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Lots of colleges claim to meet 100% of student need. Some prominent (and expensive) schools actually hit the US News "value" list because that ranking considers not the sticker price, but the average cost after financial aid.

Included in this "aid" package, however, one usually finds things like Stafford Loans, etc. While these loans may be a bit special in terms of being made to a student without the apparent means to repay them, they are still loans. They still must be repaid.

I find it curious that these are considered reductions in the cost of tuition, just like grants and scholarships. If you buy a $25K car with $5K down and a $20K loan, you wouldn't brag to all your friends about the incredible $5K car you just bought - they'd laugh at you. So why is it that loans are considered a reduction in the cost of attending college? The same question might be asked of work-study allocations.

By California Mom (Calmom) on Monday, October 29, 2001 - 09:58 pm: Edit

Dadster, I agree with you 100%. It doesn't make sense to me either. I've even heard that some schools count unsubsidized parent PLUS loans as being part of their financial aid package -- although I did not have that unfortunate experience!

I restructured all the financial aid packages to evaluate them. I considered loans and work study to be part of our family obligation; the only thing I counted as *financial aid* were grants and scholarships.

I also disregarded all estimated costs that colleges gave me for variable expenses, like books or transportation, and I considered only the fixed costs (tuition, fees, room and board). I did this because I noticed that the colleges gave widely varying estimates for the other expenses. That made no sense to me -- I figured books and incidentals would cost about the same anywhere.

The estimated transportation costs that the colleges provided seemed to bear no relation to actual airfares or to our distance from the campus; so I figured I could use my own judgment to figure out a travel budget.

In any case, those incidental figures were (1)unpredictable, (2) something that we could control somewhat by our own habits and budgeting - so they didn't make sense in comparing financial aid package. They only tended to distort the picture in favor of the colleges that provided lower expense estimates.

I stuck all the information on an Excel spreadsheet and created bar graphs. My son thought I was nuts, but it helped me to see it visually. Many colleges did weight their aid heavily toward loans, and the picture looked very different when the loans were treated as obligations, not gifts.
Of course, you and I know that loans actually increase the costs. So a better way of figuring out the "value" would be to add in the average interest on debt that the family pays.

Work-study, of course, is merely a job. At many campuses, it's not even a guaranteed job - the award is there, but it's up to the student to find the job and work enough hours to use up the work-study allotment.

By ThePrincipal on Thursday, November 01, 2001 - 04:27 pm: Edit

Why is it that people will take out big loans to buy a car that starts losing value as soon as you drive it away from the dealer, but squawk about taking out a loan for an education that will last a kid for their whole life?

By California Mom (Calmom) on Thursday, November 01, 2001 - 11:38 pm: Edit

No one is squawking, but a loan is not something that reduces the cost of college; it is something that defers part of the cost, but increases it.

Most financial aid awards are written in a way that makes it look like the loan is reducing the family's share.

Example:
Tuition + Room & Board = $30,000
Grants & Scholarships = $16,000 -
Student Loans = $ 2,500 -
Work Study = 1,500 -
EFC = $10,000

The same college will report for statistical purposes that it has awarded this student $20,000 in aid.

In reality, in the above example, the EFC is $14,000, and the college has offered to allow the student to borrow $2,500 and work for $1,500. Actually, the college has offered nothing, because the loan and work study are federally subsidized programs. The college gets the loan proceeds and the opportunity to have an employee who is paid less than the ordinary full hourly rate for whatever the work study student does. Good deal for the college.

But lets say an offer comes in from a different college:

Example:
Tuition + Room & Board = $29,000
Grants & Scholarships = $14,000 -
Student Loans = $ 4,000 -
Work Study = 2,000 -
EFC = $ 9,000

It looks like college #2 is offering a better deal, right? From the paperwork the school provides, college #1 costs $10,000 and college #2 costs only $9,000. But when you move that loan + work over to the family obligation side (which is where it belongs), you see that college #1 actually costs $14,000 and college #2 costs $15,000. The cost differential is even higher when you factor in the fact that the student pays higher loan initiation fees and interest, and needs to work more hours for the benefit of that part of the financial *aid* offer.

No one here is complaining about taking out a loan. We just don't like the idea that the loan is being called a gift.

By anon on Friday, November 02, 2001 - 06:41 am: Edit

I agree with you Calmom. The doubletalk of the colleges bothers me too. They can handle super duper abstractions (in the various subjects) but are all thumbs when it comes to money and have to invent banalities like 'need based merit scholarships' or 'merit based need scholarships'.

By Dadster on Saturday, November 03, 2001 - 10:56 pm: Edit

Excellent clarification, CM. The issue isn't whether families should use loans to pay for college, but rather if these loans should be counted as a reduction in the cost of attending college.

I think loans are really part of the family contribution - they should be part of the EFC, not part of the aid package to bring the cost down to the EFC.

Realistically, even to come up with their EFC many families will have to use loans - it's simply not right to make more loans part of the need-meeting aid package.