College price tags are meaningless. At any given school, students can be paying hundreds or even thousands of different prices.
If you've been reading my column regularly, this won't be news to you. What you may not understand, however, are the underlying motivations that prompt schools to awards scholarships to some students and not others.
Today I want to share some general rules for how awards are divvied out that I've pulled from the newly released second edition of my book, The College Solution: A Guide to Everyone Looking for the Right School at the Right Price. I devote a sizable portion of the book to sharing the hidden (and sometimes questionable) practices families need to know about to succeed at shrinking college costs.
An easy way to get a sense of whether a school is going to be generous to families who require financial aid is to look at the institution's US News & World Report rankings.
Prestige and gold-plated financial aid practices are the higher-ed industry’s version of pancakes and syrup. You won't find one without the other nearby. The schools at or near the top of the rankings heap are rich institutions with enough money to underwrite the education of any middle-class or poor teenagers who are lucky enough to get into one of these nearly impenetrable institutions.
The schools favored by the rankings are so generous with their students that many of them don't even stuff loans into their financial aid packages. This magnanimous practice became de rigueur among elite schools in late 2007 and early 2008 before the stock market tanked.
The schools that award the most generous need-based financial aid packages include such institutions as the eight Ivy League members, Georgetown, CalTech and elite liberal arts colleges such as Middlebury, Swarthmore, Haverford and Pomona. A brilliant teenager whose parents make $75,000 will go to a school like Amherst or MIT practically for free. The trick for students of modest means is not how to pay for schools like Vassar and Williams colleges (the price will be a bargain for them), but how to get admitted.
The financial aid policies of the rest of the nation's schools are a mixed bag. These institutions aren’t sitting on fat endowments and they don’t enjoy the high concentrations of wealthy students that mob the most prestigious schools. Some of these institutions do an admirable job of meeting a large percentage of the financial need of many their students. Other schools are more interested in attracting affluent families by offering them attractive merit scholarships, while they play scrooge to everybody else.
Top-ranked public universities can be just as interested in attracting smart, well-off teenagers as their private peers and they will devote lots of money to attract this demographic.
Private and public institutions employ in-house enrollment managers or hire consultants to help them leverage their revenue to attract the kind of teenagers that they covet. Enrollment management practices have turned financial aid from primarily a utilitarian way to help disadvantaged students into a powerful tool to attract high-achieving students and the wealthy.
The best article that I've seen on enrollment management was written way back in 2005 by Matthew Quirk in The Atlantic. You can find the article by Googling its title, The Best Class Money Can Buy.
Most Generous Schools
The schools blessed with the most impressive brand names can charge full price to wealthy students. Rich parents will happily write checks totaling more than $250,000 in return for bragging rights to a school like Harvard. Consequently, a brilliant wealthy student who is hoping to get a merit scholarship from schools like Yale University or MIT or Wellesley College can forget about it. It's not going to happen.
What is a more common practice among prestigious private research universities and liberal arts colleges is to dispense tiny merit awards to a small group of wealthy students. Here are examples of average merit scholarships for the wealthy at some top colleges and universities in US News' rankings: Bowdoin, ($1,000), Carleton ($3,368), Northwestern ($2,521) and Stanford ($4,985).
Beyond the nation's most elite institutions, the vast majority of private colleges and universities provide merit awards to students of all income levels. It's easier to get into these schools, but the financial aid awards are typically not as great. At these private schools, as well as state universities, most students with financial need are not going to get 100 percent of their financial need met.
These schools provide merit money to affluent students because they must to remain competitive. While a wealthy teen's parents will write a huge check for a child to attend Princeton because of the wow factor, parents are going to be less inclined to drop that kind of money on a school like Beloit College in Wisconsin, which is the wonderful liberal arts college that my son Ben attends.
If Beloit College didn't offer merit aid to bright affluent students, these students would be more likely to end up at a state university or one of the countless liberal arts colleges that do offer merit aid.
Beloit and most other private schools are considered "tuition driven." Without huge endowments to help defray yearly expenses, they depend largely on their tuition revenue to pay the bills. In a complicated balancing act, they need enough affluent students, who will often capture some type of price break, to help cover the costs of the less fortunate students who need tremendous help.
For your affluent clients, it's the schools that don't possess the marquee names that will be eager to award their children scholarships.