Students can search for merit aid options and appeal to their school’s financial aid office.
Key Takeaways:
- Many families think they won’t qualify for financial aid and don’t apply.
- There are two types of financial aid: need-based and merit.
- There’s not an income cutoff for financial aid.
When it comes to their child going to college, parents’ top three concerns are cost, receiving scholarships, and the amount of debt incurred, research indicates.
Many families are eligible for financial aid to help cover those college expenses, including tuition and fees, housing, meal plans, and textbooks. However, sometimes the cost of college exceeds the amount of financial aid a family receives.
Here’s what to know about ways to close the gap between financial aid and the total cost of attendance.
Common Financial Aid Misconceptions
Many families feel they won’t qualify for financial aid and choose not to apply, but that often leaves thousands of dollars on the table, says Shirley McDonald, director of financial aid communication and service at American University in Washington, D.C.
“Most families believe that there’s an income cutoff,” she says. “There isn’t. … There’s aid out there for all different types of families.”
There are two types of aid: need-based and merit-based. Need-based aid is determined by the Free Application for Federal Student Aid, or FAFSA, while merit aid is awarded based on a student’s academic, athletic, artistic, or leadership achievements.
“All of those things together can help a family cover the cost of education,” says Brett Schraeder, managing director of financial aid at EAB, an education firm that provides research, technology, and advisory services. “I don’t think families always realize that there’s a combination of many things that go into a financial aid award.”
Additionally, the sticker price should not deter families from considering a certain institution, McDonald says.
“The lowest-cost sticker price may not be the lowest-cost institution,” she says. “With the combination of assistance that’s available, a school like ours, which is about $80,000 a year, might still be the least expensive option for a student that’s considering a state school that doesn’t have any additional funding beyond what the federal government can award in their loan or grant programs.”
When May a Family Not Qualify for Financial Aid?
While there may not be a specific income cutoff, there are some reasons a family may not qualify for financial aid.
For instance, to be eligible for federal aid, a student must be a U.S. citizen or an eligible noncitizen. However, many colleges and some states offer grant options for undocumented students.
A family’s ability to pay for college is determined by the student aid index – formerly the “expected family contribution” – which is a formula-based index number that is calculated using the information submitted in the FAFSA. A negative SAI number indicates higher financial need.
“The SAI stays the same at whatever institution the student looks at,” Schraeder says. “So if the SAI is equal to or more than the cost of that school, then the family doesn’t have a need. But if the SAI is less than the cost of that school, the family does have need.”
Therefore, when creating a college list, Schraeder recommends students have three buckets: one for schools that are highly competitive or considered dream schools; another for a group of schools they are likely to get into and can afford through all sources of financial aid; and lastly, a set of schools they can get into and afford even with very little or no financial aid. “There might be some overlap there, but just making sure they cast a net wide.”
How to Close the Financial Aid Gap
To help close the gap without taking out additional loans, families can plan and open a 529 savings plan, search for merit aid options, and contact a school’s financial aid office.
Set Up a 529 Savings Plan
A 529 college savings plan can be opened by any relative or friend of the student. Withdrawals must be used toward qualified education expenses, such as tuition and fees, student loans, food and meal plans, and off-campus housing.
The 529 is “highly underused,” McDonald says. “For most states, there are tax benefits to families that are contributing towards the 529. You can use it without penalty to help defray costs. I still encourage my families to look at the 529, to contribute as much as they can beforehand so that they can leverage those funds when their child is attending school.”
Search for Merit Aid
Qualifying for little to no need-based aid “does not mean you should lose hope,” Shaan Patel, founder and CEO of the test prep and admissions consultancy Prep Expert, wrote in an email. “Most colleges use a combination of both need-based and merit-based aid in their financial aid packages.”
Merit aid isn’t common at the most selective universities. However, many other colleges offer it.
When a student is above the college’s profile – due to their high grades or test scores – it helps the college, says Nat Smitobol, a college admissions counselor at IvyWise, a New York-based admissions consulting company.
“When you are the most selective universities in the country, you don’t need to offer merit aid,” he says. “You offer really good financial-based aid because you’re not going to get a lot of kids above your profile. But if you’re just kind of underneath that top tier of schools or you’re reaching to kind of get into that top tier of schools, you’re going to give a lot of merit money to try to attract students that would help your overall profile.”
To see which colleges offer merit aid, Smitobol recommends using the Common Data Set. This tool, a collaboration among publishers including U.S. News, provides general data information about U.S. colleges and universities, such as financial aid, degrees offered, and enrollment.
Merit aid doesn’t just come from institutions or states – there are also outside scholarships available. Experts recommend starting the search locally, looking at what’s offered by civic organizations, community foundations, or places of worship.
“These scholarships often have far fewer applicants compared to national scholarships, which significantly increases your chances of winning,” Patel says. “Many students overlook these opportunities because they may assume the awards are smaller or because they aren’t aware of them. However, the lower competition makes them an excellent resource for funding your education.”
Contact Your School’s Financial Aid Office
Students who receive their financial aid award and feel that it’s not enough to help cover college costs can ask the school’s aid office to reconsider.
Aid packages can undergo an appeal, known as a professional judgment review, if a student has experienced changes to their financial situation or if there has been a significant GPA improvement. However, some schools are “willing to give a little more aid if it means that student can attend,” Schraeder says.
“There’s a lot of websites out there that say you should negotiate” your aid packages, he says. “Most of our institutions are trying to put their best foot forward and trying to give as much as they can. That doesn’t mean that they can’t review a student’s situation. … I think the schools that can make a change will do so and the schools that won’t will tell you that they can’t.”
A school’s financial aid office can also be a resource for students and their families throughout the aid process.
“One of the major issues that we’ve run across is that because people are so intimidated by (financial aid), they want to pay someone usually thousands of dollars to navigate the process. And that’s not necessary,” McDonald says. “It doesn’t change the outcome or eligibility for aid. I caution my students and families from taking that route and just leveraging the experience and the desire of our profession to help you through that process.”
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