Is it common for Ivies/T20 schools to reduce finaid by a lot in years 2 to 4? To the point of the student having to leave the school?
I have good finaid offers from 2 Ivies and 2 T20s. My parents are worried about years 2 to 4 because they say these offers are from their 2018 tax return, when they had 1099s. In 2019 they had the same jobs, salaries, and expenses, but had W2s, and their 2019 tax return shows more income.
Do Ivies/T20s ever “lose” students over aid?
You will apply for need based aid annually. These schools aren’t in the business of losing students…but if your family income increase enough, your financial need will go down, and your aid could too. There is no way to predict how much…
For a very rough estimate, you could do the net price calculators on these schools with the 2019 tax return info. But it would be a rough estimate only as the NPC are currently set for students entering this fall.
How much more income do they have? $10,000 a year? $100,000 a year?
@thumper1 Their 2019 return shows 33,000 higher adjusted gross income over 2018. Same jobs, salaries, and expenses. Only change was 1099 in 2018 to W2 in 2019.
Is there a practical limit to the increase in cost of attendance? That is, is it common to have to pay 3x or 4x the first year cost of attendance in later years?
I would expect a decrease in need due to that increase in AGI.
Run the NPCs at your schools to see the estimated impact by comparing that to your current offer(s). Also, it is likely COA will increase at least 3% each year, so take that into account too.
You are making the common mistake of confusing Cost of Attendance (the “sticker price” set by the school) with net cost, which is what each student will need to come up with after financial aid is applied.
At the schools you are asking about, which provide mostly (if not exclusively) need-based aid, the amount of aid you are offered will be directly tied to your need. Better family financials = less need = less aid. How much the need-based aid will change year-to-year depends on how much the family financial situation changes over the previous year.
Thumper gave you some excellent advice – use each school’s NPC with hypothetical numbers to see how the aid offered by the school changes when the data you enter changes.
@BelknapPoint No mistake. I used “cost of attendance” in the generic sense, small case, as in “the increase in cost of attendance”, meaning “the increased cost of MY attendance”, or, what it costs ME to attend. So my question was, if my cost to attend (me + family) is x in year 1, can it be 3x or 4x in year 2? Do such large jumps happen?
I know what you meant, but in this context “cost of attendance” has only one meaning, and in order to avoid confusion it’s best to use the phrase properly.
For the third or fourth time: use the Net Price Calculators that are available on every school’s website to get a general idea as to how changes in your family’s financial situation will impact the financial aid offered.
@BelknapPoint We have used the NPCs and found them not reliable. Most of my-cost-to-attend is LESS than what the NPCs show, some WAY under. And, yes, before you ask, we input correct values.
I’d ask my question a fifth time, but this must be the wrong forum.
Then you should talk to the FA offices at the schools in question and ask why there is such a discrepancy.
Can your net price be 3 or 4 times higher in a subsequent year? Sure. But nobody here can tell you how likely it is for that to happen to you, without knowing a whole lot of information about your family’s financial circumstances over the past several years, this year, and the coming years, plus the schools you are looking at.
If you ask general questions, you will get general answers. If you want specific answers, you are better of contacting the financial aid offices.
NPC will not be accurate for students who have other than simple & straight forward financial situations–like divorced or separated parents, own real estate besides the family’s home, own a business, have foreign income, have income from non W-2 sources.
Schools that offer need based aid will re-assess your family’s need annually. If you income goes up, then your need based aid will go down. Also universities do increase the expected student contribution each year.
When your parents had 1099 income, they were self employed, right? Now they are drawing income and have w2 forms. Do they own this business? What moved them from 1099 to W2 earners?
How much is your net cost this year? And what is your parent income before. You don’t need to post those here… but think about it.
Is the $33,000 increase in income double what they previously earned? Or is it a 10% increase…or what?
If your parent income was $60,000 and now it’s $93,000, you will likely see an increase in YOUR net costs.
Also, check your college policies. Some schools have very very generous need based aid for income earners under a certain amount. Once that threshold has been passed, the aid is less generous. Find that out too.
With W2 income, the NPC would yield a better estimate if your net costs than 1099 self employed income would. The only rub with using the NPC now is that it’s set for 2020, and you want to know what’s going to happen in 2021. But I still suggest doing it anyway…using the 2019 W2 income.
You also don’t mention things like home equity, and other assets, or 529 accounts. Those things count too.
Most of these schools use the CSS Profile…so look at the assets it counts.
The way need based aid works at meets need schools is that if family income goes up, your need is less so your aid is reduced. The family would then have to come up with the additional money. It makes sense, right? You earn more, you know you have college tuition coming up, so you save more. If family income goes down, the schools that meet need will give more aid.
Can schools that offer need based aid become more expensive each year for a particular family? Yes, of course. If income goes up, aid goes down. Can the increase be enough to render the school unaffordable? That’s a family decision. But yes, there are students who’ve had to leave school in later years due to finances.
Your family needs to figure out what they can affordably pay each year. You could contact the school to ask how increased income will affect aid down the road. I’m not sure they’ll have a firm answer given the current state of the economy, but you can try.
@thumper1 and all. I didn’t mention all those other factors because none of them changed from '18 to '19. The only change was 1099 to W2 resulting in $33,000 more income on the return. We fully expect our cost to go up. That’s not the concern. The concern is by how much? By what factor? Will $33,000 more in income mean $33,000 more in cost to us? That would be crazy, especially since $33,000 is before taxes, not what my parents net from that after taxes.
No it’s not dollar for dollar.
Have you run the net price calculator that’s on the college site using that 2019 W2 data and tax return info? It’s going to be a rough estimate…because you are wondering about a future year…but try it.
W2 income typically yields better results with NPCs than 1099 self employed does.
I’m not sure why you think this wouldn’t at least give you a guesstimate of what your net price would be with the W2 income from 2019. An estimate…but it would give you at least some idea.
The fact is your parents have $33k more in income on the forms. Everyone reports pre-tax income, so that’s not an argument to ignore that income.
I don’t see how getting a W2 means that they get the same amount of income as when they had a 1099. Usually it’s the other way, that someone gets a 1099 and then can take a lot of deductions for being a contractor. An employer pays an employee less than a contractor because the employer has added expenses of employment taxes, and maybe other benefits like health care or vacation pay,
This happened to us at a CSS school (T30). It is not a dollar for dollar amount. I think that that amount of income increase could roughly decrease your FA by about $5k. But you can definitely call the college and ask them to calculate it. I’ve been working with several FA offices the past few weeks (due to a job loss) to see how our FA would be affected. They have all be very happy to run different scenarios for me.
OK. We carefully ran the NPC at an Ivy and a T10 (my top 2 schools) using our 2019 tax return. The net cost to attend as a result of the $33,000 increase in adjusted gross income in 2019 over 2018 increased by these sums:
Ivy: $25,500 more
T10: $23,000 more
That’s crazy. That’s taking 100% of the after-tax value of the $33,000 income increase. Something is not right. Is the NPC not reliable? Are my first year offers artificially (deliberately?) low?
It could be it’s not the amount of the increase that’s causing the $23-25k additional cost on the NPC, but which bracket the $33k puts you in. Think of it kind of like taxes. At $100k you pay one rate, but anything over $125k is a different rate. An additional $33k in income may have pushed you into a higher bracket that qualifies for less aid.
It might very well be correct. If your colleges have special guidelines for need based aid UNDER a certain income, and you then exceed that…you could see a bigger jump in your tuition costs.
I still suggest you call your financial aid departments.
^^this
for example Stanford states that families making under 125K pay nothing. for the family making $125, 001, it is a whole different animal
For example, Dartmouth(which is one of OP’s choices ) provides free tuition and no loans for families making less than $100,000 with typical assets.
If the $33,000 of increased income pushed the family over the $100k mark, then all bets are off and it is a totally different outcome
Op’s other school is Cornell
Again, an increase of 33k in income will be a game changer for the family’s financial aid award.
Possibly moving both schools from affordable to unaffordable because neither school is going to change their policy if Op’s family goes over the income threshold.
In answer to your question, of course schools (including ivies) lose students over aid. If you cannot pay the bill you cannot attend classes.
Don’t go into this thinking that if I attend, they will not take away my aid. They will and your package will go up or down depending on the income. If the 2019 income means that you are no longer eligible for the financial aid programs, then you will have to look at a school that is affordable over the course of 4 years