Financial Aid Despite the Economy

College Financial Aid still available despite down economy, rising tuition

Recent economic reports have made it difficult to determine whether college is getting more or less affordable. We hear that state education budgets are dropping but the federal government is allocating more. With record numbers of students enrolling in colleges, does this mean that colleges are benefitting from more income or that they have less grant money available for each student? While the reports are confusing our advice is to stay positive as the overall outlook is still promising.

Discounting on the Rise

First, the good news. A recent report from the National Association of College and University Business Officers (NACUBO) found that the average discount rate (the share of tuition and fee revenues used to award aid) for full-time freshman increased 3 percent between fall 2007 and fall 2008 and preliminary estimates show another increase for fall 2009.

You may ask “how can this be?” With all of the economic issues, budget cuts and staff reductions, it would lead one to believe less financial aid is available. But colleges are not exempt from the realities of student enrollment. Just as airlines often provide discounts to ensure their flights are full, colleges must also compete for students to ensure their classes are full.

By shifting workloads, implementing hiring freezes and delaying construction, smaller colleges are transferring the savings into increased financial awards. The Ivy League schools may not be providing any additional aid, as they continue to have more applicants than openings, but the smaller private colleges, with small endowments, will make the necessary aid adjustments to keep students from going elsewhere.

Continued Tuition Hikes

Unfortunately, another way they can keep the aid percentage high is by implementing parallel tuition increases. The annual 6-10 percent increase doesn’t seem to be going away anytime soon. Also, as we discuss in our classes, schools also work to attract students willing to pay the sticker price.

Award letters are currently being mailed to college-bound families and this is a great time to compare and contrast. If the student “fits” the college criteria, the awards will be generous. If there is less of an award, there is less of a fit. Focusing on the colleges that want you, and have provided good award letters is the best plan for getting the best discounts. Also remember that you still have the option to negotiate if you feel the college did not fully consider your situation.

Student Loan Relief

The recent passing of the educational stimulus bill is also encouraging for college-bounds students. It’s very likely that families will benefit from a more straightforward loan application process and lower interest rates on programs like PLUS and Stafford loan, which already have good benefits. However, most of the funds are going to fund Pell and Access Challenge Grants, towards programs at Community Colleges and for minority serving colleges. These can be tricky for most families to qualify for but services like ours can help fully maximize all available options.

We hope these recommendations help you navigate the current college financing environment. If this is still a little confusing, contact us to help you navigate the process.