SELECTIVITY AND FINANCIAL AID: HOW THEY WORK TOGETHER

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1 SELECTIVITY AND FINANCIAL AID: HOW THEY WORK TOGETHER Students and parents often make a short list, and sometimes a very long list, of schools by virtue of their perceived prestige. Too often they equate a school s acceptance rate, aka its selectivity, with prestige. However, different schools are selective for very different reasons. This whitepaper will help explain some of the differences among selective schools and how those differences impact on their ability to award financial aid. First, we will look at three types of selective schools: Prestige Private Schools, Specialized Private Schools and Publicly Supported Schools. Prestige Private Schools The best known among selective schools are the privately-supported liberal arts colleges and universities with very high tuition charges, very high endowments, but also very low acceptance rates. Harvard, Princeton and Yale and their Ivy League sisters are among these schools, as are research universities such as Duke, Emory, Georgetown Northwestern, Notre Dame, NYU, Stanford, Tufts and Vanderbilt. So are liberal arts schools such as Amherst, Wesleyan and Williams, as well as Seven Sisters women s colleges such as Barnard, Bryn Mawr, Mount Holyoke and Wellesley. At these schools excellent grades and high standardized test scores form only a baseline for admissions. Applicants need much more: a compelling story or special talent, and possibly an opportunity to diversify the student population not only be ethnicity but also by geography and academic interests. These schools are also among the best-endowed. They are usually committed to meeting all of a student s demonstrated financial need, as shown on the Free Application for Student Aid (FAFSA). Since all of the students who will enroll in these schools are excellent students, scholarships are more likely to be based on need than on merit. However, it is not unusual for a school that regularly loses prospective students to other schools to compete by offering merit-based aid. Vanderbilt, for example, may offer merit scholarships to students to entice them from going to Harvard or Stanford. Case Western might do the same to attract students who might otherwise choose Cal Tech or MIT. In addition, meeting demonstrated financial need does not always mean that a student will be offered a generous scholarship or not be forced into a position where they must take out student loans. While some schools, like Princeton, have committed to putting students in a position where they will graduate with little debt, others leave their

2 students with extraordinarily high levels of indebtedness. It is not uncommon, for example, for a student to graduate from NYU with a debt in excess of $30,000. Specialized Private Schools Other selective schools have very small student bodies but also very low prices for every student. Some even charge no tuition at all. These include: Exceptionally well endowed small specialty schools: For example, the Cooper Union which offers degrees in the arts, architecture and engineering and the Webb Institute, which specializes in naval architecture and marine engineering, charge no tuition. Work colleges. These schools, which require all students to have demonstrated financial need, charge no tuition. In exchange, students must work in on-campus jobs that are typically held by full-time workers at other schools. Examples include Alice Lloyd College (KY), Berea College (KY) and Deep Springs College (CA) Publicly Supported Schools Some of the most selective publicly supported schools in the country are not necessarily among the most prestigious. These include: Schools in university systems that have historically charged low tuition to everyone. The best examples are probably Binghamton University and SUNY- Geneseo in the State University of New York and Baruch College in the City University of New York. These schools charge less than $7,000 for tuition and fees. However, the endowments of these schools are very small for public universities. Merit aid is exceptionally limited. Students who receive needbased aid typically receive it through the State of New York or the federal government. The U.S. military service academies. These schools not only charge no fees; they provide each student with a small stipend. This is because they are automatically enlisted in the branch of the military served by the academy. Students who choose to leave one of these schools after two years have a military service obligation or a debt to repay the military. Historically Black Colleges and Universities. Several HBCUs that charge low tuition and fees except fewer than half of all applicants. These include Delaware State University, Mississippi Valley State University and Johnson C. Smith University (NC), among others. These schools also have limited endowments;

3 aid is more likely to come through state and federal sources. Merit aid is also exceptionally limited. While the flagship universities in California, Illinois, Michigan, Virginia and Wisconsin, for example, are among the best-endowed research universities in the country, they do not necessarily charge the lowest prices, nor do they always meet 100 percent of a student s demonstrated financial need. However, they will often award merit-based scholarships to prevent their states from losing their brightest students. Some of these programs, such as the Morehead Scholars at the University of North Carolina-Chapel Hill or the Echols Scholars at the University of Virginia, offer aid beyond full-tuition, and carry their own prestige. Help in comparing aid packages From the descriptions given, we know that: The more selective a private school is, the more likely that aid will be needbased. Several very good to excellent schools will use merit-based aid to compete for students that they are likely to lose to other schools. Specialized private schools are the exception, because they charge little to no tuition. Publicly supported schools may be selective for different reasons. Selectivity is not always tied to prestige. The leading public universities will aggressively compete for the best and brightest students by offering merit-based aid. Given the above, let s look at some of the decisions that students are asked to make, using some common examples. The valedictorian of a public science magnet school in Philadelphia, Ms. A is an African- American raised by both parents, both working but neither a college graduate. She has SAT scores of 1800, 600 in each of three sections as well as similar scores on SAT II exams in Reading, Math and Chemistry. Their estimated family contribution, since both parents work and the student can work, too, is $8,500. Ms. A is interested in studying Chemistry or Chemical Engineering. While she wants to live on campus, she also wants to be able to go home by bus or train whenever necessary. Ms. A applied to the following schools, and received different financial aid awards: University of Pennsylvania. $2,000 in state scholarship aid, $2,500 Pell Grant, $3,000 Work Study job. $40,000 in institutional scholarship aid. Total need-based aid: $47,500. Total cost of attendance: $56,000. Ms. A can also commute to Penn, but the aid would be reduced as well as the cost.

4 University of Delaware. Merit Scholarship with full tuition and fees $28,000, renewable with 3.25 GPA or better, tied to an Honors program, $3,500 Stafford subsidized loan, $2,000 in state scholarship aid, $2,500 Pell Grant, $3,000 Work Study job. Total need-based and merit-based aid: $39,000. Total cost of attendance: estimated $44,000. Villanova University. Merit scholarship with full tuition and fees $42,000, renewable with 3.0 GPA or better, $3,500 Stafford subsidized loan, $2,000 in state scholarship aid, $2,500 Pell Grant, $3,000 Work Study job. Total needbased and merit-based aid: $53,000. Total cost of attendance: estimated $53,000. Penn has offered her a package with no loan, and all of the aid is need-based. However, Ms. A and her family must come up with the Estimated Family Contribution that came from the FAFSA. They can take out a Stafford Loan with an unsubsidized interest rate and make the interest payments while Ms. A is in school. Delaware has offered her mainly merit aid as well as admission to an honors program. Ms. A and her family would have to come up with less money, but Ms. A must also maintain her grades. AStafford Loan with unsubsidized interest can cover the balance due. Villanova has offered her enough aid to cover the full cost of attendance, however she is not admitted to an Honors program, though she can maintain her merit aid more easily than she could at Delaware. Now we have Mr. B, a bright Caucasian male who goes to a highly regarded suburban public high school near Philadelphia. He has an A-minus average, but SAT scores of Critical Reading, 700 Math, 650 Writing. He also scored over 650 on each of the SAT II tests, including Chemistry. His family is well-to-do and he will be their only college student in the coming school year. Their Estimated Family Contribution, as determined through the FAFSA, is $45,000. Coincidentally, he wants to study the same subjects as Ms. A and applied to the same three schools, among others. He has also been offered a half-tuition scholarship to Case Western, valued at $22,000, but no other aid. The total cost of attendance at Case is $52,000. He also applied to Tufts University and was rejected. He was also rejected by Penn, so we cannot compare his situation there to Ms. A s. However, we can compare his financial aid offers at Delaware and Villanova. University of Delaware. Merit Scholarship with full tuition and fees $28,000, renewable with 3.25 GPA or better, tied to an Honors program. Total need-based and merit-based aid: $28,000. Total cost of attendance: estimated $44,000.

5 Villanova University. Half-tuition scholarship $21,000, renewable with 3.0 GPA or better. Chemistry Department award (one-time) $2,000 Total need-based and merit-based aid: $23,000. Total cost of attendance: estimated $53,000. Both Delaware and Villanova have more than met Mr. B s financial need, and so has Case Western. He would spend less to go to Delaware and receive the same benefits as Ms. A, who has a greater financial need. However, had his SATs been higher in the Case applicant pool, he might have received full tuition and fees from that school as well. Not to mention that his scores would have placed him higher in the applicant pool at Tufts. Ms. C is also a fine student with the same SATs as Mr. B, though she chose to take a SAT II test in Spanish, which is also her native language. A Latina student who lives in a working class New Jersey suburb, she is raised by her mother, who is divorced. Her mother is employed as a legal assistant at a large corporate law firm in Center City Philadelphia. But unlike Ms. A and Mr. B, she has taken a semester s credits through a county community college. Ms. C is unsure of her major, but knows that she wants a liberal arts education. She also wants to be able to come home when she wants. Like Ms. A and Mr. B, she applies to Penn, Villanova and Delaware, though she also tries for admission to Bryn Mawr and Swarthmore. The Estimated Family Contribution is $15,000. University of Pennsylvania. $1,500 in state scholarship aid, $3,000 Work Study, $3,500 subsidized Stafford Loan. $33,000 in institutional scholarship aid. Total need-based aid: $41,000. Total cost of attendance: $56,000. Ms. C can also commute to Penn, but the aid would be reduced as well as the cost. She receives no credit for the classes she took at the community college. University of Delaware. Merit Scholarship with full tuition and fees $28,000, renewable with 3.25 GPA or better, tied to an Honors program, $3,500 Stafford subsidized loan, $1,400 in state scholarship aid, $3,000 Work Study job. Total need-based and merit-based aid: $35,900. Total cost of attendance: estimated $44,000. She may enter the school as a second semester freshman. Villanova University. Merit scholarship with full tuition and fees $42,000, renewable with 3.0 GPA or better, $3,500 Stafford subsidized loan, $1,400 in state scholarship aid, $3,000 Work Study job. Total need-based and merit-based aid: $49,900. Total cost of attendance: estimated $53,000. She receives credit for two of the five classes she took at the community college. As you can see from each example, schools compete aggressively for the best students. Sometimes they will offer aid in excess of need, as shown on the FAFSA, while others will meet the need, and no more. The key in choosing the right school is to reconcile your finances and the available aid with the place that you and your student believe is the best fit.

6 While it is extremely difficult for students and their families to ignore attractive financial aid offers, especially when the aid might be easily renewed, it may also be expensive to undo the mistake of choosing the wrong school, even if the school your student is leaving charged nothing at the start. An extra year in college can mean lost time and lost income as well as lost money and more debt.