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Part 1 of 2: Leveraging: The Bright Side of The Financial Aid Coin

Another well kept secret that parents and students might never know about surfaced in 1997, when an article in the Business Section of the New York Times exposed a new term that became part of our college financial aid terminology... leveraging. The New York Times announced leveraging as, and I quote from the article, "The New Economics of Higher Education." In essence it boils down to a new marketing stratagem centered on additional financial aid eligibility used by the largest collective business in the United States: Undergraduate and Graduate Education.

Since Time's 1997 article, additional articles were published on how leveraging addressed special student attributes so they could attend various institutions. Essentially it’s no more than sweetening the pot, which enables schools to provide additional funding beyond the financial aid eligibility the student was to initially receive.

Major corporations, firms and businesses in the United States have routinely used this procedure for decades to attract top-level employees from their competitors or directly from college campuses. This business practice has become standard operating procedure with many higher learning institutions in order to fill seats by attracting students to enroll at their respective institutions. Why...to guarantee that the school meets or exceeds full enrollment projections and the profits that accompany it.

In its simplest form, if Mary Student's special attributes lie in academics, athletics or in the arts, the school makes a decision regarding Mary's desirability. If the school believes it’s to their advantage and image to ask Mary to enroll, additional financial aid incentives beyond the original financial aid package are provided.

Financial aid enticements vary, from Merit and Alumni grants to reductions in tuition, room, and board costs, to school scholarships or any combination thereof. This is legal and to the student's advantage, dependent on what rung of the financial aid ladder the student's family stands.

This leveraging process benefits middle class families and students, who before 1996 were unable to participate in various schools' supplementary financial aid resources. The financial aid reserves accessible today to students with the required qualifications (attributes) for merit grant considerations are numerous. With merit grants being another source of the financial aid package, a minor drawback surfaces: With less money per grant than for scholarships, it still allows more students to participate in the overall supplemental financial aid resources than before.

The next leveraging progression was instituting Alumni Awards ($3,000.00 to $5,000.00). However, the stipulation regarding receivership eligibility in various schools was unique, uncommon, unusual, etc. The stipulation was the student had to graduate in the upper fifty percent of the high school's graduating class. Moreover, it made no difference if the student(s) did not have any financial aid eligibility except for a Stafford Loan.

When assorted institutional leveraging approaches were analyzed, it was indicative of the schools' efforts to separate and then examine what influence the financial aid packages had on student decisions to choose a particular school. Enrolled students are classified into various categories, by family income, academic talent or interests, ethnicity, and geographical location, to name a few. Through leveraging practices, schools determine the amount of financial aid they will require to entice students from each category into accepting enrollment at their institution.

A good business practice…definitely: It’s essentially a rebate to families with a student who did not qualify for financial aid eligibility except for a Stafford Loan. Let,s apply this situation to Mary Student whose sole attribute was graduating in the top fifty percent of her high school class.

Mary borrows $2,625.00 in Stafford Loan funds (minus the process and origination fees), and then learns she is to receive an additional $5,000.00 (free money) to attend institution XYZ. Mary and her family are overjoyed however, institute XYZ simply eliminates $5,000.00 from her bill, the result being no money is handled, transferred, or disbursed aside the Stafford.

Schools offering their "need-based awards," generated increased freshmen class enrollment of 10 – 20%. When institutions of higher learning offer such financial aid incentives, it’s not difficult to understand why Mary Student enrolls in institution XYZ.

Another example is a student named John Dewer (alias). His parents' combined income placed them a few hundred dollars over the Pell Grant's family income cut-off line. John, (graduated this past year from high school) visited several college and university campuses. One school offered him $15,000 in grant money, far more than the two prestigious schools he was accepted at, offered. The school using the leveraging process generated an additional $15,000, enabling young Mr. Dewer to attend while saving his family extensive out-of-pocket expenses.

This side of the leveraging coin permits many middle and some low-income students the opportunity to attend school while simultaneously allowing schools to fill or increase their enrollment goals. It appears to be a win-win situation for both the student and the school. To paraphrase one university official’s feelings on the matter: If our total enrollment remains viable with students not requiring financial aid, it certainly helps us in presenting better offers to certain students with greater financial need who don’t have adequate financial aid eligibility.

The conclusion to this writer: Many schools are using leveraging to attract middle and some low-income students, who under normal circumstances didn’t qualify for aid, but can now afford to attend said school. What’s wrong with this?

A clue... what about the students who qualified for sufficient financial aid eligibility only to find that aid no longer exists?

Find out in our next article on Leveraging – The Dark Side of the Financial Aid Coin, Part 2


College Survival Tips

Syllabuses - Make them work for you

This is your course assignment and time management bible…so please take care of it and...

  1. Make a copy of each course's syllabus (or ask for an additional copy...my blessings here). Keep one syllabus with your notebook and the second in the desk in your room. Transpose the same notations made on the original syllabus regarding class assignments, deadlines etc, to your second syllabus: It is essential you do this.

  2. Incorporate the syllabus's assignments deadline onto a large calendar. Seeing the small notation from your syllabus on the large surface of the calendar tends to focus your attention. It may also simultaneously generate terse combinations of George Carlin's seven famous words interspersed with your favorite utterances or just the opposite: Sighs of relief to brief sentences thanking or cursing your deity of choice.

  3. Try to maintain a three-week reading assignment buffer, a two-week paper preparation buffer, and one week for tests. Regardless of what your preferences concerning applying time buffers are, please do so based on the importance designated by your professors regarding the importance of papers over tests, etc.

  4. If you find one course demanding an inordinate amount of time and effort, try creating a separate course calendar with specific safety buffers (helps eliminate time commitment errors). Doing so may provide a measure of control: You can re-arrange your time to accommodate the designated assignments/tasks you have listed on the calendar in order to make the best use of your efforts and resources.

  5. Sounds no-brainer simple…but I have witnessed the impossible occur. If, due to some act of God, you loose (misplace your syllabus), obtain a new copy A.S.A.P.! One would be surprised how a student's intentions to replace the original after completing a few errands or things to do are taken care of first. It is amazing how hours become weeks and even months in certain cases.


Federal Updates

The U.S. Senate approved a budget plan for the 2006 fiscal year that calls on Congress to raise the maximum Pell Grant by $450, to $4,500, and to maintain several federal student-aid programs that the Bush administration has put on the chopping block.
Ref: The Chronicle of Higher Education 03/2005

Errors in the Federal Database that tracks foreign students enrolled at American colleges can take months or even years to correct, according to a Government Accountability Office report released earlier this month.
Ref: The Chronicle of Higher Education 03/2005

A Looming Increase in the interest rates that borrowers must pay on federal student loans is forcing the combatants in a fierce fight on Capitol Hill to reconsider their tactics.
Ref: The Chronicle of Higher Education 03/2005

While Borrowing for Educational Purposes increased throughout the 1990s, students who graduated from college in 2000 did not, on average, face a heavier debt burden a year later than those who graduated in 1993, according to a federal report released on last week.
Ref: The Chronicle of Higher Education 03/2005


Odds’ n Ends

Mercyhurst College, a small Roman Catholic institution in the hometown of the former secretary of homeland security, Tom Ridge, has been awarded a no-bid contract to train intelligence analysts. Larger universities say they would have been interested if there had been a competition for the contract.
Ref: The Chronicle of Higher Education 03/2005

A Former Medical Professor at the University of Vermont who studied aging, menopause, and obesity has agreed to plead guilty to lying on federal research-grant applications, to pay a $180,000 penalty, and to be barred for life from receiving federal grants.
Ref: The Chronicle of Higher Education 03/2005

The College Board plans to release next month a manual that colleges can use to evaluate whether their race-based financial-aid programs pass legal muster under the 2003 rulings by the U.S. Supreme Court on race-conscious admissions at the University of Michigan at Ann Arbor.
Ref: The Chronicle of Higher Education 03/2005


Real Life College Horror Stories

Right School – Wrong Transcript

Even if you think it can never happen to you, or that this is just a story akin to Urban Legends, ergo, Financial Aid Legends, it unfortunately has occured often with heartbreaking results.

About five years ago, a prestigious New England University was recruiting a high school senior. The Admissions and Financial Aid Offices assured the young lady that if her high academic standing (#1 one in her class), and high school activities transcripts were as described via interviews and recommendations, she would be accepted. In addition, her acceptance would be accompanied by substantial merit-based financial aid and acceptance into the university's honors program.

The student dutifully checked with the school's guidance department regarding the date the requested information and required documents were forwarded to the university. With the last task completed, the student spent the next several weeks waiting for the school's acceptance letter and financial aid award package.

It arrived in April, causing utter disbelief, frustration, and anger. She found her enrollment application had been rejected (along with the expected merit-based financial aid and acceptance into the honor's program).

What had happened? Her high school guidance department had sent the university, in her name, the transcript of another student ranked 62nd in her class, with SAT scores 200 points lower and missing two SAT II tests results. The ensuing results were a lawsuit against the high school and the guidance department, with the young lady enrolling into the college of her second choice (she eventually transferred to her first choice).

The lesson from this... if possible, verify with your school that your academic and high school activity transcripts are being forwarded to the correct institution. If the high school's policy does not sanction student verification, contact the receiving school's admissions and financial aid offices to confirm they have the correct transcripts.

A good point to remember is, be as thorough as you can possibly be... spend a little extra time to make those telephone calls in the hopes of averting the same tragedy that the young woman and her family had to endure.

If you have financial aid and or admissions horror stories, please email to ray@efinancialaid.com


College Humor -

Fireworks plus pets can equal disaster as this report will attest. On May 1, 2004, a poorly timed fireworks display, celebrating the groundbreaking of Reser Stadium's expansion, created chaos at nearby Oregon State University's College of Veterinary Medicine, who were holding their annual Pet Day.

A large number of pets at the event were terrified by the fireworks that went off over their heads, causing many animals to bolt, and others to injure themselves as they struggled to run. As a result of the flurry of complaints following the event, coupled with other complaints regarding the noise created during football games, the OSU athletics department decided to cease all fireworks at the stadium.

Recent graduates set fire to lions: June 14, 2004 n Just hours after graduation, a serious error in judgment led several OSU students to set fire to two stone lions outside a fraternity on Harrison Boulevard. They avoided setting fire to the nearby building, but the lions were blackened, and the young men were temporarily jailed following the incident. The lions have since been freshened with a new coat of paint.

Flower thief strikes quiet neighborhood: On Oct. 4, 2004 several homeowners in the North College Hill neighborhood near OSU struggled to understand why someone was decapitating their sunflowers last fall. Caren Ray found 70 percent of her hand-cultivated sunflowers had been beheaded, while neighboring gardeners had their gardens raided, most likely for seed.


College Financial Aid Fables

Fable – Does 2004’s income determine 2005’s financial aid?

Truth - Generally true, January 1, 2004 to December 31, 2004 determines 2005’s financial aid however, special circumstances such as large medical bills, loss of a parent’s job or a second student starting college could alter the financial aid.

Fable - Colleges view medical expenses differently than the IRS does.

Truth - Whereas you have to exceed 7.5% of your AGI, colleges consider the entire amount, provided they know about it.


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