Financial Aid: How to Get More

Ace! NewsFlash

Even Well-Off Families Can Outwit the College Bean-Counters

Now that families have sent in their college acceptance letters, reality is setting in. How in the world are they going to pay the bill?

Faced with steep budget cuts and slumping endowments, schools are raising tuition and paring back aid, putting additional strain on families still struggling to recoup investment losses suffered during the financial crisis. Earlier this year, for example, Harvard University announced that its tuition, fees and board would increase by 3.8% for the 2010-2011 year, exceeding $50,000 for the first time. Dartmouth College and Williams College announced plans to replace grants with loans in the aid packages of some students.

Parents Paying for Tuition

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Harvard pennants were displayed in Cambridge, Mass.

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Many state schools, traditionally far cheaper than private schools, are imposing significantly steeper hikes in percentage terms. Tuition at Washington's four-year state schools is expected to rise by another 14% this fall, on top of a 14% increase a year ago—while students at the University of California's campuses face a 32% rise in tuition and other costs. Families are likely to see even larger tuition increases at state schools in 2011 as federal stimulus funds run out.

It adds up to another depressing reminder of how difficult paying for college can be for upper-middle-class families. Many are too affluent to qualify for significant financial aid, but not wealthy enough to afford to pay out of pocket. Fortunately, there are a surprising number of short- and long-term strategies that parents can use put their finances in the right light to qualify for more aid.

All of them are based on one simple principle: "Neediness" is in the eye of the beholder. "While the money is supposed to go to the people who need it, the reality is that it goes to the people who navigate the process and understand the ins and outs of the formula," says Kalman Chany, author of "Paying for College Without Going Broke."

Short-Term Strategies

If your financial circumstances have changed materially at any time, ask the aid office to review your aid package. Under a "professional judgment review," financial-aid officers can make adjustments to the aid package if there have been material changes to the family's income or assets.

With two sons attending Stanford University this fall, Lynette La Mere of Montecito, Calif., was facing out-of-pocket costs of close to $100,000. She was able to pay the full cost for her older son, Max Oswald, now a sophomore, because her catering business was bringing in about $300,000 a year in profits. But by mid-2009, the recession caught up with her, as people scaled back their wedding plans. "My profit dropped dramatically, probably by about two-thirds," says the 49-year-old single mom. Much of Ms. La Mere's wealth is tied up in her business—the property, building and equipment—which she estimates is worth about $2 million. "It's scary," she says. "I don't know yet what I'm going to do. The obvious thing is [for her sons] to get loans. But I don't want them to start their [working] lives in debt."

Paying Up

College costs—including tuition, room and board and mandatory fees—are at all-time highs, although schools say they're boosting aid. Here is a list of the 10 most-expensive schools for the current 2009-10 year, along with next year's costs.

• Sarah Lawrence College
  2009-10: $55,788
  2010-11: $57,384
• Georgetown University
  2009-10: $52,161
  2010-11: $53,006
• New York University
  2009-10: $51,993
  2010-11: $53,588
• George Washington University
  2009-10: $51,775
  2010-11: $53,025
• Johns Hopkins University
  2009-10: $51,690
  2010-11: $53,690
• Columbia University
  2009-10: $51,544
  2010-11: $57,000 to $59,000*
• Vassar College
  2009-10: $51,470
  2010-11: $53,270
• Wesleyan University
  2009-10: $51,432
  2010-11: $53,976
• Trinity College (Conn.)
  2009-10: $51,400
  2010-11: $53,380
• Bates College
  2009-10: $51,300
  2010-11: $53,300

*Reflects estimated costs provided by the school's financial-aid office; final costs to be set later this year. Note: Landmark College and Columbia University's School of General Studies, with 2009-10 costs of $53,900 and $51,930, respectively, were excluded because their programs are geared to nontraditional students.

Source: WSJ analysis based on data provided by the College Board; rankings based on 2009-2010 costs.

Stanford initially offered her younger son, Lucas Oswald, $5,500 in federal Stafford loans. Then her adviser, Deborah Fox of Fox College Funding, a San Diego firm specializing in late-stage college planning, advised Ms. La Mere to send a letter to the school's financial-aid office explaining her steep drop in profit and the fact some of her business assets, such as commercial real estate, weren't readily available to pay for college. The result: Stanford came up with an additional $9,000 annual scholarship and has indicated that Max will get a similar package.

Schools say they are seeing a rise in the number of students asking for help. Financial-aid applications at the University of Michigan, for example, are up 4% for the upcoming academic year, on top of a 15% increase last year, and the school is making more adjustments to student aid packages to account for factors such as job losses, says Pamela Fowler, the school's executive director of financial aid.

More than half the undergraduate students at Sarah Lawrence College in Bronxville, N.Y., are receiving grants this year, with an average award of $28,113, up from 46% of students in 2008-09 who received an average grant of $25,908, according to the school. Middlebury College in Vermont, says it plans to cap increases in its "comprehensive fee"—which includes tuition, room and board—to one percentage point above the annual increase in the Consumer Price Index.

Families with kids attending private colleges may be able to qualify for help under the College Board's CSS/Financial Aid Profile, which is used to determine how to distribute the school's own funds. The CSS/Profile weighs factors, such as home values, that the Free Application for Federal Student Aid, or Fafsa—which is used to determine a family's eligibility for federal grants and loans—doesn't consider. Has your home declined in value? If so, think about getting a market appraisal or a 30-day "quick sale value" to document the loss. In addition to home equity, many private schools' formulas also factor in private school tuition for younger siblings and medical expenses.

"If you can document that the value of your home has decreased by 20% to 50%, it has the potential to make a difference of a few thousand dollars," says Mark Kantrowitz, who runs the website FinAid.org, which offers strategies to help maximize eligibility for need-based student financial aid.

Long-Term Strategies

For financial-aid purposes, the most crucial year is the one that begins on Jan. 1 while your child is a junior in high school—the "base income year." During that time, and throughout college, income earned or received is counted more heavily than assets in the financial-aid formulas. Try to avoid taking retirement distributions or realizing large capital gains during that period. Load up on contributions to retirement plans before the base and college years, because assets in those accounts aren't counted in the aid formulas.

Some families may want to defer converting an IRA to a Roth IRA, even though new laws now make it possible for wealthier taxpayers to take advantage of the conversion. Many financial-aid offices may use the income generated from the conversion to reduce the students' eligibility for need-based aid—unless parents appeal the offer through professional judgment. Since financial-aid forms ask parents to list the funds in their accounts the day they fill out the forms, aim to draw down those accounts as much possible before filing out the paperwork. If you were already planning to make a big purchase—say, a new car or computer—just buy it sooner.

Spend down assets in the student's name first, since aid formulas count student assets more heavily than parental assets. Custodial accounts, such as UTMAs and UGMAs, can also be liquidated with the proceeds transferred into a custodial 529 plan, which are currently counted as a parent asset on the FAFSA form.

Some families may want to consider margin loans, passbook loans (which use savings accounts as collateral) or a home-equity loan to help pay for college since such loans reduce net assets in the aid formula, says Mr. Chany. If, for example, you have a $20,000 stock portfolio and a $5,000 margin loan and have no other investments to report, you'd report $15,000 as the figure for your assets on the Fasfa. A major drawback: If the stock market declines drastically, you may be asked to put up additional stock as collateral or pay back part of the margin loan.

Another strategy: Use one of the more than two dozen "prepaid" 529 plans, which allow families to make an upfront payment in exchange for future tuition contracts or credits. The tuition guarantees generally apply to state schools in the state where they are offered, though you can use the money to help pay for out-of-state or private schools. Although many prepaid plans are operating in the red, for now they are still paying tuition as agreed. But the fine print in some state contracts gives them some wiggle room to pay out less than the promised amounts, so read it carefully.

As Steve Berenson's kids got closer to college, he sold some of his holdings in stock-index funds to buy contracts in the Independent 529, a prepaid plan with partnerships with more than 270 private colleges. With his son, Jacob, set to attend one of those schools—Kalamazoo College in Michigan—this fall, he was able to dodge some of the recent tuition spikes. The school also offered Jacob a $17,000 annual scholarship, and Mr. Berenson, a 47-year-old personnel manager in Vienna, W.Va., recently paid off his mortgage. "I timed it so that I would be freeing up cash flow," he says.

Perhaps the most effective tactic is to find a school that really wants your child. Barry Evans of Carmel Valley, Calif., says his and his wife's decision to send their daughter, Paige, to Southern Methodist University in Dallas was swayed in part by the scholarship money the school offered. "My perception is that early on in the process, SMU decided they really wanted her," he says. Mr. Evans also netted an additional $6,000 grant by approaching the head of the department that Paige, who just finished her freshman year, was interested in. Today, the school is covering slightly less than half of the roughly $50,000 annual cost through a mix of scholarships and grants.

*** Ace! is a member of the EducationUSA global educational advising network affiliated with the Bureau of Educational and Cultural Affairs, U.S. Department of State. We provide free EducationUSA counseling services to students in the northern provinces of Thailand; our faculty of U.S.-trained Test Prep Experts can help you with cost-effective result-driven training programs for SAT-1, SAT-2, TOEFL, GRE, GMAT, GED, IELTS etc ***

21st Century College Admission Strategy: Mass Apps

Ace! NewsFlash

Scott Yu, a straight-A student with a perfect SAT score

Scott Yu had the strongest possible credentials: a perfect SAT score, a perfect high school transcript and conservatory-quality piano skills. But his first foray into college admissions, an "early-action" application to Stanford, landed in limbo with a deferral.

His faith shaken, Yu responded the way any straight-A student would, with a flurry of work. He applied to every college in the Ivy League, along with Duke, MIT, Washington University in St. Louis, the University of Maryland and the New England Conservatory in Boston. For his efforts, the Rockville teen reaped 12 offers of admission. He now faces a not-very-painful choice among Harvard, Yale and MIT.

Yu, a senior in the Science, Mathematics and Computer Science Magnet Program at Montgomery Blair High School in Silver Spring, represents a new generation of college applicant. Spooked by single-digit admission rates at the top private schools, students sweeten the odds by applying to more of them. And, thus, the applicant pool runneth over.

Harvard, the nation's oldest college, crossed a symbolic threshold this year when it received more than 30,000 applications for about 1,600 seats in its freshman class. With 1.5 million students expected to enter four-year colleges this fall, that means that about one in 50 applied to Harvard. Brown University passed the same milestone this year, Stanford last year. One-fifth of college applicants nationwide apply to seven or more schools, twice the rate of a decade ago, according to data from the National Association for College Admission Counseling.

Yu, 18, knew he was a strong candidate. But he didn't know how strong. The early rebuff from Stanford -- a school not in the Ivy League but just as selective -- unnerved him. He sat at his computer with two Harvard teddy bears for luck as he checked for news April 1, the deadline for most admissions departments to let students know whether they got in. "I didn't mean to apply to this many schools," he said. "You can't really gauge your qualifications as a candidate until you get in somewhere."

Students apply to more schools partly because they can: Today's online applications are more easily replicated than the paper forms of previous decades. But that's not the only factor. The biggest surge has come at the most selective schools, where fewer than half of applicants gain admission. Students apply to twice as many schools as their parents did on the theory that they are half as likely to get in.

Admission rates fell this year to 6.9 percent at Harvard, 7.2 percent at Stanford, 7.5 percent at Yale, 8.2 percent at Princeton, 9.2 percent at Columbia and 9.3 percent at Brown. As recently as 2003, when fewer students competed for the same number of seats, all of those schools admitted more than 10 percent of applicants.

Worldwide interest

Ivy League schools are getting more applications from every part of the globe. Diana Barthauer, who lives in Switzerland, started with a slate of 50 schools and narrowed it to 20. She netted 15 offers, including Columbia, Stanford and Dartmouth, and rejections from MIT, Princeton and the University of Cambridge in England. Two colleges in China haven't replied. "The reason I did so many applications was that the admission rates are so low," she said. "But then, I pushed them down by doing it, so it's kind of ironic."

Is there any harm in applying to colleges en masse? Counselors and deans are divided.

The fundamentals of admission advice have not changed. Most students are counseled to apply to at least three schools: one that is deemed a "match," a less selective "safety" school and a more selective "reach." Two of each would not be deemed excessive. "I say four to six. I used to say three to five. They end up applying to six to eight," said Robin Groelle, director of college counseling at St. Stephen's Episcopal School, a college-prep school in Bradenton, Fla.

Some students apply scattershot to top schools, without regard for "fit" or "match." They raise their chances of getting in somewhere. They might also be wasting their time. "It's more work for us, and it's more work for the colleges," said Timothy Gallen, director of college counseling at the private Solebury School in New Hope, Pa. "It's playing the game, more than anything."

The process also can be expensive. Applications to selective colleges cost about $50 each, although fee waivers are available for low-income students.

The expanding applicant pool is not simply a matter of more applications per student. There has also been a growing population of college-bound seniors, although it is thought to have peaked last year and is expected to decline. And a larger share of applications is going to the most selective schools, which together receive 31 percent of applications but enroll 18 percent of freshmen. Deans say their applicant pools are larger, more diverse and better qualified than in previous generations in terms of grade-point averages and SAT scores.

"The long and short of it is, there has been a remarkable democratization of higher education in the past 50 years in the United States," said William Fitzsimmons, admissions dean at Harvard. He said his department's goal is to get a Harvard application "on the kitchen table of every student in America who has a chance of getting in."

'Come out of nowhere'

For the broader population of public and private colleges, the explosion in applications means more selectivity, but also more headaches.

The average four-year college, public and private, received 24 percent more applications in 2006 than 2002, according to an analysis of the latest available data by the admissions counseling group. The average admission rate narrowed from 71 percent in 2001 to 67 percent in 2007. The share of students who were admitted and chose to enroll also declined in that span, from 49 percent to 45 percent.

The rise of mass applications has complicated the task of predicting who will enroll. Increasing numbers of applicants "come out of nowhere" and have no connection to the college, said David Hawkins, director of public policy and research at the admissions counseling group. "And [colleges] just don't have much intelligence on what these students' intentions are." Colleges have courted mass applicants -- and higher application numbers -- by adopting the Common Application and putting forms online. But they also pay closer attention to an applicant's "demonstrated interest," Hawkins said, weighing such factors as correspondence or a visit to campus.

Admissions departments rely more heavily on early-decision and early-action programs, which deliver decisions to applicants sooner, in trade for a hope -- or an expectation -- that they will attend.

The University of Pennsylvania locked in half its freshman class this year through early decision. The effect on regular applicants was somewhat like scouting tickets for a rock concert that had been heavily pre-sold. With 26,938 applicants for 2,420 slots, the school's overall admission rate was 14 percent. For regular-decision applicants: 10 percent. "How many offers of admission can we go out with on April 1, knowing that we already have 49 percent of our class spoken for?" said Eric Furda, dean of admissions.

Despite the long odds, some in the industry envision an emerging buyer's market in college admissions. The ease of applying to any college, anywhere, gives motivated students a fighting chance in shopping among schools with single-digit admission rates. "I think they know that they can be consumers in this process, whereas maybe 10 years ago, it was the college that was picking the student," said Kristin White, director of marketing and communication at Westover School, a private girls school in Connecticut. "They're comparison shoppers now."

Missan DeSouza, a senior at Westover School, applied to 19 colleges. Some, such as Wellesley and Connecticut College, fit the liberal-arts mold of Westover. Others, including John Jay College and West Virginia University, had strong programs in forensic science, an interest she acquired from her mother, a Brooklyn police officer. She added several to the list because they offered strong academics and a lower price, or promised merit aid. Thirteen colleges offered her admission. Ursinus College included a $30,000 scholarship, and John Jay would effectively cost nothing. But she is leaning toward three others: Wellesley, Middlebury College or George Washington University. "I'm feeling it was really smart of me to apply to so many," she said, "because now I have enough options."

*** Ace! is a member of the EducationUSA global educational advising network affiliated with the Bureau of Educational and Cultural Affairs, U.S. Department of State. We provide free EducationUSA counseling services to students in the northern provinces of Thailand; our faculty of U.S.-trained Test Prep Experts can help you with cost-effective result-driven training programs for SAT-1, SAT-2, TOEFL, GRE, GMAT, GED, IELTS etc ***

Middlebury College, VT area attractions

Ace! NewsFlash: U.S. Life & Culture

Families enjoy a lakeside beach near the Green Mountains.

What to do: Depending on the season, there are numerous biking, skiing and hiking options in and around the Green Mountains. In summer, visit the Robert Frost-themed walking trail just off Route 125, about halfway between Ripton and the Bread Loaf Campus of Middlebury College. The gentle hike has markers printed with Frost’s poems. (See frostfriends.org for more information.) Middlebury has an array of good bookstores, including Monroe Street Books, a world-class used-book store, with more than 80,000 titles in-store, and another 50,000 off-site. The store has an extensive array of photography books and various first editions, and most of its books are searchable on the store’s Web site (1485 US-7; Tel: 802-398-2200; monroestreetbooks.com). In nearby Shelburne, the Shelburne Farms, a national historic landmark near Lake Champlain, has a sizable children’s farm, walking trails, an inn, restaurant and food store selling locally produced maple syrup (1611 Harbor Road; Tel: 802-985-8686; shelburnefarms.org).

The Pulpmill covered bridge near Middlebury.

Where to stay: The Swift House Inn has rooms with fireplaces, whirlpool tubs, private terraces and canopy beds. Rates range from $110 to $255 per night (25 Stewart Lane; Tel: 802-388-9925; swifthouseinn.com). A few miles away in East Middlebury, the Waybury Inn—best known as the setting for Bob Newhart’s 1980s sitcom, “Newhart”—has rooms beginning at $115 per night (457 East Main Street; Tel: 800-348-1810 or 802-388-4015).

Where to eat: In Middlebury, American Flatbreads at the Marble Works—in a 19th-century marble factory— has outstanding pizzas cooked in a wood-fired clay oven, which is featured prominently in the main dining room. The Bolognese pizza is superb (137 Maple Street; Tel: 802-388-3300; americanflatbread.com). The Shoreham Inn has an excellent restaurant. The menu changes frequently, but has included top-notch burgers, whole baked fish and an array of interesting desserts such as Banoffi pie, a banana, cream and toffee concoction (51 Inn Road, Shoreham; Tel: 802-897-5081; shorehaminn.com). Three Squares Cafe, in Vergennes, has numerous creative and affordable sandwiches and salads, plus a view of the pretty town square (221 Main St; Tel: 802-877-2772; threesquarescafe.com).

*** Ace! is a member of the EducationUSA global educational advising network affiliated with the Bureau of Educational and Cultural Affairs, U.S. Department of State. We provide free EducationUSA counseling services to students in the northern provinces of Thailand; our faculty of U.S.-trained Test Prep Experts can help you with cost-effective result-driven training programs for SAT-1, SAT-2, TOEFL, GRE, GMAT, GED, IELTS etc ***