Decision Time
Scrutinizing aid offers now can help avoid costly mistakes later
When the acceptance letters arrived in the spring of 2001, the Gerstel family of Agoura Hills, Calif., was already celebrating son Adam's cancer remission. And the festivities continued when the family, savings exhausted from medical bills, learned Adam had been offered a jaw-dropping $25,375 to attend New York University's Tisch School of the Arts. Adam's dad, Marc, figured he could borrow the extra $13,000 a year he'd need to meet the $38,000 NYU had estimated as the total cost of attending.
But when the bill arrived, Marc Gerstel panicked. It wasn't that $5,000 of the $25,375 was in the form of a student loan. It was the fact that NYU wanted nearly $7,000 more than the family had planned. Seems Marc, who runs his own dental lab, had failed to analyze the fine print on the financial aid letter. Marc learned that an additional $4,000 of the aid was work-study, which would be paid to Adam as he earned it. What's more, NYU's earlier estimate failed to include about $3,000 in fees for film classes, textbooks, and other extras. "It was like buying a car" with its fine print, catches, and surprise costs, says Marc. "It was confusing as hell."
It is indeed. And colleges often add to the complications. Some package their awards in ways that financial aid experts say can't help but confuse students and parents. Even the best-intentioned use the mind-boggling jargon of financial aid--FAFSA, EFC, and PLUS. And because each school uses different aid strategies and form letters, comparing offers can seem like an exercise in differential calculus. But parents and students who expend a little extra effort to do some simple math, draft a polite appeal letter, and think creatively can help reduce college bills.
Free money. The first step: Figure out the real value of each school's offer. Start by adding up only the grants, which are handed out according to need, and scholarships, which are awarded for good grades, test scores, or other indicators of merit. "They are the only way to reduce your out-of-pocket costs," says Kalman Chany, author of Paying for College Without Going Broke.
Next--and this is key--draw up a realistic estimate of the total cost, including tuition, fees, room, board, and all the extras such as transportation and entertainment (story, Page 57). Now subtract the amount of free money. "They need to be certain that they look not only at the offer but at the cost of education," says Charles Bruce, senior director of scholarships and financial aid at Oklahoma State University. He frequently has to explain to parents that his lower offer may be a better deal than bigger ones from private schools with higher tuition. "Then the light goes on."
Butter up. Once you've got the real cost, take a hard look at the kinds of grants included in the offer. Flattered that one school has recognized your student's genius and awarded him or her a "merit scholarship"? Maybe you shouldn't be. Colleges aren't advertising one key reason behind the booming trend of renaming need-based aid as "merit" based. A 2003 Harvard study showed that students are nearly twice as likely to go to a school that offers them a merit scholarship as a school that offers them the same amount in need-based aid. In many cases, the study found, the students were so wowed they bypassed bigger offers from schools that would probably have offered a better education. "It was an astonishing result," says coauthor Christopher Avery, a public policy professor. While many merit scholarships are legitimate, "they can be a device colleges use to gain leverage in recruiting," says Avery.
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