Need-Blind, Need-Aware and College Admissions

Does financial need factor into the college admission decision and if so, how does it affect applicants and to what extent?  Adding to the anxiety about college admissions is the question about how to handle and interpret application questions on financial aid.  Parents, especially those who are not sure whether they will qualify for assistance, often ask whether checking “yes” to the need-based aid question might negatively impact a student’s chance for acceptance. 

Like many questions related to college admission, the answer is rarely so straightforward. Students, of course, want to maximize the probability of admission without jeopardizing their opportunity to receive financial aid for college.  Some schools profess to be need-blind, meaning that they do not consider ability to pay in the admission decision.  That may sound like good news; however, it does not necessarily mean that the college will provide adequate financial aid to enable the student to attend once admitted.  New York University, a need-blind university, does not claim to meet demonstrated need and generally comes up short by more than 30% of the cost.  Admitted students are counseled by admissions, only after acceptance, that attending the university might not be a sound decision if it requires excessive borrowing.  

Certain need-sensitive colleges take a different approach to college admission, choosing to give more aid to fewer students rather than put affordability out of reach for many. Several of the more selective need-sensitive colleges, in fact, admit most though not all students without regard to their ability to pay.  When it comes down to the final 2-20% of the admission decisions (depending on the college), ability to pay becomes the deciding factor.   Is this more palatable than offering a spot in the class without providing the means to pay for it? Wesleyan University believes so, yet met with protests from students, parents and alumni when it switched from a need-blind to need-aware or need-sensitive policy this past May, stating that it would now consider ability to pay when filling the last 10% or so of the class.  The college chose to alter its admission approach so that it would still be able to meet the demonstrated need of every admitted student. A list of the small group of Colleges-that-claim-to-meet-full-financial-need was published by U.S. News & World Report earlier this year.

Whether a college is need-blind or need-aware, families should have an understanding about what they can afford to pay and what amount of borrowing is manageable, even before the applications are submitted. The unfortunate truth is that need is an unavoidable topic in most college admission offices. Colleges do not have unlimited financial aid budgets and most have to factor this into the equation. You can decide to try to game the system and avoid checking the will you apply for need-based financial aid? box, but if you honestly do not have the ability to pay, you are not doing yourself or your child a favor.  That being said, it is a good idea to understand the likelihood of your receiving aid as you work through the process.

Here are some guidelines on how to think about the application financial aid question to help you evaluate its potential impact on the admission decision for your child:

-          Is the school in question a reach, mid-range or likely for your child? If he or she is not at the high end or at least in the upper half of the admitted student range in terms of academic performance or some other compelling factor, having a financial need probably works against him/her in the admission process.  A student with money and the same academic qualifications has a better chance of being admitted. 

-          The most selective colleges reserve their financial aid for qualified students with demonstrated need rather than those with the best academic record.  At places where admission is less selective, merit tends to rule.  Many colleges use financial aid as the carrot to lure the most desirable students, whether they need financial assistance or not. In search of ever-improving rankings, colleges essentially pay to attract the high performers. 

-          More schools “gap” than do not; they expect that you will fill the balance of your need with student or parent loans.  So even if your Expected Family Contribution or EFC is less than the cost of attendance, don’t just assume that the college will make up the difference with a grant.  One major caveat: some colleges disingenuously qualify loans as financial aid; since loans must be paid back, be advised to distinguish them from grant money which is a gift.  If it is not clear whether a financial aid “award” includes borrowed money, ask.    

The best way to find out how need factors into the admission decision at a particular college, if in doubt, is to pick up the phone and call the school.  Keep in mind, however, that a need-blind policy will not necessarily work in your favor if tuition is high and the financial aid policy is to gap.  Net price calculators which can be found on every college’s website are another tool at your disposal to estimate your actual out-of-pocket cost per year.  You can also use College Navigator, a Department of Education site, to get a sense for what families in your income range typically pay at a given college.   With these tools, you will be better informed before checking the financial need box. 

Does That Price for This College Make Sense?

The cost of college today has put affordability truly out of reach for most Americans, including many who are comfortably middle class.  I am not stating anything that anyone who is currently putting children through college hasn’t realized.  While higher education has always come at a cost, it has reached a price point that now exceeds the pain threshold for most Americans.  As President Obama, Congress and colleges wrangle over how to fix the problem of runaway tuition increases, I sadly am of the opinion that the situation has no satisfactory solution that doesn’t involve drastically changing the delivery of higher education in this country. But that is a subject for another day.  Right now I am consumed by the decisions families make with respect to cost and choosing a college.  

The question that has been weighing on my mind is how much is too much to pay for college, specifically for schools that heavily discount tuition.  Anyone who follows the news about rising college costs probably is familiar with the difference between the “sticker price” (what a college publishes as its total cost) and “net price” (what its students actually pay, on average).  In recent year, most colleges have made a practice of offering merit aid to students they wish to lure away from more selective schools.  Colleges do that by “discounting” the sticker price so that students feel like they are getting a real deal…but are they?  The discounting of tuition, in fact, is one of the main drivers of higher prices.  Colleges are able to offer select students sizable discounts by charging everybody else more.  So should you pay full price for a college that uses your tuition dollars to subsidize other students?  

The question has no simple answer.  What makes sense for one student and family may be impractical for another.  My goal here is to provide a framework for families wrestling with this question as they help their children make the all-important decision about where to attend college.  

Have the family discussion and a joint understanding about affordability before the applications go out and the acceptances come in.  It is okay to apply to the dream college, but be clear with your son or daughter about what kind of financial aid package, either need or merit-based, will make it feasible to attend.  Setting expectations early may mean avoiding future heartache.

Recognize that loans may make it possible to attend the college of choice today, but that excessive borrowing will feel like an albatross around the neck once graduation has passed and the loan payments come due. Borrowing a reasonable amount to pay for college makes sense, but knowing what is affordable requires planning and forward thinking.  How much will the student and/or parents probably have to borrow over four years?  What will be the approximate size of the future graduate's monthly payments and how long will it take to pay off the loans?  Given a student’s career plans, what will he or she likely earn, and will that be sufficient to comfortably meet debt payments while still covering other living expenses?  A good rule of thumb is to keep debt payments at or below 8% of gross income.  Calculators such as those available on the website http://www.mappingyourfuture.org/ enable one to project future debt payments, based on expected borrowing and interest rates. The calculators will also help you determine what a person should earn in order to comfortably pay back a given balance in student loans. If you are looking for a way to estimate average salaries in a specific field by region, you might want to check out the Bureau of Labor Statistics site: http://www.bls.gov/.

Think it through before you pay the sticker price at a college that heavily discounts tuition. It is important to find out what percentage of students receives some type of merit aid and the amount of the average award.  If a school discounts tuition for a significant number of students and you are not one of them, you are probably overpaying and subsidizing someone else’s child who has better grades and test scores.  When is it okay to do this?  1) If it’s the dream school and you can afford it without borrowing, 2) if the student wants to pursue a unique major or program for which the college is renowned, 3) when the college offers some merit aid, but most students pay full fare (e.g., the “subsidizing of other students is not significant) and 4) in cases where other less expensive options truly do not meet the academic needs of the student.

Have your child include schools on the college list that that will likely offer tuition discounts based on his or her test scores and GPA.  For the most part, you can figure out which colleges these are.  Are the test scores and GPA at the high end of the school’s range?  In all likelihood, the college will offer some discount as an incentive to entice your student to attend.

 

Weigh the emotional against the practical.  Does it make sense for the middle income family that receives no need-based aid to choose the Ivy League or highly selective university over the state school option?  Given the emotions wrapped up in these types of choices, I find it difficult to advise others on the right and logical decision.   Choosing the highly selective, name brand college may indeed change the student’s life, but at a high cost if excessive borrowing is involved.  This is especially true if a student has plans to go on to graduate school.  I know.  It’s hard to turn down Harvard or Yale, nor am I saying that you should.  However, graduating debt-free or with limited loans is anything but over-rated.  Do well as an undergraduate anywhere and you can spend the bigger bucks on graduate school.  

Deciding what a college education is worth is a complex analysis, yet unlike an integral calculus problem, there is no single right answer.  My hope is that having a framework to evaluate this decision and a list of questions to ponder will help each family come to the answer that is appropriate for them.

Ten Trends in Higher Education

The economy is limping along and college applications are up. What’s the connection? There may be none or perhaps the increase is driven by students’ concern about not having financial options. More likely the application trend is related to technology, the burgeoning use of social media in admissions and colleges’ obsession with creative marketing as a means to attract students. Whether or not the economy and college admission trends are correlated, both offer insights on what we can expect in the higher education realm in the future. In the absence of a crystal ball, I offer up what I see as 10 notable trends in admission and the strategic paths that colleges have begun to pursue.

- Ivy League and other highly competitive colleges are becoming even more selective, as the number of applications continues to rise at double digit rates. Preliminary reports released several weeks ago were startling, indicating that six of the eight Ivies will admit fewer than 10% of their applicants this year, achieving new all time lows. There are no signs on the horizon that this trend will reverse in the near term.

- Applications across the board are up substantially, despite the fact that the number of students applying has leveled off. Why are students applying to so many schools? The answer is largely that it is easy to submit multiple applications given today's technology, with the rise also fueled by the erroneous belief that more applications improve one's odds of admission. The list of colleges that use the Common Application expands each year and many schools are now making use of “fast” applications. Students are invited to apply by a certain deadline and colleges will waive the application fee AND the essay! What better incentive is there to apply?!

- More students are choosing to know and even commit as soon as possible, taking advantage of early decision and early action applications. Harvard, Princeton and the University of Virginia each recently announced plans to reinstate single-choice early action which they had abandoned just a few years before. Cynics see this move as a reaction to losing high achieving students, especially minorities, to other Ivy League schools that were able to hook desirable candidates earlier in the process. Expect to see the pressure to apply early continue, despite the fact that it may not be the right way to go for every student.

- Social media continues to change the way that students learn about schools and connect with others. Colleges today all have Facebook pages and are taking advantage of social sites to reach out to potential and admitted students. The corollary to this is that students need to be even more careful about what they post on these sites, even on their personal pages!

- The gap year is not just about college readiness anymore. Taking a gap year was literally a foreign concept just a few years ago and was far more common in Europe, but today many students seek outdoor adventure, travel and language study programs, community service, or work experience before pursuing their college degree. The number of organized programs, both nationally and internationally, has proliferated, and opportunities are available at many different price points. Students use the time to do good, mature and pursue something personally fulfilling. Most claim that these sojourns have tremendously enriched their college experiences.

- January admission is an idea that is catching on, and is one way that colleges are choosing to manage enrollment and fill the beds of students taking a spring semester abroad. Many colleges now offer January admission to students who might otherwise be waitlisted or rejected, and the list of schools is rapidly growing. University of Southern California, Northeastern, University of Rochester and the University of Miami are just a handful leading this trend. Students accepted to their dream school as a January admit need to ask themselves: do I want to go to this school even if I must begin mid-year or is it better to enroll for the fall at another college along with the rest of the freshman class? Some schools actually offer the option to start later. At Middlebury College in Vermont a February start date is by choice. By having a separate February admission pool, Middlebury hopes to encourage more to take a gap semester and explore a different type of experience before entering college.

- Enrollment management is here to stay. Colleges can no longer ignore the fact that assembling a class has major bottom line implications. As a result, schools are continually experimenting with new tools to attract and enroll students. Merit aid, also known as tuition discounting, is still the favorite carrot to garner the interest of students they hope will round out the class.

- Demonstrating interest is important to many colleges at all levels of admission selectivity (though many of the most selective do not track this). If yield is important, it follows that being able to gauge student interest is a valuable tool to colleges. Technology today enables colleges to track contact and to record every interaction that students initiate…even if and when they open the e-mails they receive from the school!

- The classroom is now virtual; online programs are proliferating, and not just at for-profit institutions. Just today Fordham announced that it is starting an online masters degree in social work. While online learning programs are primarily at the graduate level, it is only a matter of time before distance learning college degrees become more commonplace and gain greater acceptance.

- Dwindling government support is prompting public universities to question the value of state ties. Several are seeking greater autonomy, especially in the areas of tuition setting, procurement, and public/private partnerships. Flagships in Wisconsin, Oregon and Louisiana have proposed such separation, while the State University of New York (SUNY) frequently revisits the issue, especially in years when state support is cut. While many educators believe that eliminating a bureaucratic layer will reduce costs and improve delivery, critics are concerned that these moves will be detrimental to state systems as a whole. It’s not clear how this will play out, but I think we can expect to see some greater autonomy over the next few years.

You may have noticed that my list of 10 does not include ever-increasing tuition costs and the ongoing endowment pressures at the nation’s colleges. These are driving some of the other trends I've noted. Expect the higher education landscape to continually evolve as colleges develop new ways to manage admissions, their budgets and how they deliver their product.

Picking a College - One Student's Approach

When Kira, a National Honors Society student and gifted athlete was thinking about college, she decided to take a less traditional route than that followed by many of her fellow schoolmates who dreamed of admission to highly selective New England colleges. As a junior living in Westchester County, NY, Kira knew she was ready to broaden her horizons and to meet people outside the northeast who had different life experiences. She also engaged in early conversations with her parents about affordability, right fit (academically, socially and financially) and family values. While Kira’s parents let her know that the choice was ultimately hers, they openly spoke about cost and value, sharing their thoughts on strategies to find schools that matched on all fronts, including financial.

In today’s tough economic times, many families are seeking ways to make the cost of college more manageable. Having the conversation with teenagers about college cost and affordability is usually not easy, especially when young people have their hearts set on an expensive and highly selective school that does not offer merit aid. Many families in affluent Westchester County do not qualify for need-based aid. However, that does not necessarily mean that the cost of college is something they can comfortably afford. Some will decide to take out substantial loans which may put serious pressure on future cash flow, both for the students and the parents.

Kira’s family took a different approach and one that I frequently advocate: have the conversation about affordability, perceived return on investment and family values early, know what the options are, understand what’s important to everyone involved, and know if and how you can afford to pay for it. When families talk through these issues early and develop a sound strategy, the outcome is more likely to be positive.

Kira’s experience is one example of how that approach successfully played out. She has just completed her freshman year at Washington College on the Chester River on the eastern shore of Maryland and is thrilled with the choice that she made. She attributes her success in finding the right fit to the methodical and thoughtful way she went about her search. Having made the decisions to look beyond her backyard and the northeast, Kira and her parents headed south, starting in New Jersey, and visited campuses of various sizes to get a sense for what felt comfortable. One thing Kira quickly realized, coming from a small high school, was that “small” by college standards could still feel large to her. A class of 400 to 500 students was still double or triple the size of her high school class. She also did her homework on colleges that offered merit aid and knew that as a strong student, she would be eligible to receive money from several schools. While she is a competitive soccer player, Kira was aware that the Division III schools on her list would not pay her to play in keeping with the NCAA rules.

Kira ultimately narrowed her list down to eight colleges, and included SUNY Binghamton so that she would have an in-state option. The cost of attendance at the SUNY schools is about one-third the cost of many private colleges and universities. In the end she was admitted to all eight: Loyola College in Maryland, Elon University, James Madison University, Wofford College, College of New Jersey, St Mary’s College of Maryland and Washington College. Three of the six private colleges (Elon, Wofford, and Washington) did indeed offer her money. Fortunately, those that gave merit aid included two of her top choices, Elon and Washington. While Wofford’s aid package was substantially higher (and in Kira’s words, “very tough to turn down,”) she knew that the money offered by Washington made this a better overall fit when considering all factors. As a member of her high school’s National Honors Society she received $10,000 per year from Washington, as well as a sizeable annually-renewable Hodson Trust-Beneficial Merit Scholarship. However, the big surprise was her selection for the recently established Presidential Fellow Program which put her together with a group of 30 other accomplished freshmen who share this distinction. The fellows in this program take advantage of specially organized and wide-ranging activities and events, which include dinner with the college president in his home, a behind-the-scenes tour of Mount Vernon, the home of George Washington and a trip to the Maryland State House for private meetings with legislators.

Kira’s satisfaction with her college choice is not just about the money and the fellowship honor. She is loving her experience at Washington College for all the right reasons: the fit could not be better. She relishes the camaraderie she has found with her soccer colleagues, the quality of the courses, the small class size (even for required freshman seminars) and support she gets from both professors and coaches, especially while she balances both academics and a sport, and the student diversity of experience and socio-economic background. One of the things that did surprise her about the college is the emphasis on writing, which Kira said is intensive and required for all classes, including math courses. Though she describes the writing requirements as demanding, she knows she is learning excellent skills and habits that are essential to whichever career and life path she chooses. Kira has so embraced the WAC experience, she is now also a tour guide for the Admissions office.

Kira’s strategy for her college search and her positive experience once on campus will hopefully inspire others to think out of the box when identifying and selecting a good college match. Finding the right college fit means focusing on many factors, and that means thinking broadly about identifying excellent financial options too.

Are "No Loan" Aid Policies a Thing of the Past?

First it was Williams earlier this month; now Dartmouth has announced that it is pulling back from its “no loan” policy for students who qualify for financial aid. Anyone who has been reading about college investment losses should not be surprised by this development. A couple of weeks ago a study on college endowments reported that these investment portfolios in the aggregate lost about $95 billion in value in the 2009 fiscal year (June 2008 to June 2009), contracting 23% on average. Since colleges such as Williams and Dartmouth rely on endowment earnings to fund a major portion of their operating budgets, these investment losses have significant ramifications.

Back in late 2007 and early 2008 about 40 highly selective and well endowed colleges instituted no loan or limited loan policies for their student aid programs. This trend took hold after Senator Charles Grassley, Republican from Iowa, suggested that colleges and universities be held to the same standards as foundations that must spend 5% of the value of their investments annually in order to maintain tax exempt status. Yet as colleges grapple with structural deficits, even after a series of budget cuts, the practicality of these policies is now being revisited.

With Williams and Dartmouth taking the first steps, it is just a matter of time before others follow suit, as none of these colleges has been spared the economic pain. Both schools have stated that the reinstitution of loans in financial aid packages is a necessary move in order to preserve educational programs. Each has emphasized, however, that the return to loans will not affect students who demonstrate the most significant need. Dartmouth, for example, has stated that it expects this to impact those students whose families earn above $75,000, for whom loans will comprise $2,500 to $5,500 of the financial aid package per academic year. With income under $100,000, loans will not exceed $2,500.

So what does this mean for financial aid, in general, at colleges across the country? Without a crystal ball, I can only make some educated guesses. Neither Williams nor Dartmouth has backed away from fully meeting demonstrated need, and I expect that maintaining this policy will be a priority. We will just begin to see a higher percentage of loans in the packaging. The selective schools that currently have no loan policies generally offer need-based aid only (no merit). That of course, will not change. But what about other colleges that use merit aid to attract students and shape a class? Many of these colleges do not have the hefty endowments that prompted the no loan policies in the first place. They rely heavily on tuition to meet their budgets and fund aid.

Given the importance of filling seats, I predict that merit aid as an enrollment management tool will continue for many colleges. In fact, schools that survive by maintaining enrollment numbers may find merit aid even more important. Offering some tuition discount, past experience has shown, attracts students who still bring in tuition dollars. These are the ones that also raise GPA and standardized test score averages.

But back to need-based aid...will we continue to see less generous financial aid packages? Pure economics would suggest so. Don't be surprised to see other highly selective colleges dial back their no loan policies, especially now that two of their prestigious peers have already taken the plunge.

Best Values in Public Colleges

In my November 23, 2009 blog posting I wrote about finding value in public colleges and universities. As a follow up, I wanted to share the link to Kiplinger’s Personal Finance magazine which recently published its 100 Best Values in Public Colleges 2009-2010. You can find the full list at http://www.kiplinger.com/magazine/archives/best-values-in-public-colleges-200910.html.

The Kiplinger report also includes a one page guide to the methodology used in the rankings, explaining that both academic quality and affordability come into play. The first cut to make the list was academic quality, which for purposes of the listing includes SAT or ACT scores, admission and retention rates, student-faculty ratios, and four and six-year graduation rates. Academics, in fact, are weighted almost two-thirds more than affordability. The schools were then ranked based on cost and financial aid. The cost assessment takes into consideration total expenses for in-state students, and then looks at the average cost for both need and merit aid recipients after subtracting grants. A similar exercise was done to determine out-of-state rankings.

Why is the primary emphasis on academic quality rather than cost? Following the old adage, “you get what you pay for,” Kiplinger is rightfully concerned that state schools are following prudent strategies to maintain or even improve quality while keeping costs down. Are colleges successfully eliminating the fat in their budgets or rather, cutting into their core mission initiatives (reducing or eliminating academic programs that benefit students, for example)? That is an important factor in the quality assessment.

In my prior posting about state universities, I mentioned that many of these institutions, in an effort to increase revenues, are trying to grow their out-of-state enrollment for obvious reasons: non-resident students pay more. As a result, several public “Ivies” and other flagship state universities, unlike some of their private, highly selective counterparts, offer merit aid to entice top non-resident students (A topic, perhaps, for another posting is the criticism public universities have recently received as a result of these policies: see the January 14, 2010 Washington Post http://www.washingtonpost.com/wp-dyn/content/article/2010/01/13/AR2010011302643.html). Schools such as the University of Maryland and UNC-Chapel Hill seek to increase non-resident enrollment and are using merit aid to bring in out-of-state tuition and to shape a class (though North Carolina has an 18% cap on the percentage of students from outside the state).

If you are exploring public colleges for value, then certainly take a look at the Kiplinger list. However, I will offer my usual caveat about rankings. Determining “value” based on a selection of criteria that include such measures as standardized test scores will probably yield results that should be viewed with a critical, if not skeptical eye. The conclusions drawn are not scientific. As I have stated in the past, “value” will largely be influenced by how good a fit the school is for the students attending. Student engagement is often what contributes most to value.

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!

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.

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.