Updated: Feb 2
A few years ago, a parent casually said to me, “I am taking my son to visit XYZ school this weekend.” As a college admissions consultant, it was not a school I put on his son’s college list. I cautioned the parent that XYZ school would cost $75,000 a year for his family. He explained a neighbor’s son was going for basically “free” and I confirmed that high-need students could attend XYZ for free or at a reduced rate.
According to Visual Capitalist, college tuition and fees have risen by 1,200% since the 1980s. Unfortunately, how colleges award financial aid is a complex system that is difficult to understand. Comparing financial aid information with friends can cost you time and money.
If you want to control college costs, it starts with the college list and understanding that different colleges offer different types and amounts of aid for different types of applicants and families.
Like buying a car, you want to make sure your student is applying to colleges your family can afford. Most families don’t test drive a Lamborghini unless they have the budget for one. Sometimes students will fall in love with a Lamborghini school without knowing it.
Example: high-income family at a school that only offers need-based aid.
The majority of gift aid (free money) is awarded from the institution a student attends. The plan to later chase outside scholarships or take out significant student loans does not make up for this. Most students are limited to borrowing only $5,500 in federal student loans during the first year of college. Additional non-federal student loans will likely require a co-signer. Parents can take out loans but should never leverage retirement for a child’s education. If parents have to take out a loan for year one, the school might not be affordable for the family in the long term.
The federal government uses the Free Application for Federal Student Aid (FAFSA) to determine need-based aid eligibility. Most of my families do NOT qualify for federal need-based grant aid under the FAFSA (Federal Methodology) because they earn more than $55,000 which is above the national average family income.
It is best to review your estimated expected family contribution (EFC) early by using the College Board EFC estimator: https://bigfuture.collegeboard.org/pay-for-college/calculate-your-cost/expected-family-contribution/efc-calculator.
Note: FAFSA is based on family/student income the prior-prior year (for 2023 high school graduates the base income year is 2021).
It is also important to run a Net Price Calculator (NPC) at every school on the student’s list and understand it is just the first data point. Google the name of the school and Net Price Calculator. Some NPCs are not accurate; the more questions the NPC asks, the more likely the accuracy. Keep in mind it is just a starting point and you will want to do more research.
Some schools will use the FAFSA to determine need, but typically schools that meet higher levels of need will require an additional form called the CSS Profile. CSS schools decide how they calculate your institutional EFC and unlike your FAFSA EFC, it is not standardized.
FAFSA – looks “at the family house” (family income and savings) vs “in the house”
CSS Profile – looks “in the family house” (family income, savings, assets, home equity, and more)
EFC/soon-to-be Student Aid Index (SAI) is a standardized index that helps federal/state governments/some schools distribute limited resources to the neediest of students.
View the EFC/SAI as a family’s ability (not willingness) to pay with parent/student savings, current income, future income, and ability to take out loans, sell assets or borrow against a home.
Non-need-based aid (merit aid) is rarely given at the most prestigious colleges. Typically, a student can chase prestige or merit but can’t chase both.
Every school determines its priorities in how they award limited dollars to meet institutional needs. With time, priorities can shift. Over the years, Davidson College has moved to a meet-needs school and Tulane is moving from awarding a lot of merit to awarding more need-based aid. Currently, the University of South Carolina and the University of Alabama award a lot of automatic merit aid to students at the top of the applicant pool.
Families need to determine early in the process what their family can afford and, if needed, the type of aid they are eligible to receive. Need? Merit? Combo? Parents should recognize that there are different types of schools that cater to different kinds of students and their financial needs.
**Keep in mind that the best scholarship is typically in-state tuition.**
Additionally, it is helpful to understand how a school has historically awarded need-based and merit aid while knowing it can change. Be aware some schools displace need-aid with merit aid. So if a student is awarded merit aid they might reduce the need-based aid. In some cases, I have seen a student pay more when a merit scholarship was added to the financial aid packet. The key is for families to ask if the school "stacks" scholarships on top of need-based aid.
Below is a framework to help classify the types of schools out there.
Types of Schools:
Meet Need Schools: Generally, elite/competitive schools with large endowments committed to serving the underserved. CSS Profile is usually required. They can meet 100% of demonstrated need. Many will offer little to no merit aid. Examples include:
Ivy League, NESCAC & very selective (Duke, Wake Forest, Georgetown, UVA, UNC-Chapel Hill)
May meet 100% of demonstrated need only below a specific poverty line.
May offer limited uber-competitive scholarships.
May add loans and work study to the package and call it aid.
Automatic Merit Schools: These schools use their limited institutional dollars to recruit students with strong GPA/test scores to increase their rankings. They tend to use a grid methodology with GPA and test scores and typically gap need. Examples include:
University of South Carolina, Alabama, Auburn
U of Arizona (only need to meet GPA requirement); honors college students have access to additional merit.
Combo Merit/Need Schools: Schools that award some merit aid and meet some financial need with limited institutional dollars but will gap need. Examples include:
Elon, Furman, Wofford, Meredith, Rhodes, Dickinson
Merit or Talent Scholarship Schools: Schools that gap need but offer students the opportunity to compete for some merit money. These are typically public schools but can be private. (University of Tampa)
Some have full-ride scholarships, but they are very competitive. (NCSU Park Scholarship, Charlotte Levine)
Some disperse a small amount of merit to some students, often to top students. (UNC Wilmington, Appalachian State)
Some award talent scholarships or scholarships for community service. (Pace University/St Olaf)
Some take part in the Bonner Scholarship Program for students with need.
Discount Schools: Some schools will mark up their prices and offer most students a discount in the form of a scholarship similar to a coupon.
Any school where the majority of students “merit aid” is really a discount. (Guilford College)
Midwest public schools that need students will tend to discount. (Illinois)
These schools will often add more money to the offer if asked.
To add one more layer of complexity: Beginning with the 2024/25 school year, we expect all elements of the Simplified FAFSA will go into effect. The term EFC will be replaced with SAI.
The most significant change will be that families with multiple students in school will not have a reduced Federal EFC/SAI. Additionally, family-owned businesses of 100 or fewer employees will no longer be exempt from the SAI calculation.
Before you take your student on visits, research to determine if you are in the right “car” lot. I have included a chart as an example of regional schools and how they awarded aid for 2020/21 based on North Carolina residency. For additional information, check out: Resources — BigJ Educational Consulting.
Don’t be afraid to ask colleges how they award aid and verify it through a resource like College Navigator or the school’s Common Data Set. Assume nothing, and don’t let anecdotal information influence your search.
It is key to remember that college is a consumer purchase, and we don’t buy a car or home without understanding the cost. So, buyer beware and remember knowledge is power!
(SY 20/21 Info)
Total Cost of Attendance
For a NC resident
Avg % of Need Met
% of Students Need Fully Met
Avg Need Based Aid
Avg Merit Award
% of Students Receiving Merit Aid
Queens of Ch
C of Charleston
Sources: IECA, Subcommittee for College Affordability Resource provided by Cyndy McDonald (Guided Path Data) at IECA Nov 21 Conference, College Websites & Data from College Planner Pro, BigJ Educational Consulting.