Q: Families often ask me what they can “expect” as an award when they turn in their financial aid applications. They tell me how much they make in a year, thinking that their salaries will be enough information for me to offer a rough award estimate on the spot. Do you have any advice on how to respond?
A: There are two answers to this question. The short answer will take care of the immediate situation, while the longer answer gets into why that strategy is best.
The short answer is to smile, outline the full range of financial aid amounts your school offers, and insist that you don’t have enough information to give a more informed decision even knowing their salary amounts. (“The lowest amount of aid our school offers is $1,000, with the highest being a full-tuition scholarship. Unfortunately, I can’t be more specific than that, as every family’s situation is unique. More factors than just gross income are taken into account before an aid decision can be made.”)
The long answer explains why it’s so tempting to offer published “estimated award” amounts. Schools often believe they may get better quality applications if families know what award they can expect when they apply. The logic goes that if families feel more certain that they’ll receive help—even a tentative estimate based solely on a salary range—they’ll be more likely to apply.
This strategy is rarely effective for a host of reasons. The biggest problem with publishing “estimated award amounts” is that such publicized estimates effectively paint the school into a corner. It’s basically forced to give awards to families that could pay the full tuition, simply because it set a basic expectation with families when it published estimated award amounts.
This situation usually results in a net loss for the school, as it gives more (unnecessary) discounts and financial aid awards than whatever income is gained by one or two extra seats being filled.
Even if a school is just looking to make awarding more "fair” or “transparent,” simply publishing estimates or ranges won’t result in the desired transparency. While it may seem like two families that bring in the same income should expect the same award, this quickly falls apart in several common scenarios.
Let’s say we have two families—the Adams and the Brooks—that both make $80,000 annually. This may be either high or low for you school’s tuition or the area’s cost of living, but let’s assume that on the surface, we’d expect such a family to need a little help affording tuition.
Accordingly, we’ve published on the website that families making $70,000-$90,000 a year can expect $6,000 of aid, should they apply. So, both families apply, expecting $6,000 in aid.
However, once we receive their applications, one of several situations may be revealed that dramatically impacts award amounts. Here are four possible scenarios that heavily impact award decision-making beyond initial impressions of gross income.
- The Adam family could work for an employer that covers all benefits, and so the family pays nothing for health insurance. However, the Brook family works for a company that requires its employees to pay $6000 per year toward health insurance. This additional health cost effectively gives the Brooks family a dramatically lower annual income than the Adams family that is not reflected in gross wages.
- The Adams might have moved to the neighborhood only recently, taking out a mortgage for a house. The loan costs about 25% of their gross income ($20,000). The Brooks, on the other hand, have inherited their home, and so only pay property taxes and insurance, totalling $5000 a year. The Brook family, then, has more available cash on hand to pay for their children’s tuition than the Adam family has.
- The Adams could have just one child, while the Brooks have three kids. Additional children obviously come with additional expenses that will give the Brook family less purchasing power—and ability to pay the tuition—if all else is equal.
- Both parents in the Adam family work, while the Brooks have one stay-at-home parent who could generate additional income. Depending on the situation keeping the second parent from working, the school may decide not to subsidize this lifestyle choice and not offer an award to the Brooks family at all.
Depending on the circumstances, the Adams and the Brooks may feel rewarded or cheated by their award amounts, since both families expected the amount published on the website. Even if you qualify your ranges with words like “estimated” or “possible,” families will still generally expect those amounts and use your published award estimates against you.
You may be tempted, then, to post your school’s policy on awarding and all factors considered, to be more transparent with applying parents. However, that’s not in the best interest of the school, as you’d essentially offer parents the blueprint on which to construct their argument for aid.
If your school feels compelled to offer some sort of published award estimate, put the total range of award amounts on your website so applying parents can know what’s possible without getting their hopes up for the whole amount. It’s frustrating, to be sure, but it’s the best solution to ensure that your school is offering honest, effective awards for mission-appropriate families without obligating themselves to false promises.
Have your financial aid questions answered! Submit your issue, and we may answer it in a future column.
Additional ISM resources:
The Source for Private School News Vol. 14 No. 9 FAST Answers to Financial Aid Questions: One Working Parent?
The Source for Private School News Vol. 14 No. 8 FAST Answers to Financial Aid Questions: "Mission Appropriate" Aid?
The Source for Private School News Vol. 14 No. 6 FAST Answers to Financial Aid Questions: Effective Appeals Process?
The Source for Private School News Vol. 14 No. 7 FAST Answers to Financial Aid Questions: Strategic Aid?
Additional ISM resources for Gold Consortium members:
I&P Vol. 36 No. 4 The Three Types of Need-Based Financial Aid
I&P Vol. 40 No. 12 "Rainy Day" Financial Aid: The Need for Proper Communication
I&P Vol. 39 No. 13 Strategic Financial Aid: Filling the Empty Seat
I&P Vol. 35 No. 15 The Real Cost of Financial Aid
