Monday, December 21, 2009

CSS/PROFILE - The Other Financial Aid Form

In earlier postings on the financial aid application process I have mentioned that schools may require applicants to submit different or even more than one form, especially if the colleges are allocating both federal money and their own institutional funds. Virtually all colleges and universities use the FAFSA which my faithful readers know is required for all federal aid. However, there are roughly 300 private institutions that also have families complete a form called the CSS/PROFILE which they use to award their private grant money and scholarships. The PROFILE, as it is known in shorthand, is administered by the College Scholarship Service (CSS), the financial aid division of the College Board, and it is only accessible through the College Board website. One can find the form most directly by going to The College Board website is also the place to go to find the list of the colleges and universities that require the PROFILE. I would still advise families to visit the websites of each college to which your child is applying to check the form requirements and deadlines for submission.

In many respects, the FAFSA and PROFILE take similar approaches to the way they determine the Expected Family Contribution. Like the FAFSA, the PROFILE looks at both the student and parents’ income and assets. The good news is that much of the information that you gather to complete the FAFSA will also be necessary for the PROFILE. However, there are a few major differences in the type of information required and in the methodologies, both of which may have a material effect on the outcome.

Some of the key differences are:
- The FAFSA, which is referred to as the Federal Methodology or FM, asks the same questions of all applicants, regardless of the college. The PROFILE or Institutional Methodology (IM) questions may vary from school to school, as colleges have some discretion to tailor the form to their specific institutions. As long as college financial aid officers remain within their institutional policies, they have the flexibility to exercise their “Professional Judgment” as they see fit.
- In general, the PROFILE requires more information than the FAFSA, particularly in terms of assets and expenses. For example, the IM considers the equity in the family’s primary residence (though a handful of colleges have elected to exclude this from the calculation, Princeton among them).
- The FAFSA asks for income information for only the tax year prior to the year of enrollment (e.g., the 2009 tax return information for the 2010-2011 academic school year); the PROFILE requires 3 years of income disclosed: the two prior to the year of enrollment and a projection for the coming year.
- The PROFILE permits an allowance for secondary and elementary school tuition of siblings and also one for medical expenses. The FAFSA does not.
- With the Institutional Methodology students, regardless of income, are expected to contribute to the cost of their education, though it may be a nominal amount. The FM makes no such requirement.
- For students with divorced parents, the FAFSA never requires financial information of the non-custodial parent (the one with whom the student resides less than 50% of the time). However, if the custodial parent has remarried, the stepparent’s income is considered. Not so for the PROFILE: many schools that use the IM require financial information of both the custodial and the non-custodial parents. Check with the individual colleges to find out their requirements.
- The FAFSA, as its name implies (Free Application for Federal Student Aid) is free while the PROFILE costs $5 to process plus $18 for each school.
- Lastly, the FAFSA does not become available online until January 1. The PROFILE is accessible in the fall of the year prior to matriculation. In other words, it is available NOW!

One last thought: Most colleges use these financial aid forms for awarding need based aid, not merit aid. There are exceptions, however. The best thing to do is to check with each school’s financial aid office to find out what is required to be eligible for both need and merit aid. As I have previously noted, the FAFSA must be completed for any students who wish to borrow under the Stafford loan program, regardless of need. And truly one last thing: financial aid deadlines at many schools follow close on the heels of college application due dates, so please look carefully at websites to make sure that these important deadlines are met.

Tuesday, December 15, 2009

Financial Aid Forms - What You Should Be Doing Now

It is mid-December and high school seniors are busy putting the final touches on college applications and essays. However, it may not yet be time to kick back and wait. Another deadline is lurking just around the corner and that is the due date for the submission of financial aid forms. The FAFSA, or Free Application for Federal Student Aid, which is the financial aid form used by all institutions to determine eligibility for federal funds, will become available online January 1 for the 2010-2011 academic year (go to ). Many colleges have set financial aid deadlines in February and March, and a few are even earlier! So planning ahead is important in order to get your forms filed in time.

Even if you believe you will not qualify for financial aid, it is a good idea to fill out the FAFSA. Any student hoping to borrow under the unsubsidized Stafford student loan program is required to submit the FAFSA. For these federally guaranteed loans interest accrues while the student is in school and financial need is not a factor for eligiblity.

So what should you be doing now, prior to actually filling out the financial aid form? Here are a few tips to help you get organized to make the filing process as simple as possible.
1) While people gripe about the burden of completing the FAFSA, gathering the necessary documents may in fact be the most tedious part of the process. Required documents include the student’s driver’s license (if any) and social security number, his or her 2009 W-2 forms and other records of money earned, the student’s 2009 federal tax return, the parents’ 2009 federal tax return (for dependent students), any untaxed income records (this includes child support), and current bank statements as well as investment and business or farm records.
2) Keep copies of these documents together with your completed financial aid forms; should your application be selected for verification (schools are required to verify, at a minimum, 1 in 3 financial aid applications), you will be asked to submit these to the college.
3) Obtain a FAFSA pin number by going to The student and one parent will each need to establish a pin number which is both your electronic signature and the number you will need to access your online FAFSA form.
4) Check the financial aid section of each college’s website to find out the forms required and the deadlines for submission. Keep in mind that the earlier you submit, the sooner you get into the financial aid queue.
5) You may find yourself working to meet early financial aid deadlines before you are able to file your 2009 federal tax returns. In this case you will have to estimate your adjusted gross income, federal taxes and non-taxable income in order to get your financial aid forms submitted in time. Many people estimate these numbers based on the prior year tax return, and then update the form with more accurate information once the return is filed. If you are certain that you will not qualify for financial aid, but are completing the FAFSA so that your child is eligible for Stafford student loans, you may hold off submitting it until after you have actually filed your 2009 tax return.

Completing the FAFSA is really not as painful a process as some would have you believe. Not only has the 2010-2011 form been simplified, with as many as 1/3rd fewer questions, but the directions are generally clear and simple. Families are directed to the relevant lines on their tax returns for many of the required answers, taking away much of the guesswork. Remember that need-based financial aid is awarded annually. This means that all necessary financial aid forms must be completed each year that the student is in school.

Stay tuned for upcoming information on the CSS/Profile, the financial aid form that many private colleges use for allocation of their institutional funds.

Monday, November 23, 2009

The Public University Option

Financial safeties, or as I prefer to call them, schools that provide good “value,” are now a regular fixture on college lists, having become nearly as commonplace as the academic safeties, or colleges where acceptance is highly likely. Like the academic “likelies,” schools perceived to offer better economic value are those on the list which enable both parents and students to sleep better at night. Typically these are your state universities and private colleges known to give generous merit and need-based aid, the latter should you qualify.

If you are seeking practical financial choices, you probably want to also consider public universities outside your home state. Believe it or not, many of these institutions provide a value option, even with the higher non-resident tuition. There are some exceptions to this, most notably University of Michigan and schools in the University of California system which are priced more like private universities for out-of-state students. However, cost of attendance for non-residents at many state colleges can still be several thousand dollars lower than the private school alternative.

The desire to maintain quality public education in the face of budget cuts is leading some public universities to look beyond their borders and expand enrollment to non-residents as one means to address a funding gap. The University of Massachusetts recently announced that it will increase out-of-state enrollment from 20% to 30% over the next decade. Rutgers plans to raise enrollment of students outside New Jersey from 10% to 25%, while the University of Colorado is talking about removing state caps altogether. All three offer a competitive cost option to out-of-state students. The University of Minnesota, in an effort to grow its non-resident enrollment, has set the out-of-state tuition at only $4,000 higher per year than for residents. You will find a comparison chart with the costs of many state universities in the November 1, 2009 Education Life section of the New York Times and can access it at Keep in mind that the amounts shown only include tuition and fees, and not the full cost of attendance. To better gauge what you will pay it is best to go to the individual school’s website.

Value must, of course, be considered in the context of selectivity. For example, schools such as the University of North Carolina (Chapel Hill) and the University of Florida have low caps on out-of-state enrollment. So while the cost of attendance is a relative bargain ($36,000 for non-residents at UNC, $34,000 at University of Florida), the admission standards are that much tougher for out-of-state students. Nevertheless, for the strong candidate who seeks the large research university environment, these are worth considering.

Now that I have argued the value in looking beyond your own state to other public universities, let me throw in a few caveats. It is no secret that states across the country are trying to close budget gaps, which has translated to reduced funding for colleges, accompanied by talk of raising tuition. Just last week, the University of California’s Board of Regents approved a whopping 32% increase in fees (tuition) for residents, on top of already higher than average public education costs. Even such a hefty increase will not fully address the system’s deep fiscal problems. My point is that one must evaluate the financial health of state institutions as carefully as one scrutinizes the fiscal state of private colleges, perhaps even more so. Budget cuts have led to staff and class schedule reductions. The impact of this may mean the difference between graduating in four years and needing more time just to schedule all the classes required to complete a major. Some state universities have weathered the financial crisis more successfully due to recent trends towards privatization, meaning they have tapped non-government sources and moved away from reliance on state funding. Inquire about the percentage of the operating budget that is funded by private monies. Greater reliance on state funding may mean higher risk of cutbacks in staff, departments and programs if budget shortfalls persist.

Are states likely to raise tuition on out-of-state students more rapidly than for residents in future years? While public education tuition increases are a potentially sensitive political issue, past experience suggests that out-of-state students will not bear the brunt of tuition hikes. This may even be more true today than in prior years, as states recognize the need to attract non-residents who are the ones they can count on to pay the higher freight.

Wednesday, October 28, 2009

Providing Career Guidance - Finding the Balance

How important is it that my child has a career direction before going to college and how can I guide him or her through the career search process? This is a question many parents of high school students ponder. The topic was thoughtfully addressed by journalist Eilene Zimmerman in the New York Times Career Couch column which appeared on October 25, 2009: “Helping Teenagers Find Their Dreams.” You can access it at I share Zimmerman’s belief that there is too much pressure on kids today to define themselves by a career before acquiring the tools to choose wisely and prior to gaining exposure to various options that might be right for them.

Students today receive so many messages, both subtle and overt, pressuring them to define their career interests before they are even out of high school. Consider the college application process: The first page on the Common Application is Future Plans! Many colleges want to know intended major as well as possible career or professional plans before they even see the GPA or know where the student graduated from high school! Anxious seniors who were hoping to use the next four years to figure this out come to me in a panic: Is it okay to put “Undecided?” I must confess that I, too, encourage students to put down an academic interest and possible career choice, though emphasize that they should view their college years as a time to broaden horizons and explore new things. The message I try to convey is that it is okay to change one's mind; in fact, it is expected. How can I say otherwise? I am on my third post college career!

In order to help our kids with this self discovery and career search, we can start by alleviating some of the pressure. Instead of projecting our own angst about their futures onto them, we ought to have conversations which begin to generate ideas, but also engage their interest. Talking about likes, dislikes, talents and strengths generally elicits far more enthusiasm and willingness to talk than Mr. Bradshaw’s put-off line in The Graduate: “Ben, what are you doing…? Be open, and try to listen rather than feel compelled to offer up answers.

Here are 5 tips you might consider the next time you find yourself engaged in a career discussion with your teen:

1) Help your child discover skills and interests rather than advise him or her to focus exclusively on career options – skills are transferable; careers come and go
2) Guide, don’t lead – Teens need to take the initiative. This is all about their dreams, not yours.
3) Take the cues and know when to back off; If your teen does not want to engage in this discussion when you want to, it won’t be productive.
4) Assure your children that uncertainty is okay and let them know that you support the need to explore. After all, they are still teens!
5) Accept that much has probably changed since you last embarked on a career search and recognize your own knowledge shortcomings. The career your teen ultimately chooses may not even exist today!

Saturday, October 17, 2009

ABCs of Financial Aid

COA, FAFSA, EFC…the alphabet of financial terms associated with paying for college can be a source of confusion for families in the thick of the college application process. As with applying to college, navigating financial aid requires assessing the landscape. Familiarization with concepts, knowing deadlines and being organized is the key to finding success in the financial aid process too.

Here is a quick college financing primer highlighting some of the critical terms you will need to know:

The Cost of Attendance, or COA, refers to the total annual cost of college, not just tuition and fees. Don’t forget to factor in room and board, books, transportation, and other personal expenses when trying to estimate what a year of college will cost. College financial aid officers look at the total COA when they package aid awards. Most, if not all colleges, will post the COA on their website.

The Free Application for Federal Student Aid, better known as the FAFSA, is used by colleges and universities to determine eligibility for financial aid. All students must file a FAFSA in order to receive any federal student aid. This includes the non-need based unsubsidized federally guaranteed Stafford student loans, so if you anticipate borrowing for college, don’t forget to file the FAFSA. It becomes available online January 1, 2010 for the 2010-2011 school year at

The Expected Family Contribution or EFC which is calculated from the information you provide on the FAFSA is the amount determined to be what the family can and should contribute to the cost of the student’s education. The EFC is based on the family’s current assets and prior year's income, including both the student’s and parents’ financial data. After completing and submitting your FAFSA, you will receive a Student Aid Report, or SAR, which will show your EFC.

Nearly 600 schools also require that families complete the CSS/Profile form for the allocation of their institutional (non-government) funds. The CSS/Profile is administered by the College Board and can only be filed online. Families can access the Profile as early as October 1, 2009 for the 2010-2011 academic year by going to the College Board’s website:

Now that you are familiar with these terms, there are some additional things that you should know about financial aid awards:

- Your “demonstrated need” (the COA minus your EFC) won’t necessarily be the amount shown on your SAR if the college also uses the CSS/Profile or another financial aid form. These methodologies are not the same, and therefore will produce different results. Institutions allocating their resources will naturally rely on the methodology that sets a lower threshold for your financial requirements, so don’t be surprised if the aid package is less than you expected, even from schools that claim to meet demonstrated need.
- Colleges tailor the CSS/Profile formula to their specific institutional requirements. In other words, your demonstrated need may vary from school to school. For example, some colleges consider the equity in your home; others do not.
- The college offering the most financial aid may not necessarily be providing the best package. One has to look at the composition of each award. A financial aid package that meets need with grants which do not have to be repaid is far more attractive than one comprised entirely of loans.
- If your financial situation changes materially after you’ve filed the forms, such as loss of employment, you should notify the colleges immediately.

Be sure to visit the Financial Aid section of each school’s website to check on requirements, deadlines and merit aid, if awarded. Since financial aid is a limited resource, getting things in early can make a difference. The sooner you complete the FAFSA, CSS/Profile and any other required forms, the better your chances of receiving financial assistance.

Monday, October 5, 2009

FAFSA Revision Redux

In my June 29 post I wrote about forthcoming changes to the FAFSA, the financial aid form that must be completed by students and their families seeking federal aid to pay for college. This also includes anyone who wishes to borrow under the federally guaranteed Stafford loan program, whether for need based or the non-need based loans. The new and improved FAFSA for the 2010-2011 academic year will come online January 1, 2010 and can be accessed at (do not confused this with which is NOT the Department of Education, but rather a site that will charge users for access and services!).

The soon-to-be-released version of the FAFSA should be easier to complete, as it will incorporate help text and instructions for specific questions as well as enhanced skip logic. That means you probably will no longer have to wade through pages of questions that are irrelevant to your circumstances. In addition, families will now be able to populate certain fields with tax return information retrieved directly from the IRS, a feature which will eliminate some 20 questions.

The objective of the FAFSA revision is simplification. So not surprising, one of the most frequently touted benefits to the new form is the ability to access your filed tax return to complete sections of the FAFSA form (a feature that will become available in January to those applying for spring 2010. It will be rolled out to all users later next year). A simple “Click Here” displayed in the income section for both the parents and the student instructs FAFSA to get your federal income tax information directly from the IRS. If you choose to use the IRS access feature you will no longer have to search for and re-calculate income data in order to complete the FAFSA. Much of what you need will come automatically from your filed return.

While this sounds like a vast improvement to a daunting form, the option of using financial information taken directly from the IRS may be a lot of hoopla that will have limited benefits in practice. Here is why.

As I noted in my June post, the information taken off your tax return is dated. If you fill out the FAFSA as soon as it is available on the website (January 1 every year for the school year beginning the following fall) in order to meet schools’ deadlines, you will be accessing a tax return showing income from two years prior. Once you retrieve data from the IRS and use this for your FAFSA, you can neither amend nor update it. The way the FAFSA completion process currently works, most people use income estimates and then update with actual numbers after the relevant tax return is filed. Using your tax data is not recommended for those married, but filing separately since only one tax return can be accessed. If your marital status has changed since your last filed return, you cannot choose this option.

Perhaps the greatest shortcoming to using your filed tax return is the fact that colleges will still want to see current financial data. So in the end you will find yourself gathering this information for the schools anyway. Furthermore, there are nearly 600 colleges and universities that require the CSS/Profile form for the purpose of allocating their institutional resources for student aid. That form has not been revised, so families will still be required to submit all of the financial data they had before.

Bottom line: don’t get too excited about the improvements to the FAFSA form yet. True, the skip logic and enhanced labeling and instructions should reduce the number of questions and some of the confusion. But in the end, most people are not likely to see any measurable reduction in the amount of financial data they are required to provide.

Tuesday, September 15, 2009

Tuition and Price Elasticity...How High Can It Go and at What Cost?

For those of you who have studied microeconomics, you probably remember the concept of price elasticity: how closely a change in demand correlates to a change in price. When demand falls as a result of a price increase, the goods or services are said to exhibit price elasticity of demand.

Up until now it has been fair to say that the price of a college education has exhibited low elasticity. While tuition has steadily increased, the number of applicants and students enrolling has also continued to rise. This has given college administrators little reason to try to put the breaks on the escalating price of attending college since they have been able to pass on these additional costs through upward adjustments to tuition. As journalist Ron Lieber noted in a September 5 New York Times article (“Why College Costs Rise, Even in a Recession”), the ability to increase tuition and fees without triggering a corresponding slowdown in demand has meant that colleges have been immune to pressures to behave like for-profit corporations which regularly seek ways to cut the fat out of budgets in order to control costs.

Some predict that the rising tide of college tuition is finally turning, though probably not for all higher education institutions. The most selective schools with strong name recognition will, no doubt, still draw many more applicants than they can possibly accommodate. However, crossing the $50,000 threshold and maintaining enrollment, especially in difficult economic times, may no longer be a realistic scenario for schools that are not in the top tier of selectivity.

Lieber goes on to say that holding tuition steady and opting instead to make unpopular cuts to a budget may be easier said than done. One of his key arguments is that colleges, especially liberal arts institutions, don’t insist that all academic departments be profit centers. Hoping to appeal to students with varied interests, they choose to provide a full range of majors regardless of whether the economics of doing so makes sense. Schools regularly allow the more popular majors to subsidize those that fail to breakeven. A thriving English department which generates ample income allows a college to rationalize offering majors in other departments that attract only 3-4 candidates a year.

After reading Lieber’s article I started to think about the future of the liberal arts education, especially given that many colleges have already reached the $50,000 mark and will, if you believe Lieber, be limited in their ability to continually raise their price. As colleges begin to take a hard look at how to reduce their budgets, some may start to rethink the feasibility of offering the full panoply of liberal arts subjects. Specialization may become more the norm than the rule, at least at colleges that don’t have the Ivy or quasi-Ivy League draw.

Some schools have already begun to re-think how they attract and retain students with broader academic interests, without having to incur additional costs or raise tuition. In August of this year, three Boston area colleges: Wellesley, Babson and Olin College of Engineering, announced a partnership to develop and offer joint programs which will expand the educational opportunities to students at their respective schools. The three institutions, possessing very distinct missions and few overlap academic departments, will now be able to collectively provide courses that had not previously been offered to their students, and at very little additional cost. I think it is reasonable to speculate that other schools will decide to take this one step further in the future, and may actually eliminate departments while partnering with neighboring colleges that have similar majors. Haverford and Bryn Mawr, within a short drive from each other in neighboring Philadelphia suburbs, in fact already do this. Are we likely to see more specialization and sharing of curriculum and faculty in the future? Sheer economics may become the overriding factor prompting such decisions for other colleges as they cross the $50,000 cost of attendance threshold. The implication for prospective students: if you plan to pursue a course of study that is less popular, try to get a sense for a college's commitment to that program before you commit the next 4 years to the school.

Monday, September 7, 2009

Score Choice...Misnomer?

What’s so great about Score Choice, the new College Board reporting policy that allows high school seniors to choose which of their SAT standardized test scores to send to colleges? After the initial excitement and fanfare many have concluded: perhaps not much.

Last year the College Board announced its plan to introduce the concept of Score Choice, allowing students for the first time to be selective about which SAT scores to send to colleges. The new reporting rules became effective beginning with the senior class graduating in 2010. The reason for the change in policy, according to the College Board, was an effort to “reduce student stress and improve the test day experience.” In actual practice, Score Choice is not as simple as originally hoped,and therefore, is not working exactly as initially planned. Individual colleges, it turns out, will still determine their own requirements that trump anything dictated by the College Board, suggesting that simplification and stress reduction could not be further from the truth.

And right from the start the program has had its critics. Is Score Choice just a ploy to increase fees to the College Board as students feel the need to take the tests multiple times in an effort to maximize their scores? Does the new policy further discriminate against less economically fortunate students who can afford neither test prep nor the registration fee for multiple test sittings?

Shortly after the initial announcement colleges started weighing in too. One by one many highly selective schools quickly made clear that regardless of the College Board directive, they would still require that applicants submit all scores. After all, most colleges state that they super score anyway, meaning they take the highest SAT section score from all test sittings. Why then would a student not want to submit all scores, especially if the highest math score was achieved in May and the best critical reading score happened to be from the September test date? Isn’t submitting all scores really to the student’s advantage?

If you are looking for the simplest way to track down different colleges’ requirements, you can go to where you will also find explanations of the 6 score reporting options from which colleges and universities must choose. For the student who can readily grasp the nuances of each of these Score-Use Practices based upon the written explanation (the word “obtuse” comes to mind), automatic admission to the college of choice might be a reasonable prize. One caveat: the best source for determining an individual college's requirement is the college itself. If its policy is not posted on the website, do not hesitate to give the admission office a call.

I am not trying to intentionally bash the College Board. Rather, I want to point out that the complicated new policy has actually raised the stress level as students and families try to figure it out, especially when kids are applying to multiple schools that don't follow the same Score-Use Practice. So what is the solution? My advice to all students is to forget that Score Choice was ever offered as an option. Give it your best shot each time you take the SAT and send all of your scores!

Monday, August 24, 2009

College Rankings....Drum Role, Please!

Last Thursday the U.S. News & World Report published its annual rankings of U.S. colleges and universities. The release of the rankings is always accompanied by speculation and anticipation…who will win the coveted top spot? The aftermath is equally predictable: schools that have moved up in the rankings tout their good news, other educators criticize the emphasis on misguided measures to rate schools, and parents spin into a frenzy and fret that their child may not get into one of the “top 25” schools. What amuses and frustrates me about these rankings and the clout that U.S. New & World Report commands is that no matter how questionable the criteria or poor the participation in the surveys which are used to rate schools, people from all sides of the aisle still look to the rankings as some kind of authoritative assessment of quality across the spectrum of higher education institutions.

Today I was reading the newly released college ranking issue while my freshman daughter, who heads off to college in a week, looked on. “Can I see this?” she asked as she grabbed the magazine from my hand. I knew exactly where she was headed…straight to the page with the rankings of liberal arts colleges. She quickly scanned the list, starting at the top, of course, and followed her finger down the page, glancing nervously for her school. “It isn’t here,” she said to me in a panic. “It’s there,” I assured her, and then pointed to it on the page, much to her relief, but not to mine. Despite everything I preach about “good” being what’s good for the student, my own daughter still falls victim to the ranking hysteria (I guess I do too since I already knew where her college ranked).

I, like most college consultants and counselors, make a point of talking to families and students about right fit and the fallacy of thinking one can actually meaningfully rank colleges. Do these rankings measure where your child is most likely to thrive, find the optimal social environment, get the best education that meets his or her needs and interests and at the best value, or whether the college he or she attends will predict future success in life (however one chooses to measure that)? Of course not! Then why are we overly fixated on them? We get caught up in prestige, name recognition and factors that have nothing to do with whether or not our children will receive a quality education that may open their eyes to the many possibilities available to them.

Here are some truths about the rankings. The U.S. News & World Report bases its rankings on 7 key measures, with the single highest weighted factor being that of peer assessment (in other words, the impression held by presidents, provosts or admission deans at other, unaffiliated institutions), which accounts for 25% of the ranking. Many schools choose to ignore these peer assessment surveys and only 48% actually filled them out this year. And among those that did, some are alleged to have manipulated their answers with the sole purpose of boosting their own rankings! The August 19 issue of Inside Higher Ed ( has a disturbing article that points out how schools may be gaming the system just to climb up the rankings.

Here’s my point: the flaws in these rankings are so obvious to so many, yet we still get caught up with them and ascribe undeserved value to the ranking order. Even with no intended manipulation, why would an admission dean at another college know or have any say in the quality of the education or experience a student will have at a college he or she may have never even visited and why is this given so much weight in the rankings?

So please, ask yourself as you assist your sons and daughters through the college admission process about the utility of college rankings and whether this is a good way to choose a college where your child will excel and be happy. What makes one institution better than the one ranked directly below it and who decided that college A should be listed higher than college B? Some of you will read this and continue to give undue attention and importance to these rankings. At a minimum, I hope you will think twice before you make assumptions about the value of a four year college or university based upon where it stacks up according to U.S. News & World Report. I very much welcome the thoughts of my readers on this topic!

Sunday, August 16, 2009

A New Credit Program to Help Repay Student Debt

The challenge of financing a college education has spawned many proposals on how to help students finance and achieve their college dreams. One of the newer and more innovative ideas received some press in this past Saturday's New York Times (Aid for Students Facing Mountain of Debt). The featured start-up company, SafeStart, has developed the concept of providing interest-free credit lines to student loan borrowers. The company's objective is to offer students a way to protect their credit and ease their cash flow should they experience financial hardships within the first few years after graduation. SafeStart also offers financial literacy training and debt counseling services to assist its student clients.

Here’s how the program works: Undergraduate students with guaranteed Stafford loans who face financial hardship after graduation or who go back to school during the repayment period can draw down on an interest-free line of credit. Advances under the line of credit are available to cover loan payments for up to 36 months over five years. After the five year borrowing period, the student must repay the SafeStart loans in 60 monthly payments.

The cost of the program ranges from $40 to $70 per each thousand dollars of principal borrowed, payable up-front. So a student who borrows $20,000 and is charged $70 per thousand will end up paying $1,400 for access to the line of credit. This is roughly equivalent to one year of interest on $20,000 in unsubsidized Stafford loans at 6.8%. The variation in fee charged is a function of whether the student opts for the financial literacy and debt management offerings, but the charge will also vary by college, presumably reflecting a specific school's student loan default history. To qualify to drawdown under the line of credit a borrower's monthly loan payment must exceed 10% of his or her income. One's credit score has no bearing on the ability to take advantage of this service, but a student’s college must participate in the program. While the company claims to have more than 600 schools signed up, I went to the website and typed in my alma mater, Wesleyan, only to discover that it presently does not participant.

The principals of SafeStart assert that they do not compete with the federal government’s income-based repayment plan that began July 1 of this year. Under that program, which was discussed in my June 5, 2009 blog posting, borrowers can cap their Stafford loan payments at a maximum of 15% of the amount by which family gross income exceeds the poverty level (currently $16,245 for an individual), and any amounts borrowed which remain outstanding after 25 years will be forgiven. With the income-based repayment plan, debt payments that are deferred due to the payment cap will continue to accrue interest, unlike borrowings under the interest-free SafeStart line.

So I decided to do a little calculation to test how eligibility to borrow under the SafeStart line compares to the payment cap on the federal government program. What I determined is that a student making $30,000 a year with a $230 monthy loan payment ($20,000 loan at 6.8%) would only have to pay $172 and could defer $57 a month, or $685 annually under the income-based repayment (with interest of course). Under the SafeStart program, the monthly loan payment would have to be $250 (higher than the actual $230 payment) in order to render the line eligible for borrowing. In other words, SafeStart only really has value for students who have a lot of debt!

Still, the SafeStart program may be a good option for some students, especially if they anticipate choosing a career where income is likely to be low in the early years, though the government's income-based repayment plan addresses the same issue. However, here are some caveats that should be considered before signing up for a SafeStart credit line. This works essentially like an insurance policy. One may end up paying a premium or fee for a policy that he or she will never access. In that case, the company says it will refund 30% of the fee paid. The programs is currently only available to cover undergraduate Stafford loans, though SafeStart’s website claims that it will roll out similar programs for graduate student Stafford loans, graduate PLUS and Perkins loans either this fall or by winter 2010. Also as mentioned, many schools do not currently participate, though that may change over time if the program catches on.

However, one of my prime concerns, as a former bond insurance executive, relates to SafeStart's future financial health. A company that extends credit must have ongoing access to liquidity (cash) and financial resources. SafeStart collects an up-front fee with a promise to extend credit for future drawdowns. What does that mean for someone who has paid the $1,400 in advance? The company may not have available funds to lend at the time the student needs it. I would just want to know more about the long-term financial viability of this company before I signed up for its loan repayment plan.

Thursday, August 13, 2009

Test Optional - Why Some Colleges Have Decided to Look Beyond Standardized Tests

More colleges and universities each year are choosing to go test optional, meaning that they no longer require standardized tests in the college admission process. One college, Sarah Lawrence, has taken it a step further: the school will not even look at standardized test scores even if submitted by the student. Institutions adopt test optional for a variety of reasons. They typically cite a desire to improve overall diversity, as test score requirements are believed to discourage minority applications and favor those from more affluent communities. Additionally, experience has shown that standardized tests are a less reliable predictor of performance in college than transcripts and grades, and in fact add little additional significant information to the student’s profile beyond what the college has already gleaned about the individual from other parts of the application.

There are now more than 820 accredited four year institutions that have decided to forego standardized test requirements and the number has been increasing each year. While I am not a proponent of the U.S. News and World Report rankings, I do think it is noteworthy that 32 of its top ranked liberal arts colleges no longer require standardized tests in their application process. This includes schools such as Bowdoin, Bates, Smith and Colby.

So what does this mean for the college applicant? If the standardized test scores do not reflect an otherwise strong academic performance, a student might want to consider applying to a few test optional colleges. You will rarely hear that a college values high SATs over grades and rigor of the high school curriculum. In fact, the reverse is often the case. Many will question a student’s motivation and effort when high test scores are not matched by classroom performance. However, students should not choose the test optional approach just to get out of taking or submitting SAT or ACT scores and as a way to take a short cut in the application process. Many schools will require that a student submit a graded paper or write additional essays in lieu of test scores. The complete list of test optional institutions and their specific requirements can be found on the website

While the intentions of colleges and universities that have gone test optional are generally viewed positively, some critics are suspicious of the motives and believe that less altruistic objectives drive these policies. No one argues the equity and inclusion benefits, but skeptics question whether there is an unspoken agenda: are colleges also seeing this as a way to increase the number of applications, raise selectivity statistics and improve average test scores (which impacts rankings) by factoring in only submitted scores? But here is the real contradiction: many schools that have jettisoned standardized test requirements in the name of fairness, inclusion and limited reliability still use the scores as a primary factor in determining merit aid awards. How these colleges reconcile what appears to be conflicting policies is a hotly debated topic among admission officers.

The evolving role of standardized testing in college admission prompted the formation of the National Association for College Admission Counseling's (NACAC) Commission on the Use of Standardized Tests in Undergraduate Admission in late 2006. Its report to NACAC members at the annual conference in Seattle last fall made national news and basically concluded that one size does not fit all. Schools will continue to choose whatever evaluative tools best enable them to craft the desired class. No doubt this topic will receive more attention at NACAC's upcoming conference which I will be attending in Baltimore next month. Stay tuned to hear more in the future about how colleges select and justify their admission policies on standardized testing.

Saturday, August 1, 2009

Textbook Rentals - A Viable Option for Managing College Costs

While tuition, room and board comprise the bulk of expenses one will pay during the college years, families actually should be focusing on the total Cost of Attendance, otherwise known as the COA, which also includes miscellaneous personal expenses, the cost of traveling to and from school, and textbook purchases. With prices of textbooks rising faster than the rate of inflation, today’s students can expect to pay a few thousand dollars alone in class reading material by the time they graduate. The high price of textbooks has spawned an active used-book market, as students have discovered that a few dog-eared pages and some yellow highlighting are worth overlooking in order to keep textbook costs down.

Now another option has emerged: textbook rentals. The rental alternative is available through recent online start-up companies such as and, which claim to carry a selection of more than 2 million titles each. Some colleges have even begun their own on-campus programs.

The cited advantages to students in book rental programs are compelling. Companies quote discounts of 65 to 85 percent off the list price and books are either new or are generally in better condition than one would find on the used textbook shelf. Students can rent for the full term or semester, and may find that returns through pre-paid postage boxes, once the course is finished, make the process simpler than negotiating the re-sale of one’s textbooks at the bookstore.

However, before encouraging your student to rent textbooks, make sure you understand the potential drawbacks as well. Rental companies require students to return textbooks as soon as the course is completed, though may agree to a few day extension if arranged in advance. A 20 percent penalty is often assessed for a short delinquency period of about two weeks. After that, the student will be forced to pay the full list price and in essence buy the book as if it were new. So know your son or daughter! If procrastination, forgetfulness or the tendency to lose things are issues, renting may prove not to be a cost effective option.

The fact that rented books are generally in better condition than purchased used textbooks is no doubt due to each company’s policy of prohibiting doodling or writing in the margins. Limited highlighting is okay, but anything more will carry a similar penalty to the late return. The student will end up buying the book. Again, know your student.

Lastly, renting is only a viable option if there is no benefit to the student to keep a textbook past the end of the semester. For example, if building a personal library of books in one’s major is important, then renting makes little sense. So my best advice on textbooks: know the options, yet take into consideration your child’s needs and habits!

Saturday, July 18, 2009

Net Price Calculators - What Will College Really Cost?

For those of you with a son or daughter who has already been through the financial aid process, you may have wondered why the award packages that accompanied your child’s acceptance letters differed so dramatically from school to school. Afterall, you filled out the FAFSA form which provided your Expected Family Contribution, or EFC. How is it possible that the colleges each assessed your need so differently and how might you have anticipated what the true cost of a particular school would be?

I am a strong advocate for knowing what you are getting yourself in for in terms of college cost and what you can afford before your son or daughter’s heart is set on a school and the application is sent. Here is the good news. Come August 2011, some of the guess work will be eliminated from the cost estimate part of this process. One of the provisions of the Higher Education Opportunity Act of 2008 requires that all colleges and universities which receive Title IV federal funds offer a net price calculator on their website within the next two years. The purpose of these college specific calculators is to provide a closer approximation of what the true “net” cost of a particular college will be for an individual student, given the school's own financial aid practices and history.

While the difference in aid packages is the result of multiple factors (one of which is a college’s own limited financial resources and how it chooses to allocate them), a major contributor to the discrepancies is that schools often use their own criteria when it comes to packaging their financial aid awards, separate and distinct from that asked on the FAFSA. This is especially true for colleges that require students to also submit the school's own proprietary form or the CSS/Profile. Additionally, colleges exercise something called “Professional Judgment” which is their way of deciding how and when they will deviate from the hard numbers on the financial aid forms. So while online calculators found on multiple college source websites are a nice idea, they are far too generic to provide any real utility.

Colleges will have the option to develop their own templates or adapt one that is being developed by the Department of Education’s (DOE) National Center for Education Statistics (NCES) and which will be available to them in August of this year. Several schools have gotten a jump on the task and have already posted school-specific net price calculators to their websites. Among them are Amherst, Williams, MIT and Purdue. While these calculators still have limitations and cannot replace the thinking and ultimate judgment of the financial aid officer, they should provide a much closer “estimate” of the net cost of attending a specific institution. Each college’s model will draw from its own database, enabling it to match as closely as possible a family’s financial profile to its historical aid packages, which is also expected to include merit-based aid.

The implementation of net price calculators and other provisions such as the required annual reporting to the DOE of Cost of Attendance (COA) and financial aid awards will hopefully achieve the intended objective of improving the transparency on the cost of attending college. If done right, this should take much of the guesswork out of the cost side of the college equation.

Thursday, July 9, 2009

Influencing a Young Adult's Financial Habits - The Parent's Role

As your sons and daughters reach young adulthood and take those first steps towards independence (isn’t that the goal?!), ask yourself whether they are leaving the nest with a healthy attitude about money and are prepared to responsibly manage their personal finances. Why some kids form good financial habits and others falter in matters of money is a question posed by a program initiated at the University of Arizona and known as the Arizona Pathways to Life Success for University Students or APLUS.

With a representative sample size of 2,098 students who were freshman in the fall of 2007, the study seeks to understand the relationships and factors that influence financial habits and how these attitudes are formed. Questions asked in the survey focus on issues of budgeting, borrowing, saving money and paying bills.

The researchers began collecting their first set of data in the spring of 2008, during the students’ second semester, and used this information to create a statistical model that assessed how parental teaching, work experience and high school financial-literacy courses affected the students’ behavior. I doubt the initial findings will come as a surprise to anyone: the researchers found that parental teaching was by far the most influential factor. Its impact on students’ financial relationships with their parents, satisfaction with their own monetary behaviors, and the wisdom of their actual financial habits is more significant than the other two factors combined.

As the parent of teenage daughters, I must admit that the initial results of this study hit home…literally! We hear that the behaviors we model will influence our kids’ attitudes and leave an impression that lasts long after they leave home. But is it enough to exercise good financial habits without teaching them the basics? The message to take away from this study is that we as parents need to consciously teach and communicate good financial behaviors to our children and not take for granted that they will know what to do when they venture out on their own. This is not something they pick up through osmosis. They need to be taught the difference between risky and sound money management practices as well as purely practical things such has how to balance a checkbook. These are the lessons that will enable them to establish healthy financial relationships in the future with their families and partners.

The researchers at APLUS had initially planned to collect the next round of data during the students’ senior year, yet have decided to use the current recession as an opportunity to measure the economy’s effect on the sample group’s behavior. The results of the follow-up survey which the students completed this past spring are expected to be released in the fall. For anyone interested in seeing the report on the initial phase of the study you can find it at

Saturday, July 4, 2009

Tough Economic Times Prompt New Questions for College Visits

I’ve mentioned in earlier postings that many colleges have maintained or have even increased financial aid for the coming academic year in order to meet the needs of the increasing number of families unable to pay the full cost. Some schools continue to devote resources to financial aid so they can draw and retain desired students. Obviously pressure on endowments and college budgets mean that the additional funds for financial aid have had to come from somewhere. Most schools report that postponed building projects and staff and employee benefits have borne the brunt of it. Just last week Harvard announced that it would cut its staff by 275 employees, a move that will impact nearly every one of the university’s 10 schools. The point is that while families should be pleased by the commitment to financial aid, it is prudent to look beyond and question how these cuts might be impacting academic and athletic programs, and other offerings and amenities on college campuses.

So as you approach the college search, be sure to inquire about the fiscal health of the college or university. Colleges such as Antioch in Ohio and College of Santa Fe in New Mexico have recently closed their doors, unable to survive under their financial pressures. How unfortunate it must have been for their students who had to scramble to find a new home to finish their degree programs. Other colleges have taken less drastic measures, like cutting sports teams. Case in point: the student who had hoped to wrestle for MIT had better look elsewhere; the university will be eliminating 8 varsity teams come the fall, including wrestling.

Here are some suggestions on questions students and parents should be asking of college admission staff in order to feel confident that the academic, athletic and other programs they seek will not be cut from the budget in the foreseeable future.

1) What has been the college/university’s policy towards financial aid? How has it changed in this recession and what are they budgeting for the coming years?
2) Do they claim to be need-blind or need-aware and will they meet fully demonstrated need? Do they anticipate revising this policy in the future? Reed College in Oregon, for example, abandoned need-blind admissions this year and as a result, began to factor (or at least, now publicly) ability to pay into their admission decisions.
3) If you are eligible for need-based aid, find out the range of grant aid offered and the amount that students are typically expected to borrow. How has the school addressed its budgetary pressures and what steps have been taken to date to adjust? How have these steps impacted the college?
4) Ask specifically about staff cuts, in what departments, and what that has meant for courses and programs offered.
5) Has elimination of some courses or perhaps fewer sections offered impacted a student’s ability to fulfill requirements and graduate within 4 years (and while you’re at it, inquire about the 4 year graduation rate!)? It might be worth talking to students or to a faculty member of a particular department to get the real story.

If you are reluctant to ask these questions, keep in mind that you will be making a sizeable investment in your son or daughter’s college education and future. Like any other investment, this one entitles you to know how the money will be spent and what type of yields you can expect to receive.

Monday, June 29, 2009

Changes to the FAFSA: Sooner Than You Think

For those of you who have struggled through the dreaded process of filling out the Free Application for Federal Student Aid, or FAFSA, in order to be eligible for financial aid or just to apply for unsubsidized Stafford loans, take heart. The Department of Education announced last week that it intends to substantially modify the process by making the FAFSA shorter, simpler and more user-friendly.

This streamlining will take place in 3 steps:
- Beginning this summer, enhanced skip-logic on the web-based FAFSA will allow applicants to bypass many more questions that are irrelevant to their situation. For example, students who are married or 24 and older, and therefore considered independent, will no longer have to answer questions about their parents’ finances.

- In the second phase, the Department of Education will ask Congress to pass legislation allowing the elimination of numerous questions that ask for financial data not found on tax returns. The department claims that since much of this information is not verifiable, especially that pertaining to assets, it adds little value to the process of awarding aid. So expect to see many of the asset questions discarded should Congress agree to the changes…no more reporting home equity which actually counted little towards the Expected Family Contribution anyway.

- The third step will be rolled out first as a pilot program to students applying for aid in the spring term of 2010. The program will allow students to populate 18 questions on the revised form with data retrieved from their most recently filed tax return. Why use this target group? Keep in mind that most of us have not yet filed our tax returns by the time we are required to submit the FAFSA to schools in early February in order to meet their financial aid deadlines. We complete the form as soon after January 1 as possible using estimates, to be updated with actual tax return data at a later date. Those applying for financial aid for the spring term start the process several months later, after the April 15 tax filing date. Again, this is only a pilot program. Questions still abound as to whether this will be a fair measure of need since using the last filed tax return in most cases for those filing for fall will mean relying on information that may be up to two years stale. One potential consequence is that colleges and state institutions cease to rely on the FAFSA and institute their own forms if they believe the information is too dated to be meaningful.

Will these changes be sufficient to generate greater accessibility to students or do they go to far? While that is being debated. some streamlining is already in the works, and that’s the good news for those who do not eagerly anticipate completing another FAFSA form come January 1, 2010.

Friday, June 19, 2009

Honors College Education at a Bargain Price

Don’t rule out state universities in the south if you are looking for honors college experiences at a far more reasonable price than you will find for comparable educations in the northeast. My recent trip down to Georgia and Alabama included four state universities (Georgia Tech, University of Georgia, University of Alabama-Birmingham and University of Alabama, Tuscaloosa), all with top quality honors colleges that are actively seeking to increase their geographic diversification and draw students from outside the southeast. These top-notch programs are well kept secrets just waiting to be discovered. The number of Fulbright, Goldwater, Marshall and Rhodes fellowship recipients is comparable to that at the Ivy League colleges. What’s more, for the student who is looking for a reasonably priced education, small classes, plenty of research opportunities, yet the campus spirit and excitement that come with attending an athletic powerhouse, these schools should not be overlooked. You can go to each university’s website to check out their honors programs and the types of scholarships they offer.

I also had the opportunity to visit several wonderful private colleges and learned that most offer meaningful tuition discounts, especially to candidates they are anxious to recruit (read: out-of-state!). Two of my favorite lesser known colleges were Birmingham-Southern College in Alabama (one of the Colleges That Change Lives), and Agnes-Scott College, a gem of an all-women’s college in the charming Atlanta suburb of Decatur. Its graduating senior class produced two Fulbright scholars this year and more fellowship recipients than the colleges in the Ivy League.

So think about expanding your horizons and looking beyond the colleges in the northeast and mid-Atlantic states. You may be pleasantly surprised by the quality of the education, beauty of the campuses, lifestyle, and cost!

Sunday, June 7, 2009

Looking to Canada for Value

While Canadian colleges and universities have been increasing in popularity among American students over the past few years, the state of the economy has contributed to a recent surge in interest. Primary reason: Value! The cost of attending many private colleges in the U.S. has topped $50,000 a year. By contrast, the total annual bill for foreign students at a Canadian university is in the $30,000 range, a 40% savings!

But cost is not the only reason that Canadian schools have experienced an increase in applications and matriculation by American students. Canadian universities had been attracting more and more U.S. citizens well before the current economic crisis. Over the past 12 years the number of U.S. students studying in Canada has more than tripled to top 9,000. And as more American students head north, the benefits of attending a Canadian university are no longer such a well-kept secret. Those benefits include globally recognized academic programs, the opportunity to enjoy an international college experience without venturing far from home, state-of-the-art campus facilities in cities such as Montreal or Toronto, and a far less cumbersome and more straight-forward application process (no essay or letter of recommendation requirements).

American students attending schools in Canada can take their Stafford or PLUS loans with them across the border, though Pell Grants are not transportable. So if you are sensitive to cost (and who isn’t), want a top quality education with a vibrant student life experience, and are willing to explore beyond the U.S. border, then you might consider the Canadian university option. Check out the Association of Universities and Colleges of Canada’s website at to learn more.

Friday, June 5, 2009

New Option for Federal Student Loan Repayment

Borrowers graduating from college with student loans are about to get some relief from the federal government starting on July 1. Those in good standing on their student loan payments will be able to take advantage of a new program that will allow them to tie their monthly loan payments on federal loans to what they make, rather than to what they owe. Monthly loan payments will be capped at 15% of the amount by which gross income exceeds the federal poverty level (now $16,245 annually). Furthermore, if the loans are not fully paid off after 25 years, the unpaid balance will be forgiven. While this is generally great news for graduates starting out with modest post college incomes, there is some fine print of which borrowers should be aware.

As income rises, so will your monthly debt payments. That’s not a reason to turn down a raise, but don’t be surprised when the required loan payment suddenly increases.
Income used in the calculation is household income, not just the borrower’s; if a person is married, the spouse’s income will factor into the formula to determine the maximum payment amount, provided the couple files jointly. Filing separately will get around this issue. However, the taxpayers will forfeit other tax benefits such as student interest deductions which are only available to married couples who file jointly.
Payment reductions will slow down debt amortization. The not-so-desirable result is higher interest charges over the life of the loan.
Any debt that is forgiven after year 25 will be treated as income and therefore subject to taxes.
And as noted, borrowers must be in good standing to take advantage of the payment option.
This program applies to federal loans only. In other words, payments on high interest private student loans cannot be tied to income.

In an earlier post I discussed the advantages of the federal, or Stafford loan program, over other types of borrowing to finance one's education. The new income-based repayment program will provide another reason to exhaust this borrowing source before resorting to other types of loans.

Wednesday, May 27, 2009

Credit Card Reform...It's About Time

Financial institutions that prey on college students by offering gifts and other promises in order to entice them to sign up for credit cards has been a huge problem…one that fortunately is about to come to an end. Both the House and the Senate recently passed the Credit Card Accountability Responsibility and Disclosure Act of 2009, which President Obama is expected to sign into law. What is significant about this act? Aside from addressing what are considered unfair practices with respect to interest rates charged to cardholders, this act will do much to curb potential abuses targeted at college students. You may recall from one of my prior posts that students graduate from college with, on average, more than $4,000 outstanding in credit card debt, according to a recent Sallie Mae survey. This truly illustrates how serious a problem student leverage has become.

The most significant provisions of the act relating to college students can be summarized as follows:
- The issuance of credit cards to consumers under the age of 21 is prohibited unless
- a co-signer, 21 or older, agrees to be jointly responsible for the account, or
- the borrower can demonstrate independence and the means to repay debt incurred under the card.
- Credit card companies may no longer offer give-aways on or near college campuses to induce students to sign up for credit cards; The act will also encourage colleges to set policies that will limit credit card marketing locations and institute credit and debt counseling as part of their student orientation.
- Any contracts between colleges and credit card companies will require public disclosure.

This is a much needed first step to address a practice that is contributing to the potential financial irresponsibility of the Millennium generation. The changes that the act will institute are overdue, and we as parents should take this opportunity to also counsel our children on good and bad debt to help them establish sound money management habits as they move on to financial independence.

Tuesday, May 19, 2009

Finding the Colleges That Will Change Your Child's Life

Many of you are probably familiar with Loren Pope’s book, Colleges That Change Lives, in which he identified 40 schools that he believed offer unique college experiences and which have strong track records for producing graduates who go on to become successful scholars and scientists. Last night these 40 colleges drew a crowd of several hundred students and parents at the Colleges That Change Lives (CTCL) information session and college fair in New York City. Whether or not one of these schools is potentially the right fit for your son or daughter (go to the website to check out the list of these 40 colleges:, the approach has merit for all students beginning the college search process. The CTCL colleges travel across the country each year as a group to reach out to students and families and to share their philosophies on admission and on picking the right college match:
- Don’t let yourself be seduced by rankings such as those in U.S. News & World Report, which are based upon entering student statistics. These rankings say nothing about what goes on during the four years in college!
- Identify schools where serious and thoughtful scholarly work is performed. Pope picked his 40 schools by finding out where PhD students did their undergraduate studies. These colleges out pace many of the more selective schools in terms of the number of future PhDs they turn out each year.
- Look for colleges that are student centered and focused on undergraduate education.
- Find schools that produce creative and critical thinkers, encourage cooperative rather than competitive learning, and where students are engaged in intellectual pursuits both in and outside the classroom.
- Bottom line: Look at outcomes, rather than inputs. What do students accomplish while they are in school and what paths do they follow after graduation?
The principle message of the CTCL schools is that students are more likely to have meaningful and worthwhile college experiences if they jettison the criteria of name recognition, prestige and ranking, and focus on understanding their particular needs and how these will be met by the mission and identity of the college community they choose. Young people owe it to themselves to take ownership of the process. That means knowing themselves well and having the confidence about what they have to offer. Your son or daughter is more than just test scores, a GPA and his or her class rank. Fortunately most colleges are more interested in learning about who the student is as a person. They share your objective of helping your child find the right fit and have the best possible college experience!

Thursday, May 14, 2009

Teaching Financial Responsibility - Talk to Your Kids About Money

This week I gave a presentation on Good Debt/Bad Debt to students at Chess-in-the-Schools, a not-for-profit after school program for New York City youth. I am hopeful that they left the session that much smarter about how to manage their personal finances. I am encouraged that I made some headway and was able to impress upon a group of high school kids that good financial habits will make or break their ability to lead financially secure lives.

Personal financial responsibility is a subject that needs to be taught to all young people, not just kids from lower socio-economic backgrounds who have no safety net. No one wants a child to graduate from college with excessive and unpaid credit card balances or to rack up large and unmanageable debts during any point in his or her life. Many of us had children in our thirties, and need to be thinking about our retirements too. Do we really want to be supporting our children’s bad spending habits after we’ve shelled out an obscene amount of money for a four year college education that we hoped would lead to their financial independence?

So what can we as parents do? Don’t wait until they go off to college to talk to them about good personal financial habits. Teach them the difference between good debt and bad debt. Using a credit card for impulsive purchases and paying the monthly minimum balance means that they are probably financing that purchase, at an 18% interest rate, over a period exceeding 20 years! At a double digit rate, the amount of interest they’ll end up paying will exceed the cost of the original purchase. If your son or daughter has a newly acquired credit card and is finding it difficult to pay off the balance each month, suggest using a debit card which takes the money directly from the checking account (but make sure that the checking account has sufficient cash so as not to overdraw the account). Help your child to see the need to cut back on impulsive spending.

Here are some staggering statistics. A recent survey conducted by student lender Sallie Mae, as reported on Bloomberg, revealed that 84% of students have at least one credit card, compared to 76% in 2004. Students with credit cards have an average of 4.6 cards and half of them have 4 or more. The average credit card debt among graduating college seniors was more than $4,100 last year, up from $2,900 in 2004. And only 17% of those who responded to the survey said they paid off their credit card balances each month!

You may be shocked to learn just how easy it is for an 18 year old college student to get a credit card. The banks prey on them on college campuses, send mailings about low initial rate offers, post inviting pitches in college bookstores and even entice students with free lunches. Make your child aware of these seductive offers and help him or her to understand how to be responsible about money and credit. There is no shame being one of the 17% who pays off credit card balances each month!

Tuesday, May 5, 2009

We've Deposited...Now How Do We Pay?

I am just back from college tours and an Independent Educational Consultants Association (IECA) conference in San Francisco. My college visits took me to Stanford University, Menlo College, University of San Francisco, Mills College, St. Mary’s College, Cal Berkeley and Santa Clara University, a rather eclectic grouping of schools. These trips always reinforce for me the benefits of the college visit experience, where one can truly get a feel for the campus and academic life, as well as the character of the student body. College visits are the only way to experience a school firsthand. There is no near substitute. When students make a judgment about whether they click with a particular school it is rarely cerebral. Fit is generally about feel: how well can I envision myself here?

But before I get ahead of myself talking about fit for the juniors just beginning this process, I want to continue with a topic that has been tops on the minds of many with high school seniors: how to pay for college, especially now that the May 1 deposit date has come and gone and students have committed to a school.

Myth #1: Families who do not qualify for need-based aid are the fortunate ones since they can afford to pay for college.

The opposite is often true. Middle income families are among the ones most affected by the economy and the rising cost of attending a four year school. Unless your child receives merit aid, he or she will not have access to outside resources such as federal or institutional grants that would help defray some of the costs. Even those families that were disciplined about saving for college are finding that the 529 plans have come up short. For many of us, closing the gap with income is a stretch.

If paying for college is a concern (you are not alone!), you hopefully gave serious consideration to all of these factors prior to putting down the May 1 deposit. Taking a more practical and realistic approach to financing a college education has motivated some to decide in favor of the more affordable option. The role that the financial factor will play this year has been the wildcard that has had colleges on edge about their enrollment numbers for the fall matriculating class. Some schools, perhaps in panic, even went to their waitlists prior to the May 1 deposit deadline, previously unheard of!

Whether your son or daughter is attending a state or expensive private college, you still want to consider all of your options for financing these four years. Scholarships are one route, but your student must be willing to devote the time and energy to filling out more applications and writing essays. Amounts tend to be in the $500 to $1,000 range, but with any luck, he or she will be able to win one or two that will make a dent in the cost. Good websites for scholarship searches include and, and some scholarship donors are still accepting applicants. Additionally, you may want to inquire in your guidance department to see if there are local scholarships that remain unclaimed. Don’t be alarmed if you have to register at a scholarship site, but you should never have to pay, so move on to another if they ask for money.

If savings, available income and scholarships still do not cover the cost, your option is to borrow, and unsubsidized federal Stafford student loans are the best priced loans for those not eligible for need-based awards. Students who do not demonstrate need can borrow up to $5,500 at 6.8% in their freshman year under this program. The amount goes up by $1,000 each of the next two years, maxing out at $7,500 for juniors and seniors, a borrowing total for all four years of $27,000. Though 6.8% is high based upon today’s interest rates, the loans are fixed so they hedge the risk of a rate rise. These loans are unsubsidized which means that the student is responsible for paying the interest on the loans while in school. Otherwise interest will be capitalized, or added to the principal. Principal repayment begins 6 months after graduation.

Other borrowing options include the PLUS (Parent Loan for Undergraduate Students), which is also part of the federal loan program. Unlike the Stafford loan, where the student is the borrower, PLUS loans are taken out by the parents and have no specific dollar limit. Parents who qualify (there is a credit evaluation) can borrow up to the full amount of the difference between the total cost of attendance and the student’s financial aid (grants, scholarships, Stafford loans, work-study). The rate is 8.5% if borrowed from a bank or 7.9% if the federal government is the lender. Unfortunately you have no control over the rate. The college determines in which program it will participate. Don’t forget that many of these loans will have to be repaid in 10 years, so before you start loading up on debt, check out one of the many student loan calculators to estimate your aggregate monthly payments after four years of borrowing. My favorite site for this purpose is I plan to discuss reasonable debt load in an upcoming post so stay tuned.

Tapping home equity, if there is still any in your home, is another way to go. Families can take the mortgage interest deduction. However, equity lines of credit are generally adjustable rate. While the rate might be attractive today, expect that it will go up as the economy recovers, though anyone’s guess is when that will be.

In my view, two last resorts for borrowing are private loans, which are also adjustable rates, subject to rate increases, and retirement funds. Many banks have pulled out of the private loan market given difficulties over the past year and a half in securing funding for these loans. Banks that continue to offer private student loans will continue to do so only if the business remains profitable (i.e., the spread between the interest earned on the loans and cost of funding them is positive). Sallie Mae, the largest private student lender, recently changed its lending terms such that the private student loans it offers will now begin to amortize while the student is still in school. This is clearly an additional financial burden on a family that is paying for college at the same time. Lastly, your 401(k) is sacrosanct so do not touch it! Early withdrawals will result in a 10% penalty. Even borrowing against your retirement fund has its drawback. The money is no longer working for you and you must pay it back with after tax dollars, not a good strategy since the money you initially invested was pre-tax. Also keep in mind that you can borrow for college. You can’t borrow to fund your retirement so don’t raid this account!

One last thought on paying for college with borrowing and this is perhaps the most important point! You must fill out the Free Application for Federal Student Aid or FAFSA if your student is going to apply for unsubsidized Stafford loans, despite the fact that they are not need-based. To fill out the FAFSA you will need a pin number for you and your student ( which is used to sign the form. The FAFSA can be accessed at The other primary reason to complete the FAFSA is that situations change: a parent loses a job or perhaps becomes sick. The last thing you want to do is have to scramble to complete yet another form if that were to occur. A situation change might even be a new family member or an additional student in college. These are factors that will directly affect your aid eligibility. Lastly, FAFSA rules do change from year to year, so your eligibility for financial aid may change as a result of an adjustment to the federal methodology. These are reasons why I advise all families to fill out the FAFSA form each year, regardless of their financial situation.

Tuesday, April 21, 2009

How Badly Do They Want Me?

For those of you who may have missed the Education Life section in last Sunday’s New York Times, an article written by Laura Pappano titled The Office: Behind closed doors as aid officers decide just how much they want you to say yes, describes Boston University’s approach to awarding money. This is one of the more transparent articles I have seen in terms of shedding light on how aid dollars play into the enrollment management process. The executive director of BU’s aid office makes no apologies for the underlying messages that these award packages send: If you don’t get the financial aid you need, especially if you have been “gapped,” the school is telling you that it likes you enough to admit you, but you are not its top choice. If you read my prior post, you know that colleges use financial aid to entice students whom they want to attend; that is the unspoken truth.

So what is the best strategy for students? Devote the time when developing the college list in the spring of junior year to explore schools that will view you as a highly desirable candidate and colleges at which your special talents will be valued. There is no problem going for the reach school, but just be aware that if financial aid is an issue, being an “on-the-bubble” candidate may not only affect your award package, but might also impact your chance of admission.

While several colleges still claim to be need-blind, some are publicly moving away from that policy. Earlier this month, Tufts University announced that it had abandoned its need-blind policy for the last 850 applicants, or roughly 5% of the applications yet to be read. Their explanation was that the money just ran out. Message here: students requiring financial aid need to submit their applications early and not wait for the December 31 deadline, or whatever date it might be, in order to receive priority consideration for money!

Will we see more colleges follow the lead of Tufts over the next few years? Let’s not forget that colleges are businesses too. They have budgets to balance, which means that maximizing revenues and controlling expenses, especially in economically lean years, need to be a primary objective. Absent a quick rebound in the economy, which is not looking likely, do not be surprised to see other schools abandon the need-blind policy in the coming years. Some will continue to practice “need-aware,” which gets back to the point that money and candidate desirability are, in practice, not treated separately in the college admission process. Many people are skeptical that there are any schools today that can honestly state that they still maintain a Chinese Wall between admission and the financial aid office, regardless of the stated policy.

Friday, April 10, 2009

The Economics of a College's Admission Process

If your child is a senior in high school and is evaluating college options, he or she is most likely consumed with the decision about where to spend the next four years. No doubt, how to pay for college is more of a factor in the decision this year than it might have been in years past. Whether or not you qualify for need-based financial aid, your child may still have been fortunate enough to receive a merit-aid scholarship from some of the colleges offering admission. Why do schools do this for students who do not demonstrate need? You may be surprised to learn that colleges which rely on tuition to cover most of their expenses are more likely to offer merit aid, even during these turbulent economic times. Unless they fill every seat in the class, colleges may find themselves short of precious tuition dollars needed to operate. These are the funds necessary to pay everything from faculty salaries to the utility bills. Better to entice a student to attend by offering a nice discount to tuition than to fall short in filling the available spots, which may in fact mean resorting to faculty layoffs and other cost reduction measures.

The April 6 issue of Time Magazine had an interesting article: Sticker Shock: Inside the College Financial Aid Game by Laura Fitzpatrick, a look at the financial aid and admission process at Skidmore College this year. This article provides some interesting insights into the workings of a financial aid office at a college that relies 80% on tuition for its funding. According to one school official, not meeting their enrollment numbers by just a single student can mean a $25,000 to $30,000 gap in the operating budget. Skidmore, like many other colleges, actually increased its financial-aid budget 8% this year (primarily need-based) by reducing costs elsewhere including travel, faculty raises, and by placing renovation plans on hold.

So how does all of this affect a college’s admission practices and is it true that no colleges are truly need-blind (meaning that financial need does not factor into the admission decision)? There is no doubt that college admission in this economy definitely favors the student who can pay the full fare. While some schools still profess to be need-blind, others admit publicly that they are “need-aware” or “need-sensitive.” The most desirable students will make the cut, regardless of their financial situation. However, on the margin, the students who can pay will edge out those who can’t. By the way, one should not assume that a college which professes to be need-blind or need-aware will fully meet a student's demonstrated financial need. More and more colleges are following a practice known as "gapping," meaning that they accept a student, offer an aid package, but one that falls short of paying the full cost of attendance (a subject for another posting).

Even for families that don't qualify for aid, many are finding it very difficult to justify the private school sticker price these days. A recent U.S. News & World Report survey (published April 8, 2009) found that 70% of prospective college students will alter their college plans, seeking less costly options than they might have considered in prior years. Though college costs have been rising faster than the rate of inflation for many years, the time has come when families are recognizing the need to think more strategically about college and cost.

Thursday, April 9, 2009

The Decisions are In!

Now that April 1st has passed, most colleges have notified their applicants of admission decisions, ending an unusually anxious period of speculation about how the economy, juxtaposed against the largest class of graduating seniors, would impact the admission decision process. Though many colleges did have record applications this year, some have actually hedged their bets, admitting more students and maintaining larger waitlists, in anticipation of student fallout due to the recession. This year no one on the admission side is confident that they will know what their freshman class will look like by the May 1 deposit date. Will families ultimately choose state school options, feeling they can’t justify the cost of private school tuition in today’s economy (for more on Paying for College – Tacking the Tough Questions, see my article under Helpful Resources – Recommended Reading on my website)? The likely result: colleges will go to their waitlists this year, perhaps to an extent not seen in prior years. Schools probably won’t know until August what their ultimate freshman class will look like, as students get off waitlists at their first choice colleges and walk away from deposits at other schools.

So what does this mean for students who have been waitlisted at their number one choice? No one can predict how deep into waitlists college will go this year. In prior years, 14% of waitlisted students, on average, were ultimately admitted, though Harvard took a whopping 200 off the waitlist last year! While I honestly believe that colleges will heavily rely on waitlists to fill their freshman class this year, I would not advise a strategy of holding out for a school. It’s still a big unknown so students should focus on the options that they have and commit to a college that has already accepted them. That doesn’t mean you should give up on your hopes of getting off the waitlist. Get in touch with the school and let them know of your continued interest and why you think you are a good fit. Be specific on what appeals to you about the college and what you have to offer the school. Update the admissions committee on any positive changes in your profile, whether it is grades, awards, or some other honor or achievement. Then, don’t stalk. You have demonstrated your interest. Now commit in your mind and heart to one of your accepted school options. Remember, all your choices are good ones!