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Economy shakes up college scholarships, financial aid
Amy Buttell is a freelance writer based in Pennsylvania
Two major trends are affecting the way college scholarships, grants and other financial aid are awarded.
The first is no surprise: The fallout from the Great Recession cost many colleges millions of dollars from their endowments. Forcing cuts to financial aid budgets.
The second: More colleges are strategically employing tuition discounting -- the term used to describe the process of awarding college scholarships and grants -- to shape their student bodies in specific ways.
Combined, these trends mean potentially fewer students will get large awards and the awards they get may be wildly different.
"What's happening right now is that everyone's been hit with the issues in the economy, so we'll be seeing a little bit less of tuition discounting," says Manuel Fabriquer, founder of College Planning ABC in Tracy, Calif. "It is still going to be prevalent -- there will still be discounting -- but more of it will be going to the top 20 percent or 25 percent of a particular school's freshman class."
Colleges are being more proactive than ever in using tuition discounting to attract exactly the type of students they want in their student body. "The trend in recent years has been to leverage tuition discounting -- not just to recognize scholarship and or financial need, but also to address competitiveness in certain markets," says Karen P. Condeni, vice president and dean of enrollment at Ohio Northern University, a liberal arts college with an enrollment of 3,600 students in Ada, Ohio.
"Some institutions discount in order to help shape their enrolled classes in line with each institution's strategic goals," Condeni says. "For example, if an institution is seeking higher profiled students or more students for a particular program of study, tuition discounting could be a strategy used to achieve higher yields in line with such goals."
For students seeking admission to the most competitive private colleges, it means that there won't be as much need-based (aid) as there was in the past, says Peter Ratzan, a partner in College Planning Specialists in Weston, Fla. Some of the top private colleges have rescinded their need-based policies, under which they sometimes met the entire financial aid need of a student based on the expected family contribution.
Now, instead of being completely need-based, these schools will consider financial need as well as a student's academic, athletic and other qualification for merit scholarships. Colleges that are entirely need-based generally do not offer merit scholarships, so it doesn't matter if the student has high test scores or some other academic qualification because they don't offer merit aid.
For everyone else, "all signs point to the very strong possibility that discounting is going to be much less on a going forward basis," says Andrew Lockwood, Ratzan's partner at College Planning Specialists. "The financial aid packages are going to shift to being a greater percentage of loans compared to grants and scholarships."
State colleges are affected more than private colleges, Lockwood adds, because they have less money to start with. Most public colleges have been hit by state budget cuts as well. "As a general rule, the private schools are more generous than public colleges when it comes to financial aid," he says." They have more funding, larger endowments, and they are, by far, more able to address a family's financial needs than public schools."
Students applying to state colleges are impacted by these trends, especially those applying to out-of-state public schools, where tuition is much higher than in-state schools and students generally receive less financial aid, according to Lockwood.
Ratzan advises parents not to ignore private colleges in favor of public colleges not only because of the size of the potential financial aid awards, but also because it generally takes public college students longer to graduate than private college students -- an average of five-and-a-half years. So even if your state college is cheaper than a private college, if you have to pay tuition for an additional year and a half, that difference may evaporate.
When selecting schools to apply to, it makes sense to apply to schools that are similar and within your student's reach, Fabriquer says. "Every college has a niche, so it's important to match up the student with the right college and then figure out which colleges are competing against each other for the same type of student," he says.
For example, if you are looking at schools in Pennsylvania, Carnegie Mellon, Haverford and Bryn Mawr frequently admit the same type of student, so your son or daughter could apply to all three and, if admitted, try to leverage a large financial aid award from one into a bigger award from another.
Finally, make sure your son or daughter applies to a good mix of schools, says Lockwood. He recommends a high school senior apply to between six and eight schools with at least three of those well within academic reach.
Posted March 26, 2010