In my last blog post I introduced you to the topic of need-based financial aid. I explained how to figure out whether your family is eligible for need-based financial aid and, if so, for how much. Most important, I recommended that you use the net price calculator of a college to obtain an estimate of how much you should expect to pay for that college after need-based financial aid.
But what if you come to realize after running your numbers through various net price calculators of colleges where your student has a good chance of admission that your family does not qualify for (enough) need-based financial aid? The more your household income exceeds $100,000, the more likely this scenario becomes. Does this mean that you and/or your student have to take out loans to cover the full cost of college?
Fortunately, the answer is a resounding no for most families. It may come as a surprise to you, but, most students are eligible for substantial merit aid at many colleges. Merit aid is basically scholarship money awarded based on a student's academic and, sometimes, non-academic performance in high school, i.e., regardless of the family's financial need. Merit aid typically is granted for all four years in equal amounts, so that there is no need to reapply each year. The only condition is that the students remains in good academic standing, which usually means a 3.0 GPA or better.
If merit is so readily available, you might ask, why haven't you heard of this before? The answer is that the colleges I have in mind are small liberal arts colleges that don't enjoy nationwide name recognition and, with few exceptions, are located outside California. Seven years ago, when our oldest started looking at colleges, we too had never heard of the colleges our two children ended up attending – in both cases with generous merit aid.
In this blog post, I will introduce you to this group of colleges, explain what differentiates them from colleges that give only need-based financial aid, and show you how to find out whether your student would qualify for substantial merit aid.
To begin with, you need to understand why some colleges offer merit aid while others don't. The basic answer is that colleges offering only need-based financial aid are "sellers" whereas colleges offering both need-based financial aid and merit aid are "buyers." As Jeffrey Selingo, the former editor of "The Chronicle of Higher Education" and author of the book "Who Gets in and Why – a Year Inside College Admissions," explains,
"sellers are the 'haves' of admissions. They have something to sell that consumers want, typically a brand name that signals prestige in the job market and social circles. As a result, they are overwhelmed with applications, many from top students. Admissions officers at the sellers see their role as the gatekeepers who allow successful applicants into the inner sanctum for the opportunity to interact with other star students.
The buyers are the 'have-nots' in terms of admissions – although they might provide a superior undergraduate education. They lack names that are instantly recognized when the scores of sports teams stream across the bottom of ESPN. Rather than select a class, their admissions officers must work hard to recruit students to fill classroom seats and beds and dorm rooms." (Emphasis added)
In other words, colleges are ultimately businesses and as such respond to the law of supply and demand. Prestigious private institutions, such as Harvard, Stanford, or USC, as well as public flagship universities, such as UCLA or UC Berkeley, have no economic incentive to offer merit aid, because plenty of top students, way more than can be accepted, are happy to attend these institutions without merit aid - and plenty of parents are happy to pay full price, if necessary. While need-based financial aid is generally available at sellers, we saw in my last blog post that this is true only to a very limited extent and only for a very limited number of students.
In contrast, buyers are usually small, private liberal arts colleges that cannot fill all of their seats by reputation alone. To effectively compete for students, and not just top students, they have little choice but to offer financial incentives - discounts - not available at more prestigious institutions. Merit aid is only one such financial incentive. Small institutions generally also have significantly lower sticker price, closer to $60,000 than $80,000. Some of them even offer a four-year graduation guarantee to minimize the risk of incurring additional costs after the traditional four years of college. In combination, merit aid and a lower sticker price tend to reduce the cost of a private college education to levels well below the cost of attending a prestigious private institution, especially for families that are not eligible for meaningful need-based financial aid. In many cases, they will reduce the cost even below the cost of attending a public university!
It is worth noting that, in addition to financial incentives, many buyer institutions also offer what you might call "quality incentives." In the minds of many higher education experts, including Jeffrey Selingo, small liberal arts colleges provide a higher-quality undergraduate education than their larger peers, private or public, in terms of the classroom experience, access to professors, research and internship opportunities, flexibility of the curriculum, availability of effective career counseling, skills desired by future employers, percentage of graduates earning PhD's later in life, acceptance rates to medical school, law school, and dental school (80%-90% vs. 50%!), and more. I will address these qualitative benefits of small liberal arts colleges in detail in my next blog post.
What does this mean for you?
In practical terms, it means that you need to create two separate college lists – one list of colleges that are sellers and offer only need-based financial aid (see my previous blog post), and another list of colleges that are buyers and offer both need-based financial aid and merit aid. The more your household income exceeds $100,000, the fewer sellers you should have on the first list and the more buyers you should have on the second list. For some of you, this may mean that you only have one list – of buyers. To prevent disappointment or worse down the line, you should discuss with your student right from the start which type of college (seller and/or buyer) can be included in your list or lists and which type cannot, and why or why not.
In psychological terms, the buyer-seller dichotomy means that you may need to let go of the – widely held – belief that your student will only be successful in life if they attend a seller institution – a prestigious, or at least well-known, college or university. For reasons that I will explore in a future blog post, this belief is simply wrong and unsupported by data. As Jeffrey Selingo puts it in his aforementioned book, "Success in college is about how you go, not just where you go".
This is not to say that jettisoning the ball and chain of prestige and name recognition is easy. It is only natural that parents want to impress friends and family, and that students want to impress their peers, with the name and reputation of the college the student attends. And our own family was, and is, no exception. Our children both attended, or attend, colleges whose names, without fail, elicit nothing but blank stares when mentioned to friends or family. In fact, I usually have to spell the names of each college, the response to which usually is "Oh, okay" accompanied by a sympathetic look feigning approval. And I don't blame them.
This need not mean, however, that you will be completely out of bullets. While buyer institutions may lack name recognition among the general public, that is often not the case for audiences that actually matter – graduate schools, professional schools, and employers. Our son, for example, is a marine science major at Eckerd College in St. Petersburg, Florida. As it turns out, Eckerd is the top undergraduate marine science program in the U.S. This has already paid major dividends in terms of on-campus, long-term research opportunities as well as a highly regarded, extremely competitive summer research internship at USC's Wrigley Marine Science Center on Catalina Island, all within the first two years.
Much the same is true for many other small liberal arts colleges around the country. They often turn out to be the top institutions for particular programs, ranging from geography, geology, or chemistry to foreign languages, music, or the classics. Many of them also have outstanding pre-professional programs with law school, medical school, or dental school acceptance rates by far exceeding those of many more prestigious institutions. As a result, students graduating from any of those top programs will be in an excellent position when applying to graduate schools, professional schools, or jobs in their area of expertise.
In other words, you can still have bragging rights at a small liberal arts college, except that they will be based on substance rather than illusion or deception – which, you may be surprised to learn, is the original meaning of the word “prestige.”
If you would like to learn more about the benefits of small liberal arts colleges, please check out my next blog post.
