Colleges Face a Financial-Aid Crunch

Bob Shorb, Skidmore College’s fast-talking director of student aid and family finance, did more reading than usual this year. And not just because the 4,000 financial-aid applications that landed on his desk made up a record 62% of the applicant pool. Shorb, who has worked in financial aid for 30 years and is halfway through putting his three daughters through college, had also never seen so many personal appeals folded into the files. Setting aside his computer algorithms and thick-buttoned relic of a calculator, he absorbed every typewritten page. One family expected a 50% income drop; another planned to sell its home to help pay tuition. A note from a family nearly a year behind on its mortgage made Shorb chuckle. “Unfortunately,” it read, “we have not been bailed out by the $700 billion government rescue.” (See pictures of the college dorm’s evolution.)

Finding the funds to meet applicants’ unprecedented financial need this year is a tall order for all but a handful of mega-wealthy schools, and as colleges decide how much they can afford to give, many worry they won’t have enough to attract a full freshman class. Because private undergraduate colleges draw an average of 60% of their operating costs from tuition revenue, a student shortfall could cause a painful budget crunch, forcing schools to cut programs, slash faculty salaries and potentially raise tuition for students already enrolled. With admissions letters in the mail, many colleges are as nervous as the high school seniors waiting for word. Nailing the target class size is always “like landing a 747 in your backyard,” says Skidmore president Philip Glotzbach. This year many colleges are prepping for the bumpiest landing yet.

Colleges of all stripes are taking a battering as endowments evaporate and the alumni-donation well dries up. But when it comes to actually getting its class in the door, Skidmore, which allowed TIME to observe scholarship discussions and review admissions and financial-aid applications less than two weeks before the school mailed its final decisions, typifies the unique dilemmas that face smallish private colleges. Schools with deep pockets are coping: seven of the eight Ivy League universities, for instance, notched application increases this spring, three of them in double-digit percentages. The same goes for state schools and community colleges, where the comparatively small sticker price is a big draw.

By contrast, Skidmore’s applications tumbled almost 14% this spring, in line with plunges at seven of the country’s top eight liberal-arts colleges and many others down the food chain. Skidmore’s projected $51,196-a-year price tag makes it one of the nation’s 10 most expensive schools, but its $223 million endowment–down 23% from its high about a year ago–is too small to bankroll financial aid for all who need it. Founded in 1903 as a women’s college, Skidmore was long known for teaching art to well-heeled young ladies, but in its modern permutation as a coeducational college, it is a relative newcomer to national prominence and the donations that come with it. And while it’s ranked among the top 50 liberal-arts colleges by U.S. News & World Report, administrators worry even that may not be enough to persuade students it’s worth the higher sticker price.

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At the 2,400-student college, nestled among sugar maples, beeches and basswoods at the foot of the Adirondacks in Saratoga Springs, N.Y., the decision-making kicks off Jan. 15, which is when applications for the incoming freshman class are due. Working in teams of two in their offices across the street from Skidmore’s main campus, admissions officers are assigned about 450 applicants apiece, divided by region. Staffers paw through transcripts, essays and recommendations, sending the occasional art portfolio for faculty review and using spreadsheets to keep track of the students. When they finish, they hand the piles off to second readers. Certain files get special attention from Mary Lou Bates, dean of admissions and financial aid. Sitting at her desk in a converted Tudor carriage house, she reads every application from children of alumni (or “legacies”), students recommended by faculty or trustees and applicants who drew mixed reactions from the first two readers. (See pictures of eighth-graders being recruited for college basketball.)

The admissions officers are scanning for high scores and hotshot extracurricular activities, but they’re also on alert for interest in Skidmore and evidence that a student will thrive in college. A young African-American woman from a Southern city, for example, had impressed Dean Mendes, assistant director of admissions, during their on-campus interview. The student recounted waking up at 4 a.m. to catch a bus to school when her family didn’t have a car. Even though her hodgepodge of A’s and B’s didn’t put her at the top of the academic heap, the grades were good enough to confirm Mendes’ early impression that she would be a good fit. Accepted. A National Merit Scholar from California with a 3.88 GPA, by contrast, was a “remarkable” student, according to her U.S. history teacher. But on the application page that offered spaces to indicate whether she had visited the campus, browsed Skidmore’s website or otherwise sought to learn more about the school, the student was 0 for 11. “No contact,” scrawled an admissions officer. Waitlisted.

While the admissions committee churns through applications, Shorb is crunching the “expected family contribution”–in other words, the amount the students and parents are expected to pony up for school costs–in his student-center office not far from the bustling dining hall. He relies on two formulas, one federal, one from the College Board. Both use a fairly spartan set of assumptions about a family’s saving and spending–instead of its actual habits. For instance, a Midwestern family earning $89,800 is expected, according to one of Shorb’s algorithms, to put away $1,365 a year for its two children’s education. By the time Bates and her team have selected their initial crop of accepted students, Shorb has made enough aid projections to sum up the potential admittees’ total financial need.

In the final, “need sensitive” stage of Skidmore’s admissions process, Shorb reports how much aid the school can offer and still get the class in under budget. Starting about March 1, the admissions committee does “triage,” Bates says, scrapping some applications stamped FA-Y for “financial aid–yes,” which are occasionally scrawled with a dollar amount. (Students who apply but don’t qualify for aid are not penalized for trying; they get lumped in with the rest of the “full pays.”) Needy applicants with weaker academic records, spotty senior-year grades or little apparent interest in Skidmore are booted to the waitlist. There were about 100 of those this year. To meet the final target number of acceptances–which Skidmore, to preserve its competitive edge, won’t reveal–that left 214 spots for kids who could pay full freight. Personalized “Yes!” letters were mailed March 26.

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Financial Uncertainty
In most years, the system would leave Skidmore and colleges like it with a pretty good idea of what to expect come May 1, when deposits are due. This time, though, money troubles are continually changing the outlook. In previous cycles, Shorb estimates, he could base 95% of the aid awards on the prior year’s tax returns. But this time Shorb is also trying to project many applicant families’ income for 2009, which, given the volatility of the economy, is anyone’s guess. He’s leaving his calendar open every day in April to deal with further appeals from students whose family finances are casualties of the recession. “In other years, there have been changes in circumstances,” Shorb says. “But not to this magnitude.” (See the worst business deals of 2008.)

Skidmore has boosted its financial-aid budget 8% this year by trimming travel, faculty raises, renovation plans and commencement festivities. While the cost of attending the college rose $2,000 this year, the average aid award increased $2,300. In addition to $7,000 worth of federal and state grants, work-study earnings and federal loans, the average financial-aid applicant will pocket $28,000 in Skidmore grants. Skidmore, like many of its peer schools, also allocates funding for superstars with financial need, a practice known as “preferential packaging.” The most desirable students–the ones who blew the lid off the SAT, for instance, or those who will be the first in their family to go to college–get a nice surprise in their aid awards: fewer loans, more grants. “Just like an airplane,” explains Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers (AACRAO). “No two people going from point A to point B paid the same price for the ticket.”

But what happens if in the end, a college can’t book a full flight? Glotzbach says the possibility is remote, but Michael Casey, Skidmore’s vice president for advancement, estimates that because 80% of the school’s funding comes from tuition, any single student’s absence could punch a $25,000 to $30,000 hole in the operating budget. And it’s possible that the sophomore, junior and senior classes could shrink as well. Shorb has already received about 60 new financial-assistance requests from currently enrolled students, five times as many as in a typical year.

Such financial uncertainty is stoking fears of backsliding to an era when private colleges were the ivy-covered province of the privileged. Skidmore assistant director of admissions Marisa Ferrara fielded her first ever requests this year from parents rescinding financial-aid applications at the eleventh hour for fear that they would harm their children’s chances of getting in. “They’re feeling this guilt,” Ferrara recalls of a phone call with one such parent. “You could almost hear it in this mother’s voice, saying, ‘I’ll do anything. I don’t want my kid not to get in because of needing financial aid.'” As it turned out, the student had already been denied admission, and the family’s finances had nothing to do with it.

On the discussion forum College Confidential.com a February thread debating whether applying for aid will hurt a student’s chances of getting admitted has been viewed nearly 25,000 times. At Skidmore, one figure suggests the answer is yes: students of color, who disproportionately applied for financial aid, made up a higher percentage of this year’s applicant pool than last year’s. But reflecting “the demands of financial aid,” says Bates, they make up only 24% of the admitted pool this year, in contrast to 28% last year. “You’ve always been in an advantaged position to be rich and smart,” says Morton Schapiro, a higher-education economist and the president of Williams College, which does not consider financial need in admissions. “Now you’re at an even greater advantage.” If so, then you can chalk up one more casualty of the financial crisis: diversity on campus.

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