. If a student has a big test to study for, or paper to finish, campus-based-job supervisors are typically understanding; the boss at the mall usually isn’t. Moreover, most colleges will not allow students to work more than 20 hours a week in work-study jobs. Your child’s academic success is the priority.

The third component of the financial aid package is a grant or scholarship. This money typically comes from the school’s endowment. It is money that doesn’t have to be repaid (and is obviously the best form of financial aid.)

Merit Scholarships

There are lots of different types of grants and scholarships, and it is useful to broadly understand them. (It will help in your conversations with your new financial aid office friend.) Among the most commonly mis-understood terms is “merit-based” scholarships.

Many colleges – ranging from smaller, slightly less prestigious private colleges to large state universities — award “merit” scholarships. These are usually based on a student’s high school grades and are an effective “marketing tool” used to attract students to a particular college. These scholarships have nothing to do with financial need.

At many highly selective schools such as the Ivy League or their smaller equivalents (such as Amherst, Haverford, Swarthmore, Wesleyan, Williams etc.), all aid is need based. There are no merit scholarships just as there are no athletic scholarships. The myth of Ivy League athletic scholarships is exactly that – a myth. Financial aid at the schools is completely need-based. (That doesn’t mean students aren’t admitted because of their athletic prowess; they are. But we’re talking about financial aid here; and you’re way past that phase anyway. At least for this child.)

“Gapping”

Many schools with limited resources cannot meet full need of many of their applicants, whether through need based or merit awards. This is called gapping, as families are expected to find the means to fill the “gap” between the total cost of the school and what they receive as an award.

Lastly, schools sometimes make available special emergency-aid grants or set aside loans for unusual circumstances. Your financial-aid-office-friend will know about these school-supported loans, often called unsubsidized loans

Judgment and Discretion

It is important to remember this distinction between need-based aid and merit-based aid. It goes back to that term I mentioned earlier: professional judgment. That’s because, as I said earlier, financial aid is an ongoing process. If you’ve established a contact in the college’s financial aid office — as I’ve only repeated you should only about a hundred times – you can share information about financial aid offers from other colleges. And sharing that information enables your newest-best-friend to use his or her judgment to better help you.

Professional judgment allows the school to adjust the financial aid package, if they so choose. But it is important to use discretion in how you ask for reconsideration. If you threaten one school with another school’s offer, it is unlikely you will win friend or influence people. (Apologies to Dale Carnegie.) But if you present information as mitigating circumstances, you are more likely to gain an ally.

Now back to the merit-based vs. need-based discussion: A school that doesn’t offer merit-based scholarship will be un-moved by your argument that a different school has offered your child a merit-based scholarship. But a school that does offer merit-based scholarships may be influenced by the knowledge that another college has offered your child merit-based aid. (After all, these schools are competing for your child – and the underclassmen from his high school.) And word of generous aid or responsive financial aid officers does get around.

Don’t Delay!

May 1 comes quickly, and most aid issues need to be resolved by that date. Many schools, however, will grant an extension on submitting a deposit until all aid questions are resolved. But make sure you request that extension in writing before May 1, or discuss it with your contact person at that school.

Read the fine print, compare those packages and talk with an expert. In most cases, that expert will be the contact you developed at each school. You may just find that cheaper seat on the plane yet. Just like the airlines, colleges need to fill all those seats. And most will use their professional judgment and do their best to accommodate you