How do colleges handle merit aid?

Paying for College
1

<p>OK, this seems like a stupid question, but perhaps it is not. When schools award merit aid, is that considered OVER and ABOVE what they might be awarded via need-based aid?</p>

<p>The reason I ask is that my son just got a financial aid package from one of the colleges that he applied to. It included an institutional merit aid scholarship from that college, which we really appreciates. However, the remaining portions of the financial aid package are a work study program of about $2,000 and a National Direct Student Loan of about $2,500. So, if the merit adi was truly over and above our EFC, it would mean that the school estimated our EFC to be just $$4,500 less than their total cost of attendance. This estimate of the EFC is way much higher than any amount I've come up with using a variety of EFC calculators. Of course, all that assumes the school is meeting 100% of the demonstrated need, which I don't know if it is.</p>

<p>Some people I've spoken to have said that any extra aid you get is used to reduce your EFC, so the college is correct in awarding you less money. Others have said that any merit aid you get from the school should be over and above whatever your demonstrated need is (Cost of Attendance - EFC). I realize that if you get any type of aid from outside sources, that those funds would reduce your EFC though.</p>

<p>So, before I call the college and ask about this, I'm just trying to understand what others have experienced. At the moment, my son doesn't have the full details of offers of financial aid from other schools, so we don't have anything else to compare to.</p>

<p>Can someone help me understand the rules of the game when it comes to how colleges treat merit aid? I imagine there are no rules, and the practices vary from school to school.</p>

<p>Thanks in advance for any advice out there!</p>

<p>StarTrekFan</p>

2

<p>Typically aid from outside sources does not reduce your EFC. That is your expected FAMILY contribution. Extra aid would reduce your NEED and therefore might reduce any need based aid you receive. Most schools reduce loans and work before they reduce scholarships and grants. Policies vary by school so you would need to contact the schools regarding how they treat additional scholarships, for example.</p>

<p>The other thing you should research is the %age of need this college typically meets. Your son's award could very well be in the ballpark for the %age of need this school meets.</p>

3

<p>
[quote]
OK, this seems like a stupid question, but perhaps it is not. When schools award merit aid, is that considered OVER and ABOVE what they might be awarded via need-based aid?

[/quote]
</p>

<p>Not a stupid question at all and one I found myself asking years ago with my oldest.</p>

<p>My experience with my kids and being offered merit aid is that it is part of the total financial aid package.
Each school is different but typically my kids were offered a mixture of merit aid and need based grant. A conversation I had with a FA officer at one school indicated that if the merit scholarship had been smaller the need based grant would not have been bigger - but who knows?
It is all a part of the game.
We had experience with one school that while they claimed to meet an average of 75% of financial aid - all their grant money was put into merit based scholarships. So while my kid with a small EFC was awarded a merit scholarship of 1/2 off tuition the gap in her case was quite huge. She did not enroll as it was unaffordable.</p>

<p>Students who do not need or qualify for FA can do very well at schools that offers a comprehensive merit scholarship program - how well the student who needs lots of FA makes out - depends. At some schools they do well and at other schools not so well.</p>

<p>Many first timers make the mistake of thinking that the nice merit scholarship awarded at acceptance will make the FA package rosy - this is not always the case.</p>

4

<p>Usually, merit aid is used to reduce your need, not your EFC. </p>

<p>Let's say that the COA is $30,000. Your EFC is $5,000. Your need, therefore, is $25,000. </p>

<p>Now you get a $10,000 merit scholarship. So you no longer need that $10,000, and your newly calculated need is $15,000.</p>

<p>Unless the merit scholarship exceeds your need (let's say in this example, you got a scholarship for $28,000, exceeding your need), your EFC remains untouched.</p>

5

<p>StarTrekFan I had exactly the same scenario as you. D got a 'merit scholarship', I thought that would mean that, combined with her need-based aid, we'd be in good shape, but instead she got very little need-based aid. Our unmet need is around $15,000.00, and frankly, I'm very worried about how I'm going to come up with that kind of money.</p>

6

<p>Chedva and Others,</p>

<p>Yes, I meant to ask if merit scholarships reduce our NEED, not our EFC. Thanks for catching that one. So, just to clarify, by way of an example (I'm just making this one up):</p>

<p>If the CoA = $25,000
Our EFC = $10,000
Then our Need = $15,000</p>

<p>If the school fulfilled 100% of our need, they would offer $15,000 in some fashion (loans, grants, etc). </p>

<p>If my son didn't qualify for any merit aid, then I assume he would be offered the full $15,000 in need-based aid above. But, are you saying that if he is offered $5,000 in institutional merit aid (which is NOT based on need), then the school would only consider our need to be $10,000 and that they would offer that much in need-based aid?</p>

<p>So, if the above scenario is true, it wouldn't matter if a student got merit aid or not. The total offer from the school would be the same. I was under the perhaps naive impression that being a good student in the eyes of the college would help financially (after you got in). I know that the better the candidate, the greater the mix of grants vs. loans, but other than that, isn't there an advantage to receiving merit aid? I suppose that if a school had offered you aid in loans, then they would replace some of that loan aid with merit aid. But, it still sounds like the TOTAL package amount stays the same in this scenario. </p>

<p>Sorry to belabor the point, but it sounds like some others out there were unsure of what to expect as well.</p>

<p>Thanks,
StarTrekFan</p>

7

<p>The benefit as I see it is:
1) It doesn't need to be repaid; it's always a grant.
2) It is up to the student whether he or she receives it every year; it is not subject to the vagaries of income/assets or of the financial aid system itself.
3) It can cover a significant amount of "need gap" for schools that do not promise to meet 100% of need, and remember, those are the majority of schools.</p>

<p>Also, at many schools, merit aid is administered by the admissions office, while financial aid is administered by the FA office. Merit aid is used to entice students, and for students who have only a small amount of "need" (remember, this is defined by the schools, not by the family; the EFC may be out of a family's reach in practical terms even for 100% need schools), the merit aid can make the difference in attending a school or not.</p>

8

<p>Different schools do have different policies. One school that DS was accepted to allowed any scholarships to be stacked, as long as they did not exceed the cost of attendance. In other words, you could not get financial aid (in total) that exceeded the cost of attending their school. This, however, is not typical of most schools.</p>

9

<p>At my daughter's school when she got a better scholarship it reduced her need based aid - EFC stayed the same. But it reduced the loan portion of her aid not the grant portion. I believe this is fairly standard though there may be schools that do it differently. For federal aid I believe EFC +need based aid + scholarships cannot exceed COA. The schools own aid they can do what they want. There is another thread on this same topic. </p>

<p><a href="http://talk.collegeconfidential.com/financial-aid-scholarships/472101-efc-comes-first-equation.html%5B/url%5D"&gt;http://talk.collegeconfidential.com/financial-aid-scholarships/472101-efc-comes-first-equation.html&lt;/a&gt;&lt;/p>

10

<p>For those with low EFCs at full need schools, there may not be much of a difference to your bottomline whether you receive a merit scholarship or FAid (since your full need will be covered, one way or the other). But remember, merit $ is all scholarship whereas FA can include loans, work-study and student contribution from summer earnings. In the future, if the student loses the merit award due to low grades, the school SHOULD offer FA to replace the merit $.</p>

<p>An important advantage of getting merit $ is if your income increases significantly during your college years. Your child will continue to receive the original merit amount, whereas if they started out on FA, they would lose it (or a portion of it). </p>

<p>Merit $ (such as a full tuition scholarship) can be high enough to replace any/all of a student's FA and even some of your EFC. Regardless of EFC, all those granted the scholarship receive the same minimum amount (full tuition). So if your EFC is 0 or if your EFC is $40,000, you receive a full tuition grant each year. I suppose the student with an EFC=0 might receive additional FA to cover room & board, although it could be given as loans or work-study. For those not receiving FA, merit $ (or outside scholarships) is the only way to lower EFC. </p>

<p>For many people, merit awards act like discounts. They lower the costs to make the school more affordable, but the EFC stays the same and the merit $ replaces the FA. So it's like going to the store where you can get 20% off using your store credit card - or you could use a newspaper coupon to receive the same 20% off. Bottomline, you pay the same discounted amount (EFC) in the end, but you feel good because you didn't pay sticker price - BUT you feel annoyed because you want to use both the store credit card and the coupon (but the store won't allow it). Getting a full tuition scholarship is like paying clearance rack prices. Even those prices are too high for kids with low EFCs.</p>