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Part 2 of 2: The Dark Side of The Financial Aid Coin

As mentioned in our last newsletter, leveraging appears to be beneficial, providing opportunities for both middle and lower income students to enroll in schools where, prior to leveraging, it was impossible for them to enroll (all things considered). Fortunately or unfortunately, like all coins, a second side exists.

In a Times article, Mr. Richard Whiteside, Tulane University's Dean of Admissions suggested, "Just because this isn't a business doesn't mean you shouldn't use good business principles to meet the University's goals." Excuse me, not a business; he actually said not a business! Post-secondary education is the largest collective business within the United States.

The article went on to describe that his decision to offer smaller merit scholarships to larger numbers of applicants sharply increased both enrollment and tuition income, without lowering the academic quality of entering freshmen. Two essential phrases... enrollment and tuition income... translate into a business term we know as profit. It would be refreshing if individuals in positions of this nature simply stated they are profit-conscious, and that leveraging is another means of insuring said profit. Mea Culpa... did not mean to subject you to one of my obsessions... so back to leveragingís other side.

One of many complaints lodged since 1996 is that, by using leveraging, more and more post-secondary institutions are making use of this practice to open admissions to any wealthy applicant they hope to enroll. Makes perfect sense. Originally, schools would provide financial aid assistance to families who couldnít afford to pay the cost of school unless additional procurement of financial aid and/or outside funds were made available. Within a year, schools began to develop a shrewd axiom: Obvious differences having nothing to do with need or academic ability can create extensive contrasts.

Thus as schools refine and redefine the delicate art of restructuring their financial aid to attract the proper student, the axiom becomes increasingly important. Incoming freshmen, enrolling as in-state students, were viewed as being less concerned with tuition costs, etc, than out-of-state applicants. To the schools' collective smile... leveraging would become the perfect means to attract students who were considering entering a public school, to think about attending a more expensive private school.

The means again... quite simple. Instead of making a financial aid award for full tuition, etc... at $24,000, the schools reduced the award to three $8,000 awards. Why? It gave families an alternative. The public in-state school (costs $12,500) may have offered no aid aside from the Stafford loan, forcing the family to finance roughly $10,000 toward one year's costs.

Costs of a private out-of-state school are $22,000. Deduct $11,000 and the Stafford loan's amount (minus processing and origination fees), and the family must secure about $8,400 in out-of-pocket expenses. Second, in the majority of the cases where ranking is short of a religion, the family finds their student in a higher ranked school. Again, simply put, "leveraging has captured two birds with one net". As school costs continue to climb, many private and high-priced public schools watched its middle class student base and upper-middle-class base -- whose tuition payments make up much of its budget -- erode. Generally, all schools followed the federal formula for distributing student aid based on family income. However, being profit driven and needing to fill seats to remain in the black, the federal formula for distributing student aid helped little financially. It simply could not close the widening gap between many schools' costs (tuition, room, board, fees) and those at in-state public institutions whose costs were considerably less.

Admissions offices attempted to find out how much it takes to enroll various types of applicants, so schools responded by offering merit scholarships until they found this wasn't sufficient to lure their type of student(s). So the axiom described earlier increasingly came into play. Schools began leveraging financial aid. The process works as follows: Every student -- to make the school affordable and or attractive -- is/was offered the correct amount of financial aid. Should the amount of $3,500.00 in merit aid (in addition to the original financial aid package), prove adequate to catch the student and his family's attention, the amount offered was not increased: This practice is termed leveraging. The student may have had this school and another as their two final choices, however, since it was calculated that $3,500 should be enough to persuade the student to attend this school, the $3,500 amount was offered.

Whatís the harm? Private schools want to lure (enroll) students in other groups. They have targeted applicants regarded as their type of students; yet they are classified as high need students. The financial aid originally set aside for high need students was now severely reduced or exhausted. The school offers more aid to make better offers to students in other groups, especially if they are in the low to middle financial aid needs classifications. Please note one viable factor. All post-secondary education institutions, if they participate in federal programs, must follow absolute guidelines when dealing with federal funds. However, when dealing with their own funds, they can do as they please... hence leveraging.

Leveraging has now become a way of life for many schools to increase enrollment and revenue, while enhancing their academic profile (rankings). Good taste prohibits my mentioning the schools, however admissions' miracles at various institutions have and continue to occur thanks to leveraging. One institution had an applicant with no attributes -- athletic, academic, extra curricular, tests scores -- save very wealthy parents. She was admitted though well below every national academic profile level.

Though leveraging is controversial, it continues to spread. Some admissions officers denounce it as an alienated method to attract students who pay full costs (minus the merit based financial aid). There have been forums on the subject, pro and con articles, even debates. After all the anti and pro pabulum has settled, it is the morals of each admissions and financial aid office to decide if they will use leveraging.

It has expanded to the point where many schools have consultant firms to assist with leveraging, which in turn leaves the middle-income students scratching and shaking their heads: "How can I afford this?" Again, a simple solution but one they donít want to hear: You have little choice but to enroll in a public school.

In closing, the following paraphrase of a statement by a hired consultant (at a private college) may offer what could become the standard philosophy on leveraging. If public schools are unable to attract a good student offering $3,000 should it be in the taxpayers' interest to bribe that student to attend a private institution?

So much for the question on morality... or is it what a large business conglomerate would utilize to stabilize and increase profits?


Real Life College Horror Stories

A student received $14,450 in Federal State and Institutional Financial aid to attend her freshmen year in college (school's costs $17,740). She had received advice from a former high school guidance counselor (recommended by a friend), on how she should complete the financial aid forms and organize her record keeping. With the school's permission, she had the guidance counselor act on her behalf since her father had abandoned the family and her mother didnít understand the financial aid processing systems. Beginning in January of that year and ending mid-July all had been successfully completed, and she enrolled at school.

During the latter part of her freshmen year, she attempted to complete the forms as she had done previously. She hadn't bothered to contact the former counselor once she found he had moved, deciding to handle everything herself. The logic was sound: She had all last year's forms before her; the school realized her financial circumstances had not changed, and she did have some experience.

Since there was no one to represent her to ask the proper questions and to make inquires when things appeared wrong, she received only a Stafford. She had earned more than the federal student income cap of $2,642, but when combined with her mother's income, did not exceed $21,000 for a family of three.

Not knowing the school focused on her income to deny her aid ($6,000), which generated a significant EFC, she had been denied all aid save her Stafford and her State Grant, leaving her to find over $12,000 in funding.

Not wanting to quit school, she enrolled at the local community college to take courses that her four-year school would accept once she reapplied upon saving enough money. The community college and her four-year school advisors mentioned she must be a half time or better, degree-seeking, matriculating student in order to be eligible for financial aid (State Grant and Stafford Loan).

She didnít list a degree... she was only taking courses to transfer on once the academic year was over. She applied for the Stafford and State Grant, only to be told she wasnít eligible. Not only did she miss the financial aid package she had received her freshmen year, she now had to pay to attend community college, or drop out.

She finished the year, followed the same procedures as her freshmen year, but with one difference... she contacted the guidance counselor and he agreed to help her again. Knowing what questions to ask, he had the four-year institution falling over itself regarding the tactics used the prior year.

The ending: She was re-admitted as a second semester sophomore, her financial aid package at $14,750 to be increased to $15, 650 upon the successful completion of her fall semester and the school did accept the five courses she took at the community college.

My one question, with everything else being the same, why did the school reduce her financial aid? Was it deliberate, was it due to incompetent staff, or both?

If you have a horror story you would like to share, please contact Ray at ray@efinancialaid.com


College/University Safety Tips

I am not going to write volumes regarding campus crime, for we all know it exists.

For incoming freshmen, ask to see the school's crime statistics for the past four years, including the current year if possible. Ask for all campus safety brochures, then ask if the institution publishes campus crime information as required by The Jeanne Clery Act (request a copy if it does)?

Are annual crime statistics included in reports to the dean's office, are they for judicial hearings, women's rape/crisis centers? Are Security Logs open for public inspection?

Is escort service provided for women students studying late, or is there a bus or police service which performs the service? If the student is lost in a nearby town or in the city the school is in, does the school provide a location and escort service? (West Virginia University will pick up students too inebriated to walk home to their dorms or residences until 2 A.M).

What are the procedures for reporting a crime, or if you think youíre being stalked and/or harassed? Does the school ask applicants if they have been arrested and convicted of a crime? Do they admit applicants with a criminal history?

Are campus crime policies and penalties explicitly addressed during orientation, as well as prominently stipulated in the student handbook? Are bathroom doors in coed dorms secured with master locks for floor residents?

Are drinking, drug, and weapon laws strictly enforced? Does the school address the entire student body during the academic year about growing problems related to campus crime: date rape and sexual assault, alcohol and drug abuse, and sexually transmitted diseases? When? Who addresses the students?

Ask what facts they have on date rape drugs (GHB and Rohypnol) that are placed in a woman's drink before the intended assault. Are single sex and "substance free" dormitories available?

Where does the school post all its hotline numbers and are they staffed 24-7? Does the school have an open judicial committee? How many and what type of cases did the judicial committee handle last year?

Does the school provide immediate medical, psychological, and legal aid to victims, as required by the Campus Sexual Assault Victims' Bill of Rights (Federal Law 1992)?

Repeat these inquiries to the Women's Rape/Crisis Center and Campus Security Dept., comparing responses and statistics. This is one of the better methods in determining if the prospective school you wish to attend is determined in crime suppression and reporting and in providing and maintaining safer environments for students to obtain their educational goals.

Also, dorm room safety tips to follow...

Card access systems surpass metal key and lock systems for safety, and cards allow quick changes in locks if/when housing assignments change.

Always lock your doors and your first/second floor windows at night: Do not leave door unlocked for roommate... very uncool move.

Does your dorm have its lobby, entrance and exit under constant night monitoring and an outside telly for visitors to ring you up? Have a dorm policy that patrols for the unusual, especially propped doors 24-7.

Never have your identification, wallets, checkbooks, credit cards, door access cards, cameras, and other valuables out in the open (view).

Program your telephone's speed dial memory with the schools listed emergency numbers, followed by family and friendís numbers.

Be able to identify those living on your floor... if you see anyone hanging around who shouldnít be or doing odds things, report it.

and for Students living off-campus...

Contact your student legal aid or advice rep to see if they can draft or amend existing leases that specify what standard security responsibilities that your landlord has. Consult any Neighborhood Watch association active in the neighborhood and/or community or Police Station regarding crime rates.


Federal Updates

Too Private for itís Own Good
Federal appeals court rules that Penn official can be sued for comments made during university's grievance process.

Supreme Court Rules Against File Sharing Companies
Students are major users of downloading software that justices say entertainment companies can sue over.

House Holds Firm on Tight Budget
In passing spending measure for student aid and NIH, lawmakers approve permanent end to lender loophole.

2 Years Later
The Supreme Court allowed affirmative action, but new report blasts Education Department for discouraging it.


Odds and Ends

Yale's recent changes in its financial aid policy -- which eliminate the parent contribution for families earning under $45,000 and reduces it for families earnings between $45,000 and $60,000 -- were generally applauded by admissions and financial aid officials at peer institutions, but some officials raised concerns about the technical aspect of the new policy.

Across the Ivy League, universities in recent years have altered their financial aid policies. Experts said they expect more universities with sufficient funds to make similar moves in coming years in order to stay competitive with schools that have already made improvements to their financial aid policies, although officials at several top universities said they do not anticipate making changes this year. Yale's announcement was followed two weeks later by the University of Pennsylvania, which on Friday announced a $1.8 million addition to its financial aid policy to appeal to low-income students.

Yale officials said they hope its changes will be a selling point for low-income students and increase the number of applications to the University. Yaleís Dean of Admissions and Financial Aid Richard Shaw said the changes will help "level the playing field" with competitors Harvard and Princeton, which had already adopted sweeping financial aid changes.

Last year, Harvard removed the parental contribution for families earning under $40,000 and lessened it for families earning between $40,000 and $60,000. Harvard Director of Admissions Marlyn McGrath Lewis said she supported Yale's changes.


College Humor -

Buying Grades

One day a professor was giving a big test to his students. He handed out all of the tests and went back to his desk to wait. Once the test was over, the students all handed the tests back in.

The professor noticed that one of the students had attached a $100 bill to his test with a note saying "A dollar per point." The next class the professor handed the tests back out.

This student got back his test and $64 change.

A letter home...

The parents of a Northwestern student who just headed back from holiday received this letter:

Dear Mom and Dad,

Univer$ity life i$ $o wonderful! Cla$$e$ this $e$$ion are intere$ting, my cla$$mate$ are the be$t!

But after $pending all my ca$h on Chri$tma$ pre$ent$, I am in a little need for $ome $pending money for book$ and $uch. But don't want to $end the wrong $ignal$ home.

Your $on

...After deliberating a while, Mom & Dad drafted this response:

Dear Son,

NOt much to NOtice here on the NOrth side of town since you left for NOrthwestern. NObody doing NOthing NOble.

Enjoyed having you home for Thanksgiving in NOvember and Christmas. NOthing is the same since you left.

Loved your NOte; write aNOther one when you have time.

Have to go NOw.

Mom & Dad


Headlines Found in Various College NewspapersÖThink about it

Cold wave linked to temperature

Red tape holds up new bridges

Man struck by lightning faces battery charge

Kids make nutritious snacks

Hospitals are sued by 7 foot doctors

Hurricane rips through cemetery... hundreds dead


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