Thousands of students nationwide are in the process of making one of the biggest decisions of their lives: which college to attend. This means that parents are down to the wire on “confirming” their child’s decision, which too often depends on what they can afford.

Although the net cost of a college degree is often difficult to determine, many families are poring over their financial award letters to help determine their net cost. Most colleges instruct students to calculate their “true net cost” by subtracting only grants and scholarships from the school’s total costs (including tuition, fees, room and board, books, travel, etc.).

The problem, however, is that every college uses different terminology in their award letters, which makes it more difficult for families to properly compare financial awards.

Here are answers to some of the questions parents have asked me to help you better understand tuition discounts and financial award letters:

What is a Tuition Discount?

A tuition discount is anything offered by the college that reduces your tuition cost.

The money may actually appear on the award letter as a tuition discount, entrance award, or specific college-based grant, but the effect is the same: the amount you pay for tuition is reduced.

Where Does the College Get This Money?

The college funds this amount through its own income, internal budgets, and endowment funds.

Generally, a certain amount is set aside in the college admissions budget for these incentives. In many cases, these institutional funds can also lower private college tuition costs to the same price-range as public universities.

Why Do Colleges Offer Tuition Discounts & Incentives?

Enrollment is key to a college’s survival.

Many colleges select students for admission to their school, only to have the student enroll and attend another.

Private colleges fight a constant battle to fill seats every year, and the second-tier private colleges are even more challenged because they must compete with the low costs of public universities and the popularity of the elite private (Ivy League) schools.

How Do Tuition Discounts Works?

When the college sets a sticker price for its tuition, higher-income families naturally pay full tuition while lower-income families are subsidized with financial aid. This is how the system has worked for years and colleges use this method to attract a more diverse socio-economic group of students.

In reality, though, not all higher-income families pay full tuition and not all lower-income families will be offered enough financial aid to receive a significant discount on tuition.

Colleges put incoming freshmen into pools and set a range for tuition prices based on those pools. For example, each family is placed in a pool based on the amount of income and assets they show on the FAFSA and/or CSS Profile financial aid forms. Then, the college uses a mathematical process called “financial aid leveraging” within each pool to attract and enroll the best students into their college while using the minimum amount of financial aid to do so.

In other words, they will take a $40,000 scholarship they normally give to a needy student in a lower-tier pool and break it into four scholarships of $10,000 each for wealthier students in an upper-tier pool, even when these wealthier students would probably attend another college without the $10,000 tuition-discount incentive.

“Financial aid leveraging” is the game colleges play, and they play it very well. But if you know how to play the game, too, you can avoid paying full price.

How Do I Get My Share of Tuition Discounts?

The student knows the college he/she would really like to attend, but the Financial Aid Officer (FAO) does not. What the FAO does know is the student applied to six to eight schools because this information is on the FAFSA and Student Aid Report. So, the FAO knows this will yield six to eight different financial aid packages from the colleges to which the student applied.

As a result, the FAO must make a decision: he must bid for the student or risk losing the student to a competing college. As a general rule of thumb, if the FAO can get the family to pay 75% of the college’s tuition cost, they will not try to recruit another candidate.

So, if your student does not receive at least 25% of his/her award letter in tuition-discounts, there may be an opportunity to negotiate the award. The result: at least one of the private colleges the student applies to should offer an excellent package, and if not, the student can always fall back on a less expensive public school.

Can I Appeal the Financial Award Letter?

Yes! It is preferable for the family to contact the financial aid officer in person, if possible, or write an award letter appeal.

The letter should clearly state the reasons for the appeal, request offers from other schools be matched, and include any specific documents regarding the appeal. The letter also has a better chance of success if the student has a talent (academic, athletic, musical, etc.) that the college can use to fill its enrollment needs; this special talent should also be mentioned in the appeal letter to the financial aid officer.

Once the letter and all supporting documents are received, a review is completed, and a decision is made by the financial aid officer about possible adjustments. The review of your appeal may take several weeks. If the appeal is approved, the financial aid officer will send you a revised financial aid award letter indicating the changes that have been made. If the appeal is denied, a letter will be sent from the financial aid officer to explain why the appeal was denied.

Getting Help From The College Funding Coach

REMEMBER: What looks like a better aid package from one college may actually be less favorable than another college. This is where working with a College Funding Coach can be an invaluable service. For instance, your student may receive a specific grant (e.g. Pell Grant) or a particular scholarship for achievement (merit-based award); if your student receives a tuition discount, I may be able to help your family negotiate an even larger discount.

If you’ve received a college financial aid award letter that seems confusing or hard to understand schedule a free zoom call with me to get all your questions answered. Choosing the right college at the right price can be a difficult decision, and I can help ensure that you plan properly and pay no more than your fair share.

Author:

Mario Carannante, CFBS, CCFS

Related Reading

A Peek Behind the Curtain of College Pricing

The EFC Mumbo Jumbo

Why Do I Have Two Different EFC Numbers?

The FAFSA vs CSS Profile for Divorced Parents

Understanding Your Student Aid Report (SAR)

Are Scholarships and Grants Taxable?

 

 

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