Financial Aid Strategy Guide

College is expensive, and the stress about paying for it is a concern we often discuss with students and parents alike. We have written several guides describing the processes of applying for financial aid before, but this article will take a slightly different approach. Here, we will examine how your college application strategy can affect your chances of financial aid, and how you can maximize your chances of receiving aid, both while applying, and once you are admitted. 

We’ll first examine how colleges award financial aid, and how this should impact your college search and college list. We’ll then discuss strategies to maximize financial aid awards when you apply. Finally, we’ll cover how to read financial aid letters, and how to choose which college to attend based on their aid awards. Let’s get started!

How Colleges Award Financial Aid

Each school is unique, and there is no standardized way that they award aid. That said, there are some trends which we can observe. Here are the standard ways we see colleges offer aid awards:

• Ivy League and Ivy+ Schools: These schools only offer need based aid, and do not award scholarships based on merit, either academic or athletic. 
• Second tier private schools: These schools offer both need based and merit aid. The merit aid is highly selective, and often limited. 
• Lower tier private schools: These schools have more limited need-based aid, but are more likely to offer merit aid. 
• Top tier public schools: These schools have some need based aid, and offer a limited number of generous merit aid scholarships. 
• Lower tier public schools: These schools have limited need based and merit aid, but do have some generous merit scholarships. 

The reason for this is the disparate size of these schools’ endowments. The larger a college’s endowment, the more money they have to devote to scholarships, and the less they need to rely on tuition to balance their operating budget. Harvard, for example, has an endowment so large they could go completely tuition free indefinitely without harming their bottom line, while a school like Northeastern relies on tuition in order to meet their operating expenses. 

Institutions then use merit aid to recruit students with attributes they want on campus. This can be a star football player, a talented musician, or an academically gifted student. This aid is most often aimed at students which schools believe may otherwise choose to attend other universities. 

Public schools have limited merit aid, and much of it is awarded through their honors colleges. Their need-based aid is generally limited to in-state students; while out-of-state students can compete for merit aid, they are more often seen as a source of tuition dollars. This applies doubly to international students. For more information on financial aid for international students, check out our guide.

Applying for Aid Strategically

So what does this information tell us about searching for financial aid while applying to college? That by building your college list carefully, you can focus on schools who want to give you money. Let’s look at the ways to do this, separated by kinds of aid.

Academic Merit Aid

The best way to earn academic merit aid is to apply to schools you are academically overqualified for. A student who could get into Harvard will be offered large merit scholarships to attend a less competitive institution. This is because colleges want to attract smart and talented students. 

Schools want to recruit these students for several reasons. First, it helps them in the rankings to have students with high grades and test scores enroll in their programs. Second, having bright students on campus makes classes more engaging, and elevates the level of academic discourse at the school. Finally, talented students more often become talented and successful alumni, who will give back to society, and their alma mater, in the future. 

Thus many colleges see merit scholarships as an investment. We recommend applying to schools where your grades and test scores are above the 75th percentile for admitted students to attract this kind of aid. We also recommend applying to honors colleges, as these exist to attract bright students, and often have large scholarship funds earmarked solely for students in the honors programs. 

Enrollment Management Aid

This is also merit aid, and is listed as merit aid on financial aid awards. The reason colleges award it is very different however. Enrollment management is the process by which colleges attempt to attract students, and make sure their class size stays relatively consistent. 

Some colleges use merit aid awards to entice students to attend for tuition reasons; by giving these students a partial scholarship, they get more money overall. Here’s how it works: 

College A has $40,000 scholarship dollars to award. They could offer a single full tuition scholarship to one student, or four $10,000 merit scholarships to four different students. 

• In the first case, the single student is more likely to attend the school, and the net expense for the college is zero. 
• In the second case, these scholarships may convince three of the students to attend who otherwise would not have. Thus college A now has $90,000 extra tuition dollars per year to spend on instructors, facilities, or even more scholarships. 

The strategy to get offered these scholarships is to apply to schools which are academically competitive, but which have smaller endowments, and are more in need of tuition funding. Small liberal arts colleges with smaller endowments often use these scholarships to attract students who may pay a portion of the tuition. 

Need Based Aid

Most universities have limited need based scholarships to award, with a few exceptions. This is reflected in how enrollment decisions are made. Colleges use the following terms to describe how need based aid is awarded: 

• Need blind. These schools do not consider a student’s financial need when making admissions decisions. 
• Need aware. These schools do consider your ability to pay when making admissions decisions. 
• Meets full need. These schools guarantee to meet your full financial need with gift aid (more on what that means later).

Schools may be need blind without guaranteeing to meet full need; these schools can admit you, but then leave you struggling to figure out how to pay the cost of tuition. Generally, only institutions with very large endowments are both need blind and pledge to meet full need. 

Public universities do not have the budget needed in order to meet the full need of most students. The cost of in-state public education is generally much lower than private institutions, though your chances of receiving additional aid may be lower. We recommend using your reach schools to apply to colleges with robust need-based aid policies. Dartmouth and UCLA are both great schools, and quite hard to get into, but only Dartmouth guarantees to meet your full financial need. 

Comparing Financial Aid Offers

The financial aid process does not end once applications are submitted. Reading your award letters, parsing what they mean, and choosing the best option is a new hurdle for many families. We’ll break down the best way to approach your financial aid awards in this section. 

The first step is to read and understand all offers of financial aid. This can be quite difficult, as there is no standardization between universities. One study found that hundreds of different terms can be used for the same kinds of aid, some of which seem intentionally misleading. Here, we’ll break down common components of financial aid, and what each one really is:

Award letters may list all potential sources of aid together, or may split them up by category. When analyzing your financial aid awards, you should compare the following: 

• What is the cost of attendance for each college? Not all schools will tell you this in an award letter, so you may need to do some research. 
• How much gift aid is the school giving you? Note that this does not include any loans or work study. 
• How many loans are you expected to take out? 
• What is the net cost for each school? Note that this may not correlate with the overall cost of attendance. 

It would be much easier for students and parents if there were a standardized way colleges presented financial aid awards, but for now, you are stuck doing some legwork. We recommend taking the time to be certain of the total costs of each college before making a decision, as otherwise you may be stuck facing unexpected costs. 

Also note that you may need to take steps to claim any awarded merit or need based aid, and that loans need to be applied for, and have their own fees associated with them. This is often not clear from aid awards. Parent PLUS loans especially are not based on how much funding you need, but on your credit history, and estimated ability to repay. These often have high fees associated with them.

Appealing Aid Awards

If you are unsatisfied with the amount of aid you are offered by a school, you can appeal the decision (especially in the case of need based aid). You can do this by contacting the financial aid office directly, and sending them a letter (or more commonly an email) where you detail why you think you are deserving of more aid. 

In most circumstances, colleges will only award more aid if there was a mistake in their original calculations, or there was some circumstance they were unaware of. If their estimations for how much money your family has access to were flawed, or if you have undergone a sudden change in circumstances, we recommend appealing your aid award. 

A Note on Merit Aid

Many merit aid awards are conditional, meaning that they are not automatically renewed each year. Instead, you need to meet certain benchmarks for academic performance to continue receiving the money. While this makes sense, it is still something to be aware of when calculating the total costs of college when factoring in merit aid. It is also something to track while taking courses at college, and another reason not to slack off in your coursework.

Tuition Increases While Attending

The cost of college is constantly increasing, and this doesn’t stop while students attend. How this is handled, as always, varies by institution. Some institutions will lock in prices when students are admitted, and will lock in aid amounts as well (at least for need based aid) to ensure students know ahead of time how much they will be expected to pay each year. 

Other schools will raise tuition costs for both new and continuing students, causing you to have to pay more than you expected. Sometimes schools will recalculate aid when they do this, but this is not always the case. 

It is sometimes unclear on financial aid award letters which case a school practices; while some colleges explicitly state their policy on tuition increases, others do not mention it at all. If you are uncertain, we recommend calling the financial aid office to ask what their policy is in regards to tuition increases. 

Final Thoughts

As the cost of college continues to grow at a rapid rate, parents and students continue to worry about how they will pay for it. We hope that this guide has given you the information you need to approach the cost of college strategically, and to make the best choices for your situation. While paying for college will always be a challenge, approaching with the right information mitigates much of the stress. 

Paying for college is the last in a long line of hurdles in the college admissions process. First, however, you actually have to get in. We have a depth of experience helping students with every step of the admissions process. If you want to learn more about how we can help you, schedule a free consultation today. We’ve helped hundreds of students find the best school for them, and are always happy to hear from you.