A bit of a PSA/cautionary tale which I think bears repeating

[Hoggirl]

I am just sick about this. 

I have a frend from college whom I have been messging with in an informal way about various topics as her daughter has been going through the admissions cycle this season. Her daughter was recently accepted SCEA to Yale.  About a week after her acceptance (presumably when they received their financial aid package), my friend messaged me again in a state of total frustration. As I always do, I had previously discussed with her and pushed, pushed, PUSHED about money -  that can be hard to do in a “friend” situation without seeming to be incredibly nosy.  I received some dismissive comments, and a couple of “We’ll work it out,” replies and dropped it.  I urged her not to allow her daughter to apply to schools they could not afford. Her daughter is vying for a LARGE, renewable, outside scholarship which, in mom’s mind would have made Ivies and similar schools workable for them.  HOWEVER, mom and dad had NO IDEA that outside scholarships would first be applied to what Yale offered - NOT to what their family was expected to contribute. So, even if she receives it, Yale is likely unaffordable for them.  They *are* in a unique financial situation which I won’t go into. However, I think the way outside scholarships are applied is the single most misunderstood aspect of financial aid.  If you are full-pay, of course any amount of outside scholarships is going to reduce what you have to pay!  But, if you are receiving monies (whether grants or loans) from an institution, what you receive in outside scholarships is going to go against those first.  The best-case scenario is that those outside scholarshps will first reduce loans and then grants, but even that is up to each individual college. Unless and until you receive enough in outside scholarships to cover an amount BEYOND the institutional aid you are being offered, outside scholarships are not going to reduce what you are expected to pay out of pocket.   

She is frustrated because she says this was never mentioned in any college info session they attended.  And they did many visits to many schools.  Schools really like to brag on covering “full demonstrated need.”  But, what THEY (not YOU) believe you can pay has to be paid by YOU! This was the component she failed to understand, so I am reiterating it here. 

 

[Hilltopmom]

So far, no one I’ve tried to explain this to has believed me. I think people believe what they want to be true...

same thing with lots of schools not allowing stacking of scholarships- people say to me “that can’t be true”.... okay....

Edited December 23, 2018 by Hilltopmom

[teachermom2834]

My son actually won a large outside scholarship that his private school did allow him to use without reducing aid. It was such a happy surprise. 

I hesitate to even tell people that he was allowed to keep his without reducing aid because i realize it was an exception and people definitely don’t want to hear the truth about financing college. 

It is hard to watch people go down the path uninformed (especially, for me, with really high stat kids that could have gotten great merit aid elsewhere). But what are you going to do? 

 

[Hoggirl]

49 minutes ago, teachermom2834 said:

My son actually won a large outside scholarship that his private school did allow him to use without reducing aid. It was such a happy surprise. 

I hesitate to even tell people that he was allowed to keep his without reducing aid because i realize it was an exception and people definitely don’t want to hear the truth about financing college. 

It is hard to watch people go down the path uninformed (especially, for me, with really high stat kids that could have gotten great merit aid elsewhere). But what are you going to do? 

 

 

It is good to know that it does happen, but I do believe it to be rare.

I think often that students believe monies for outside scholarships will be paid directly to them.  I know this does sometime happen for smaller, local scholarships, but larger ones are going to want to pay the colleges directly for tax purposes. 

[teachermom2834]

28 minutes ago, Hoggirl said:

 

It is good to know that it does happen, but I do believe it to be rare.

I think often that students believe monies for outside scholarships will be paid directly to them.  I know this does sometime happen for smaller, local scholarships, but larger ones are going to want to pay the colleges directly for tax purposes. 

I agree that it is rare. I don’t even necessarily count on the school not adjusting his FA offer each year (the outside scholarship is renewable) because I know they would be within standard practices to do so. 

His school is very generous but also not a highly desirable school that is difficult to get into. 

But yes, it is a big misconception that outside scholarships will be like cash to a needy student. Luckily, I read enough here to understand how it works and I know for my next kids they are unlikely to have the same scenario work out. 

[flor]

Not saying that this will make it affordable and agree with all that was stated above (net price before applying!), but they could also try appealing Yale’s financial decision with a very solid and honest case. Clearly document all expenses (caring for or supporting aging parents, medical costs, homeschooling costs, etc) not captured by FAFSA and CSS Profile as these don’t always reflect all there is to a family’s financial story. 

[HollyDay]

Oh yes.  Dd received a VERY nice scholarship to a VERY expensive school.  But, still realized she would be $40K SHORT per YEAR. 

She decided to attend another institution, received the 2nd highest non athletic scholarship and only needed about $12K per year additional.

Colleges, money, financial aid, scholarships, living expenses, etc. are VERY confusing.

[Hoggirl]

4 hours ago, flor said:

Not saying that this will make it affordable and agree with all that was stated above (net price before applying!), but they could also try appealing Yale’s financial decision with a very solid and honest case. Clearly document all expenses (caring for or supporting aging parents, medical costs, homeschooling costs, etc) not captured by FAFSA and CSS Profile as these don’t always reflect all there is to a family’s financial story. 

 

Their biggest challenge is that they are currently in a situation where they have their housing provided. Her dh is older than she, and will be retiring in another year or so. They have saved money in anticipation of purchasing a house.  Of course, that money is set aside for that purpose in their minds, but on paper it is not a sheltered asset (not in a qualified retirement plan), so is “available” for paying for college. They can technically afford what they are expected to pay, but it isn’t really realistic for them to do so. Many others on here have faced similar situations. 

 

[GoodGrief]

Good advice. I know in my daughter's case, it's not worth her while to earn more than about $3500 in outside scholarships per year, because any additional simply reduces the amount of aid the school provides. They will only reduce the amount they have determined that she, personally, must earn, not the amount they have said that the parents must pay.

It's unfortunate that your friends could not have purchased the house before college season.

Edited December 24, 2018 by GoodGrief

[Lanny]

17 hours ago, Hilltopmom said:

So far, no one I’ve tried to explain this to has believed me. I think people believe what they want to be true...

same thing with lots of schools not allowing stacking of scholarships- people say to me “that can’t be true”.... okay....

 

One school I know of that does allow "Stacking" is Texas A&M University.  

[creekland]

9 hours ago, Hoggirl said:

 

Their biggest challenge is that they are currently in a situation where they have their housing provided. Her dh is older than she, and will be retiring in another year or so. They have saved money in anticipation of purchasing a house.  Of course, that money is set aside for that purpose in their minds, but on paper it is not a sheltered asset (not in a qualified retirement plan), so is “available” for paying for college. They can technically afford what they are expected to pay, but it isn’t really realistic for them to do so. Many others on here have faced similar situations. 

 

Make sure your friend knows to contact Yale and let them know her specific situation.  This is one that could possibly be "fixed" with an appeal.  When colleges do financial aid they assume all is typical.  When it isn't, most make exceptions and tailor things accordingly.  No one can say whether Yale will or won't, but the worst they can do is say no.  She'll never know if she doesn't ask.

Personally, we had a situation where we sold a piece of property that was part of our retirement investment during the college years.  It made us appear to be full pay, but doing so would gut our retirement.  We called both colleges involved and they told us to appeal sending in specifics.  Both fixed things for us - no problem at all.  They just needed proof to do so.  Had they not, my lads would have had to skip a year TBH.  Middle son was entering his junior year so one could think his college wanted to "keep" him and adjusted accordingly, but youngest was just entering freshman year and his college still had no problems protecting our retirement even though it wasn't in a traditional spot.

I can't say it will work for your friend, but I do feel it's worth a try since they have a non-traditional situation.

[Hoggirl]

Thanks, all.  I am going to suggest that she try an appeal.  As one of my other friends says, “It’s an asking world.”

Her daughter’s first choice is actually Brown, but they are ED.  Thank goodness they knew better than to do that!  They have consistently told their daughter that the financial side has to work out, but I think they believed if she got the large, competitive scholarship it would. I don’t know how much money they have set aside for a home, but I imagine that amount is significant enough to be throwing them off at least some.  

[Lanny]

@Hoggirl:    If they do not appeal to Yale, she is not going there. If she does appeal, there is a possibility. Nothing ventured, nothing gained.

If she applied ED to Brown and is accepted and does not receive that huge outside scholarship, what will happen then?  That seems quite risky if I understand how ED works.  

[Hoggirl]

She did not apply ED to Brown. She couldn’t because she applied SCEA to Yale.  

She is applying RD to Brown.  They always knew they would need to compare offers so no ED schools for them. 

[Pegasus]

I agree that this is one of the most misunderstood aspects of college finance planning.  Because this is such a complex and nuanced topic, I'd like to add a couple items of clarification to this discussion:

1. It would not have been enough for the parents to have purchased a house with their savings if they were still living in the provided housing when they applied for financial aid. The purchased house would have to be their primary residence for the value to not be fully counted.  Also, while the value of the primary residence isn't counted at all for the FAFSA, each school that uses the CSS Profile or their own methodology for computing financial need can and do count the value of the primary residence over a specific amount.

2. The federal loans are always available to eligible students as long as the loans do not cause the total aid to exceed the cost of attendance.  So, even if a school reduces the amount of federal direct loans on the financial aid statement, the student can request the full amount.  Note that the loans would not be subsidized.

 

Edited December 24, 2018 by Pegasus

[8filltheheart]

6 hours ago, Hoggirl said:

She did not apply ED to Brown. She couldn’t because she applied SCEA to Yale.  

She is applying RD to Brown.  They always knew they would need to compare offers so no ED schools for them. 

I find the Brown application extremely ironic. Brown is one university that blasts the info on their website. I use their website as an example when I giv my college talks. 

Quote

Receiving outside scholarships and tuition benefits is an excellent way to help reduce your need to work while at Brown. When you receive an outside scholarship, our office is required to reevaluate your financial aid package and account for the additional resource. Keep in mind that federal regulations stipulate that an outside scholarship cannot be used to reduce your parent contribution. 

Note: This policy does not apply to entitlement awards (State Scholarships, Pell Grants and Federal SEOG). Receipt of these funds will result in dollar for dollar reduction in University Scholarship

Outside scholarships can be used to reduce the following:

• Student Contribution from Summer Earnings
• Work-Study/Campus Employment Expectation

When you reduce the components of your package listed above, you may reduce the entire student expectation, or what we call student-effort (work-study/campus employment and summer earnings expectation).

Brown's Summer Earnings expectation is reevaluated each year. For the 2018-19 academic year, the minimum expectation is as follows:

Freshman	$2,750
Sophomore	$3,200
Junior	$3,200
Senior	$3,200

For more details on what is required of you in regard to outside scholarships, along with some examples, please visit our Frequently Asked Questions.

I have no idea what the federal regulation is that they reference bc there are schools that do allow outside aid to reduce parental contribution. But her Brown application is a waste of time bc they are definitely NOT one of them.

[creekland]

36 minutes ago, 8FillTheHeart said:

I have no idea what the federal regulation is that they reference bc there are schools that do allow outside aid to reduce parental contribution. But her Brown application is a waste of time bc they are definitely NOT one of them.

 

Perhaps they are only talking about subsidized loans or Pell Grants?  A college can offer as much aid as they want - hence, full rides - but they aren't supposed to still offer subsidized loans or Pell Grants if the EFC hasn't been met last I knew.  Grandma can't even send $$ to the school and have it apply to the EFC if public subsidized funding is used at all.  Grandma needs to send the money to the parent or student and they have to pay the school (or so we were told at multiple financial aid seminars at various schools).

[Sebastian (a lady)]

I think that many families hear that a school meets "full need" or that the financial aid office will determine what need based aid they are eligible for and assume that need refers to something related to the family's budget rather than a more complex assessment of income and what they are expected to have saved over the years or be able to afford to pay. There is often a large delta between the calculated Estimated Family Contribution and what feels feasible to a family. 

 

[Matryoshka]

1 hour ago, Sebastian (a lady) said:

I think that many families hear that a school meets "full need" or that the financial aid office will determine what need based aid they are eligible for and assume that need refers to something related to the family's budget rather than a more complex assessment of income and what they are expected to have saved over the years or be able to afford to pay. There is often a large delta between the calculated Estimated Family Contribution and what feels feasible to a family. 

Or that "full need" actually has nothing to do with the FAFSA EFC.  All the "meet full need" schools I can think of use the CSS profile.  We do not own a second home, we drive old beat-up cars, but for some reason we apparently look like we have more to give to the CSS schools.  The one "meet full need" school that dd got into calculated our "need" as being more than twice our FAFSA EFC.  Excuse me?  They told us that putting money into dh's 401K was considered 'optional' and that they considered that money was available for tuition.  Even though he'll be 64 when our kids (three - and all in college at the same time, no less!) are done with school.  I am actually surprised that the PP got away with that land sale that was 'for retirement' being taken off the table.  Nope, we shouldn't worry about saving for retirement.  It should all go to the school.   So 'meets full need' actually has nothing much to do with EFC, at least not as calculated by the FAFSA.

[Hoggirl]

9 hours ago, Matryoshka said:

Or that "full need" actually has nothing to do with the FAFSA EFC.  All the "meet full need" schools I can think of use the CSS profile.  We do not own a second home, we drive old beat-up cars, but for some reason we apparently look like we have more to give to the CSS schools.  The one "meet full need" school that dd got into calculated our "need" as being more than twice our FAFSA EFC.  Excuse me?  They told us that putting money into dh's 401K was considered 'optional' and that they considered that money was available for tuition.  Even though he'll be 64 when our kids (three - and all in college at the same time, no less!) are done with school.  I am actually surprised that the PP got away with that land sale that was 'for retirement' being taken off the table.  Nope, we shouldn't worry about saving for retirement.  It should all go to the school.   So 'meets full need' actually has nothing much to do with EFC, at least not as calculated by the FAFSA.

 

^This.  “‘Full need’ actually has nothing to do with the FAFSA EFC.” 

I think a lot of confusion comes in with the term “Expected Family Contribution.”  This is really what I would call a “term of art.”  One’s EFC applies to the concept of federal loan and grant money ONLY.   It is, as you say, a FAFSA term.  One’s EFC determines eligibility for Pell money and whether or not one qualifies for any subsidized federal loans or not.  

And, yes, contributing to one’s 401k plan is technically “optional.”  It’s a discretionary expense that schools expect one to “suspend” while kids are in in college.  

 

[Hoggirl]

Regulations can be found here:

 

https://www.law.cornell.edu/cfr/text/34/673.5

[creekland]

19 hours ago, Matryoshka said:

I am actually surprised that the PP got away with that land sale that was 'for retirement' being taken off the table.  

 

Which is why I tell people to ask (file an appeal).  We didn't think it would work either, but it did.  Then we thought it might work where middle son was a junior because he had established himself well there with a high GPA, research, being an RA, and oodles more.  It would make sense that they would want to "keep" him able to come, but we didn't think it would work for my incoming Freshman lad at his school because they had no particular reason to "need" him.  He wasn't even in their Honors College or signed up for an unusual major.  It worked at both.

I definitely can't say it will work for everyone - or anyone - else, but IME when one has something outside the "norm" it's worth asking about.  If we had gone off the folks saying "it won't work" my lads would each have had a year off (which was our plan for either/both had it not worked out).

The first school was a CSS school.  The second was a Fafsa school.  Our main income comes from being self-employed, and of course, we own our farm.  We're about as atypical as one can get except we're not divorced.

[GoodGrief]

On 12/24/2018 at 6:54 AM, Hoggirl said:

Thanks, all.  I am going to suggest that she try an appeal.  As one of my other friends says, “It’s an asking world.”

Her daughter’s first choice is actually Brown, but they are ED.  Thank goodness they knew better than to do that!  They have consistently told their daughter that the financial side has to work out, but I think they believed if she got the large, competitive scholarship it would. I don’t know how much money they have set aside for a home, but I imagine that amount is significant enough to be throwing them off at least some.  

 An appeal worked beautifully for my daughter's BIL at Yale, taking him from full pay to almost fully funded. BUT he did not have his final answer until well into summer, so they should be prepared for that possibility. Hopefully having an early acceptance speeds up the timeline a bit.

Edited December 27, 2018 by GoodGrief