Need help from old hands understanding fin.aid

<p>Actually, Mini, all the merit scholarships we're familiar with have been for the price of tuition (or a % of tuition--50%) rather than a firm $ amount. These have all been merit awards offered by the Us themselves; I believe outside merit scholarships are generally fixed $ amounts.</p>

<p>As I remember, we had 5 of 'em; 4 were for set amounts, one for a percentage of tuition. (Of course, they were irrelevant in our case, as they simply were counted against need-based aid.)</p>

<p>Actually, my S was offered a combo--1/2 tuition merit + set amount merit aid from 2 different private Us & full-ride from an OOS U he totally was not interested in. I'm not sure the full-ride would have increased to keep pace with any tuition increase but the merit offer he accepted will remain at 1/2 tuition + the set merit aid amount.<br>
We didn't qualify for any need-based aid per any of the calculators, so we didn't fill out the forms to apply. Perhaps we'll try again when our D applies to colleges next fall because we'll have two in college then.</p>

<p>ORJR - I'm confused with how your FA numbers are written, so I can't answer your question, and noone else has yet either. Could you restate your FA information? I'd like to help answer your question.... Okay. I'm the frugal, paying it out of pocket person... let's factor in something else. Your kid eats food at home, wears clothes, consumes vast quantities of hot water and shampoo.. When you send him off to college, you no longer have to provide those resources. You will probably save $2000 with kid not living at home, which becomes available to send to the college.<br>
It WAS very scary when I sent first to college, because I really had no idea how much money we could scrape up to pay for her. I didn't have a "budget" - just pay for things as we go, and not a lot of savings. Our EFC is also about $18,000 a year. DD earns money for all her books/clothes/shampoo/personal expenses - about $3000. We pay for tuition/room&board/cellphone (because it is a family plan), which works out to about $15,000. It has been fine, and we're not broke yet - and if you read enough here, you'll find that most people manage it somehow. If college REALLy was so expensive, there would not be so many people enrolled.<br>
It'll work out - really ;)</p>

<p>It really is expensive. It is my theory that with time you can get used to just about anything.</p>

<p>It's truly amazing what folks can get used to & manage to do when they feel it's important enough. I don't know many folks who thought sending their kids to college would be financially "comfortable," but somehow most are able to figure out how to juggle to make things work.</p>

<p>As was said previously, be sure to see this as a 4+ year plan, so the child doesn't have to transfer after a year or two because debt is getting to high (as has happened). Still, if the family pitches in, it sometimes works out to be less grueling than expected.</p>

<p>I think mini's point, to plan for increases, is extremely important. It's not just tuition increases, but I've seen many here in LA get shocked when their house is worth $100K more than the year before. Or the kid has a wonderful opportunity for an unpaid summer internship. Expenses for the study abroad dream program is effected by the strength of the Euro.</p>

<p>If you are scared going into it, good chance it will get worse. The time to get real is now. I know how hard it can be for both parents and kids to strike an ivy off the list, but when an Emory is offering a free ride it's certainly worth considerable thought.</p>

<p>Most of us will do anything for our kids, butI don't think any financial advisor will tell you to jeopardize retirement security when there are good options. Still a hard pill to swallow for many, but we need to lead the attitude change.</p>

<p>Thanks again. All points are well taken. Retirement is sacred and sacrifice is fine, but our son is a hard worker who will work during college also. I'm just trying to wrap my mind around how the system works - some of the twists don't seem to me to make sense. For example, the college taking the amount of an outside scholarship off your need-based aid. After the outside scholarship replaces the loan portion, then the school begins deducting from the gift portion of the need-base aid $ for $. This makes no sense to me, as it seems to give an applicant a DISincentive to try for outside scholarships. Am I wrong? (hope so!)
What I was envisioning (oh naive one that I am) was that we would get a "need-based" package, which would include gift aid(if lucky), student loan, and work study. Then IN ADDITION if he qualified for merit aid, it would be a separate issue, on top of the need-based package. But what I'm hearing from most schools is that any merit aid awarded just takes away part of the need-based package (maybe this is because our need is high?).
Are there schools where the merit is separate from the need-based aid? It doesn't seem fair that if my S had the same stats and received the merit aid he would get it if we had a ZERO need, however since we have need, then it's subtracted. Please set me straight if I'm not gettting this right. Thanks</p>

<p>I believe policies at different Us may vary. It is important to talk with each school your child is seriously considering to find out what their policy is toward outside scholarships. There are schools which will allow the student to apply outside scholarships against loans & EFC rather than trying to offset grants or U merit aid. Each school is allowed to determine its own FAid & Merit Aid policies, which makes things very confusing for us parents.</p>

<p>I agree that it makes sense for schools to recognize the extra effort students have to expend to get outside awards & should do everything to encourage such efforts, including allowing any outside awards to count against EFC & loans rather than offsetting U grants (unfortunately I don't get to create U policy).</p>

<p>Anxiousmom - thanks for asking me to clarify - let me see if I can! These aren't exactly my real numbers, but we can go for an example:
Let's start with a 40K COA and an 18k EFC (which includes student's summer employment and contribution from savings). That leaves "need" of 22K. S qualifies for 12K "merit" scholarship from U, which they take away from our need-based package, leaving a 10k need - which would be then loans and work study -- is that correct? Or I suppose if you were very lucky it would be gift aid and work study.
Does it sound like I understand correctly?
And is there any way to find out - short of calling each school - which schools will allow an outside scholarship to cover above "need"?</p>

<p>There ARE many schools where merit aid is in addition to need based aid, or doesn't require need at all. The point is this:</p>

<p>Let's say that a family with no need or only a small amount of need sends their kid to a college where tuition is $30K, and the college will give 1/2 tuitiojn merit aid to all National Merit scholars. That kid gets the benefit of the $15K reduction in cost - assuming that room, board & incidentals are $10K, total cost to attend is $25K.</p>

<p>Now lets say another family which has an EFC of $25K is in the same situation - they also apply for need based aid. With the half tuition scholarship, their full need is met, and so their kid attends, for $25K a year, with no loans.</p>

<p>Then we have a third family, with an EFC of $10K - so they NEED $30K to make up the difference. Their financial aid package might look like this: $15K merit award + $3500 loan + $1500 work study + $10K need-based grant. </p>

<p>The incentive for outside scholarships is that (1) a grant is better than a loan and (2) work study money is really a job offer, not cash -not only does the student need to work, but the higher the offered amount, the less likely it is that the student is going to be able to get a job with enough hours to earn the total amount. Also, to the extent that a student can work, a student who has had the work-study replaced by grants may still be able to get a part-time campus job, and now is using those same hours to earn extra money rather than meet the EFC.</p>

<p>Keep in mind that parents with good credit are eligible for PLUS loans to meet whatever costs are not covered by financial aid. At current interest rates, for every $8000 you borrow with the PLUS loan, you will have to pay about $100/month in loan payments -- so $1200 out of pocket now pays for $8000 of tuition.</p>

<p>So lets say that the parents' EFC is $18K/year, and they pay $10K from income and savings each year, and borrow $8K each year, meaning that the first year they are out of pocket $10,600 (because the PLUS loans don't actually come due until the second semester); year #2 they are out of pocket $11,800; year #3 it is $13,000; year #4 they are paying $14,200. Year #4 their child has graduated, but they still owe a bunch on those PLUS loans, which were amortized over 10 years. However, they no longer have to pay for the kid to attend school.... so rather than pay the $4800 due that year on the PLUS loan, they accellerate payments and pay $10K that year, and every successive year, until the PLUS loan is paid off much earlier than planned, which also of course saves a lot of interest. </p>

<p>Meanwhile, as someone else pointed out above, there are other savings. It is amazing how much money you no longer spend on groceries when a male child moves out. I found out that my son was costing me $50/week to feed - so that's $1800 saved while he was away at school 9 months. </p>

<p>Does the kid drive? Send him to another state, at least 150 miles away, with no car and a stern lecture about not driving anyone else's car -- and most insurance companies will substantially reduce the rates or allow you to drop the kid from the policy. Depending on where you live, that might be $2000+ in savings right there. </p>

<p>Anyway, my biggest mistake the first year my son was in college was the failure to account for these savings, so I budgeted and borrowed and ended up borrowing more than I needed. I borrowed about $10K when I probably should have borrowed $5K... so the next year I didn't borrow at all. </p>

<p>One more thing: the amount of financial aid you are given is determined by subtracting the EFC from the total cost of attendance (COA) -- COA includes incidentals that may be flexible, so there can be room for savings. Kids don't have to buy every required textbook new; they can rely on used text books and even avoid purchasing some books entirely, if the book in question is readily available from the library. Most colleges require kids to buy a full meal plan the first year, but many college meal plans are structured so that you pay more under the meal plan than you would to pay separately for each meal and buy the same amount of meals.... so for me, year #2 the kids come off the meal plans entirely. Since my son happened to be a vegetarian and content to live primarily off of rice and ramen, that worked out well for him. </p>

<p>So basically, it works out..... It does tend to be a lot more expensive than planned, but once you get used to the idea that this is one of those big, life expenses that requires some borrowing (like buying a house or a car), it's not so bad for families with a reliable income, even if that income is modest.</p>

<p>This is generally the way we experienced things as well, except that most of the colleges where we received offers said that outside scholarships could be applied against any loans or work-study the student was expected to carry. But we didn't realize any benefit from merit as opposed to need-based aid (from our perspective, they were both the same) except that merit aid, being a percentage of the tuition total, went up as list prices went up.</p>

<p>
[quote]
Let's start with a 40K COA and an 18k EFC (which includes student's summer employment and contribution from savings). That leaves "need" of 22K. S qualifies for 12K "merit" scholarship from U, which they take away from our need-based package, leaving a 10k need - which would be then loans and work study -- is that correct? Or I suppose if you were very lucky it would be gift aid and work study.

[/quote]
Calman has answered a lot of this, but I'll restate. Yes, you have it correct. You would get left with 10K, which would be met with some grant, less than 2K workstudy, and less than 3K loan - at schools with good financial aid. At schools with worse FA, or where your kid is "less desirable" in the applicant pool, you might get higher loans and less or no grant. And at schools with even worse FA, you would get gapped: there would be no grants, some work/study, some loans - and a gap between that amount and your determined "Need".<br>

[quote]
And is there any way to find out - short of calling each school - which schools will allow an outside scholarship to cover above "need"?

[/quote]
Not that I have heard of -and I've been hanging around here for four years. :) I have NOT seen many schools that allow you to use outside scholarships to meet EFC. (Unless you end up with more merit aid than your "Need" - in which case the merit aid replaces the need, and can be added to without affecting the non-existent needbased aid.)</p>

<p>It's true that students CAN economize if they want to--my S has not spent much on textbooks & was able to get some on amazon.com & others used. We save $20-30/month on electricity since he's been at college + substantial groceries. Next year, he won't have to buy the freshman meal plan & that will also be a savings.
Still, unexpected expenses do arise, like internships, trips, travel, sometimes expensive texts, an extra term of school, summer school, expensive school equipment, etc. We all do our best to estimate & plan as well as possible.</p>

<p>Sorry, I don't know of any way to KNOW how a school handles outside scholarships other than asking each school--or at least checking the U website of each (may state it in the FAid section or you can e-mail them & get a response). Really don't know much about FAid, but know it gives the student more flexibility about which schools to choose among, since the student is bringing some money to any school.</p>

<p>Calmmom - you really have created some calm in my heart. Thanks. I think I just started in on that CSS Profile this morning, and just about fell out of my chair. But with all of the conversation here, I am seeing that this might be doable - but I'm still iffy about which schools I need to ask which questions. Information overload.
What I'm really afraid of is that we won't have one or two financial safety schools - or I'll think we do, when they really aren't.
A little love in the EA arena or great scores on the October SAT's would be a nice break.
I agree with posts here that there will be "invisible" savings, however we are pretty frugal livers so it may not be as much as most folks. For example S didn't get license until just a couple of months ago and has no car or access, so insurance isn't an expense (or a savings).
And thank you very much for the explanation of PLUS loans. What are the right questions to ask yourself to determine if a PLUS loan is better than a home equity loan? (we don't have much home equity, but we do have some).</p>

<p>Calmom, does a great explanation. I add that choosing a dorm affect the cost of freshman living. The newest dorm is typically the most expensive, the oldest with triples/quads are the least expensive. </p>

<p>After the first semester/year when student is not on the mandatory food plan, additional monies can be saved which can be substantial.</p>

<p>Oh, the other problem with a high amount in PLUS (or any other kind) loan is that we have a second son 4 years behind this one ....
good thing ya'll are educating me now!</p>

<p>When your 2nd child applies if your 1st one is still an undergrad, that can be considered in determining financial need & MAY lower your EFC. For my niece, even tho her older sister is in OOS public college & she's attending a very expensive private college, their EFC is above the combined cost of attendance, but the private college gave her some work study & qualified her for loans.</p>

<p>A potential area of savings in years 2, 3 and 4 is for your son to be an RA in one of the dorms. My deal with my daughter (when her #1 choice was not the least expensive by any stretch of the imagination) was that she will be on her very best "dorm behavior" and really try to get an RA position for years 2 and 3. If it doesn't work out, she is responsible (via loans) for the room and board costs for those two years. Using the current cost for room and board, she has about a $19000-$20000 incentive to get the job (I think costs decrease after year one when they don't have to take the full meal plan, just not substantially). Luckily, she loves that kind of stuff (e.g. wants to be camp counselor next summer) and doesn't view it as a burden at all.</p>

<p>I have no idea how competitive it is to get the position, but I'm keeping my fingers crossed.</p>

<p>"I think it bears repeating that the EFC does NOT assume you will be paying the bill out of current income, but either out of past savings (investments, etc.) or out of future savings in discounted dollars (loans, mortgages, etc.)"</p>

<p>Some people live paycheck to paycheck and don't have any savings!</p>