"Financial Aid eBay" Winners Set Off Scholarship Bidding Wars

Cornell announcement proves it pays to apply to several competing colleges.

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A recent announcement by Cornell University may be the just what is needed to get students and parents to understand one of the worst-kept secrets in the college financial aid world: Students who get into several competing colleges usually get more scholarships than those who focus on just one "dream" college.

Cornell announced this summer that it would match the aid offers of admitted students who also got into other Ivy League colleges. In addition, it says it will "strive to also match the parental contribution and loan levels at Stanford Universitiy, Duke University and MIT."  Likewise, Dartmouth College confirmed to me that it is also matching aid offers from other Ivies.

[Learn the 7 steps to finding a great, affordable college.]

In other words, if you want to go to Cornell or Dartmouth, and you don't think your family can afford the full sticker prices, which total about $55,000 this year, you are likely to get bigger scholarships if you also apply—and get in—to wealthy and more competitive schools such as Princeton University.

Admittedly, getting into these competing colleges is extremely difficult. Brown, Columbia, Harvard, Princeton and Yale universities all rejected more than 90 percent of their applicants this year. Dartmouth rejected 88.5 percent of applicants for the class of 2014. Cornell had the Ivies' lowest rejection rate: 81.6 percent.

But by making public their matching strategies, Cornell and Dartmouth are confirming that applicants to nearly every kind of private college can increase their odds of getting aid by pitting competing colleges against each other. If they can get into at least a couple of competing schools, students have a chance of getting colleges to act like bidders on eBay, and raise scholarship offers.

[Read how to leverage more aid out of colleges.]

One reason colleges like Cornell are willing to enter scholarship bidding wars is that they like the cachet of luring students away from schools like Harvard. Most colleges use merit scholarships - money awarded because of grades or other accomplishments - to lure students. But because all of their students have top grades or other "merit," most of the elite colleges only award aid based on students' financial needs. Harvard's financial aid formula defines "need" generously: It usually estimates that families earning up to $180,000 can afford to pay no more than 10 percent of their income for college. Cornell, which has a smaller endowment than Harvard, has generally assumed families needed less aid than did Harvard. But for the lucky or brilliant students who get into both schools, Cornell will now adopt Harvard's definition of "need," which, in many cases, will mean bigger scholarships.

[Read how colleges determine your "need" for financial aid.]

Of course applying to lots of colleges doesn't guarantee bigger scholarships. Many colleges continue to insist that they don't "bargain" or "negotiate" over financial aid. And many mean it. Most budget-strapped and low-priced public colleges, for example, just don't have the money to enter into bidding wars.

And just because Cornell wants to lure students from, say, Brown, doesn't mean Brown, which has an acceptance rate about half that of Cornell's, is willing to give away more money to lure students from Cornell. Brown declined to comment on Cornell's announcement. Some schools will only match offers from what they consider to be "peer" institutions. And some will only match offers from schools with superior admission rates or rankings.

But those students who do figure out which colleges compete with each other can often squeeze extra aid, says Gary Carpenter, executive director of the National College Advocacy Group. His son used a generous offer from Lynchburg College in Virginia to persuade Hartwick College in Oneonta, N.Y., to improve an aid package. Carpenter says his clients have used offers from schools like Clarkson University in Potsdam, N.Y. and Carnegie Mellon University to start scholarship bidding wars.

Applying to, getting into, and then negotiating with these colleges takes a lot of time and work, Carpenter admits. But the payoff—thousands of dollars and a college education—is worth a lot of work.