MONEY College

Don’t Bother Appealing a Financial Aid Award if…

Rich woman crying
Crying poor doesn't always work wonders with the financial aid office. iStock

Sometimes it doesn't make any sense to ask a college for more money. An expert explains what those times are.

I’m often approached by families who want me to help them request more money from a particular college. About a third of the time, I turn them down.

So what is it about these families that has me refusing to take their business — and their money?

It’s their unrealistic hopes. These families want a strategy. They’ve read that if you show a college a competing award, the college will match it. Or they’ve heard that you can negotiate a better award by telling the college how much the student wants to attend the school.

If these are the only reasons they want more money, I tell them they can appeal themselves. These parents will probably be unsuccessful if the award they want a college to match is in a different category of selectivity. A highly competitive college that does not give merit awards will not match a school that has awarded a student an academic scholarship. That selective college will award only need-based aid, based on the family’s income and assets; the other college uses merit awards to entice students to attend, regardless of their financial situation.

Financial-aid appeal letters are difficult for colleges to respond positively to, since a decision to change an award is limited by a college’s policies and requires consensus of the financial aid committee. There are no cut-and-dry rules of what will be accepted and what won’t. The committee can use what they term “professional judgment” and override entries on financial aid forms.

I try to put myself in the college’s shoes. I will assist a family, for example, whose primary wage earner is out of work because of an incapacitating illness that struck after the student submitted his or her financial aid forms. I’ll help a family forced to maintain two households because the family can’t move and the only job a family member can get is too far away for a commute. I’m also sympathetic to families forced to draw upon retirement funds to pay for medical bills.

In these cases, I will calculate the decrease in income available for college expenses and ask the college to lower the family’s income by this amount in their financial-aid calculation.

On the other hand, what if the parents want to appeal due to high living expenses, such as a $7,000-a-month mortgage, three $600 monthly car payments on their new SUVs, and private basketball coaching for their children? In such a case — and I really did hear from such a family — I pull out my “World’s Smallest Violin” and play a tune. I tell them their letter will be posted on the bulletin board in the financial aid office’s lunchroom, so that the financial aid officers get a quick laugh from it each time they take a break from their demanding jobs.

I get no pleasure out of helping with these types of appeals. For me to work with them, they need to pass my personal litmus test: They have to make me shed a tear after hearing what’s going on with the family — not make me run for my World’s Smallest Violin.

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Paula Bishop is a Certified Public Accountant and an adviser on financial aid for college. She holds a BS in economics with a major in finance from the Wharton School and an MBA from the University of California at Berkeley. She is a member of the National College Advocacy Group, whose mission is to provide education and resources for college planning professionals, students and families. Her website is www.paulabishop.com.

MONEY College

Why Your College-Bound Kid Needs to Meet Your Financial Planner

Parents showing jars of money
Jamie Grill—Getty Images

Sheltering children from tough money choices now can lead to unhappiness later on.

When I schedule a meeting with parents to talk about college costs, I always ask if the student will be attending the consultation.

About 80% of the time, the parents say no. Their usual response: “He’s too busy,” or “We would rather not include her.”

That’s a big mistake.

What I do is help estimate the final costs that the parents will be facing, taking into consideration projected financial aid, merit awards and the family’s current resources. Those costs can vary widely, from $5,500 a year to attend a community college while living at home to over $70,000 per year to go to a private college such as New York University.

Students should be involved from the start, so they can understand the financial issues that their parents will be facing. Students need to see the great disparity in cost outcomes among the different colleges on their wish list.

When I meet with the whole family, we can narrow down the types of schools that would be affordable to the parents as well as meet the academic and social needs of the student.

That way, we can avoid a situation in which a high school student, ignorant of any financial implications, pursues whatever college he is interested in. Then, in April of his senior year, when all of the acceptances and awards arrive, his parents review the options and say, “We can’t afford any of these.”

At that point, the only choices are for the student to attend a school he’s not happy with (such as a local college commuter school), or for the parents to go into deep debt in order to finance an education they cannot afford.

So I try my best to convince the parents to invite their student. Perhaps the parents are trying to shield their finances from their children. Eventually, however, the kids will be part of the parent’s estate planning. The earlier the children know about the parent’s financial situation the better. If a family limits the college search to the types of colleges that meet all needs (financial, academic, and social), then the only outcome in senior year will be a happy one for both the parents and the student!

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Paula Bishop is a certified public accountant and an adviser on financial aid for college. She holds a BS in economics with a major in finance from the Wharton School and an MBA from the University of California at Berkeley. She is a member of the National College Advocacy Group, whose mission is to provide education and resources for college planning professionals, students and families. Her website is www.paulabishop.com.

MONEY College

$182,000 in Student Debt for a Film Major?!?

Film clapper board
A film student can't take too much debt. Losevsky Pavel—Alamy

A financial adviser laments the choice faced by a high school senior: A large amount of college debt vs. a ridiculous amount of college debt.

When a high school senior starts receiving college acceptance letters, it should be a cause for celebration. But this April, when I met with a couple whose son got into two great schools, I was disheartened.

The parents wanted my thoughts on which school their son should attend. He wanted to study film, and the choice before him was between New York University and Emerson College in Boston — two good schools with good film programs. He had to make his decision by May 1.

The parents were convinced that NYU’s program had a better film program. The big issue, though, was money. The list price for NYU’s film school, including all expenses, is around $71,000 a year, and the school didn’t offer any financial assistance to the student other than a $5,500 federal student loan.

Emerson’s list-price cost of attendance would be about $57,000. The school also offered a $17,500 annual scholarship and a $5,500 federal loan.

The parents were willing to chip in $25,000 annually if their son attended NYU, but only $13,000 if he were to attend Emerson. Their reasoning, right or wrong, was that Emerson’s film program was not as good as NYU’s.

So where did that leave the student? With the parents’ contribution figured in, the student would have to come up with nearly $46,000 a year — more than $182,000 over four years. And that’s assuming no price increases over four years.

For Emerson, the student’s cost would be less than $27,000 per year, given the merit award and the parents’ contribution. Total cost over four years: at least $107,000. That’s a much more palatable figure, though still a hefty one.

My first question: Why were the parents not willing to contribute for Emerson the same $25,000 as they would for NYU? If they did, the student would have to pay only about $15,000 per year, or $60,000 over four years.

My second question was about the $182,000 the student would have to pay for NYU: Where was he supposed to get this kind of money? The federal student loan system will only offer him $5,500 as a freshman. The next level of borrowing for this student would be private loans, which have variable interest rates that can rise to 18% or higher, depending on the economy and the indexes to which the rates are tied.

Burdening a student with $182,000 debt upon graduation (and, most likely, monthly payment of $1,800 for 10 years) is intolerable. Even leaving him with $60,000 upon graduation from Emerson (and monthly payments of about $600) is something I find abusive.

This is too much borrowing! You can’t repay that kind of debt on a film major’s starting salary, and you can’t get rid of student loans in bankruptcy. For this family, I might suggest their son could handle about $25,000 in debt for a four-year college education. More than that would seriously limit his living options upon graduation, threatening his ability to buy a car, get married, or have children.

Given the circumstances under which I met the family, their story turned out to have a relatively happy ending. The student will be going to Emerson. I’m hoping that the parents will chip in more than they said they would.

Even so, I wish I had been included in the initial college search, since I most likely would have identified colleges that offered film programs that were reputable, and also satisfied the financial issues facing the family. April of senior year is too late to start grappling with college-finance issues.

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Paula Bishop is a Certified Public Accountant and an adviser on financial aid for college. She holds a BS in economics with a major in finance from the Wharton School and an MBA from the University of California at Berkeley. She is a member of the National College Advocacy Group, whose mission is to provide education and resources for college planning professionals, students and families. Her website is www.paulabishop.com.

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