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How to Evaluate Financial Aid Award Letters with Missing Tuition and Grant Information

Mark Kantrowitz

April 11, 2011

At the same time, many state grant programs are also in trouble because of declines in state income tax and lottery revenue and because of increases in the number of students applying for financial aid. Five states — Illinois, Kentucky, Oregon, South Carolina and Tennessee — are awarding state grants on a first-come, first-served basis until funding is depleted. Some states, like Georgia, are setting new caps on the maximum state grant. Other states are raising eligibility requirements to reduce the number of recipients.

Even the federal Pell Grant may be cut because of a $10.7 billion funding shortfall. The US House of Representatives passed legislation that would have cut the maximum Pell Grant by 15% as part of a proposal to roll back funding to 2008 levels. President Obama has proposed maintaining the maximum Pell Grant unchanged by suspending the year-round Pell Grant program, which allowed students in accelerated programs to receive up to two Pell Grants in a single year. Either way, funding for the Pell Grant program will be cut significantly.

The timing of the turmoil is particularly problematic. Most colleges send financial aid award letters to students in late March or early April. But the state and federal funding situation is still not resolved. Some public colleges are reacting by emphasizing that the tuition and grant figures are estimates. Others are omitting these figures entirely from the award letters. (Even private colleges, which are less dependent on state appropriations, must nevertheless include caveats about federal and state grant programs.)

This makes it very difficult for families to compare college costs. The bottom line cost of college is the difference between the total cost of attendance and the grants and other gift aid. But key components of both the cost of attendance and the gift aid may be missing or inaccurate. How can you choose a college without any real information about costs?

One practical solution is to use last year’s cost and grant figures, but to add a fudge factor for the uncertainty. Calculate two estimates of the bottom line cost, a high estimate and the low estimate. The high estimate should assume that public college tuition will increase by a third and that the Pell Grant will be cut 15%. The low estimate should assume that public college tuition will increase by 10% and that the Pell Grant will be unchanged.

You could try waiting until the last minute to make a final decision, but the state budget situation is unlikely to be resolved in the near future, maybe not even until fall. Some public colleges may have to implement mid-year tuition increases.

Even with above-average tuition inflation, in-state public colleges are most likely to be the least expensive option. The main exception to this rule of thumb is the six dozen colleges that have adopted more generous “no loans” financial aid policies that yield a bottom line cost that is sometimes less expensive than in-state public college tuition.

But still, the uncertainty about public college costs and government grants this year will force families to make educated guesses when comparing college costs.

For additional advice on evaluating financial aid award letters, look at Fastweb’s Quick Reference Guide on Evaluating Financial Aid Award Letters and FinAid’s Award Letter Comparison Tool.


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