Most parents and students at this time of year are in the final decision making process of college selection and resultant funding. Years ago, colleges looked at financial aid as a charitable operation run within their institutions. With college costs now higher than ever, this has changed dramatically. Financial aid has now become a strategic tool that is commonly used by colleges to recruit students they would most like to enroll.
There are three basic sources of college funding: the private sector, the federal government, and the institutions themselves. The common myth is that the private-sector scholarships pay the majority of college costs, when in actuality they make up less than three percent of all funding awarded annually. Please, pay attention to this warning! There are multitudes of so-called experts/services in the college marketplace today that claim that they are able to put thousands of dollars in your students pocket by directing you to targeted scholarship offerings. Of course, this is information that is provided to you along with a healthy fee attached. Common sense should have you ask yourself this thought-provoking question. Why do I want to spend the majority of my and my student’s precious time chasing three percent of the money and paying a fee for all that time and trouble? The federal government and the institutions are responsible for the remaining 97 percent, with the colleges themselves being the single biggest source of funding, by far.
Colleges are in charge of distributing the federal government’s allocated funds. Yes, even the recently enacted “Dream Act 2011.” The colleges then offer their own funds to entice the preferred student to attend. Overall, colleges control the entire funding process and the final say on all monies awarded.
Supply and Demand
As more and more students enter college, and the financial aid system balances between supply and demand, financial aid offices are being forced to use their limited funds to attract the strongest applicants. The very wealthy schools (basically the Ivy Leaguers) are still in a seller’s market. In other words, they can most often command that a student (and family) still pay the sticker price.
However, there are hundreds of very fine institutions that are very comparable to the Ivy Leaguers. These colleges have found themselves in the midst of a bidding war to attract desirable students. These institutions are where the majority of the real educational bargains can be found. More for your money!
However, you must be careful. Although these schools will most often discount, they will also reduce their discounts (not offer as much financial aid) to students who may be less attractive or more likely to attend no matter what the offer of funding may be.
Due to the intense competition, these colleges are constantly looking for those students whose decision may be swayed by financial aid. This is a true buyer’s market. This buyer’s market puts the student (and family) in a very strong position, and in most cases allows the student to call the shots.
Scholarships, grants, and tuition discounts are how colleges commonly label their funding when all these monies are, in fact, rate reductions on the institution’s total cost of attendance. These rate reductions are subsidized by huge endowment funds enjoyed by the colleges, with hundreds of institutions having over $100 million at their disposal.
An excellent source of information for you and your student can be found at: www.americancollegefoundation.org. Register your student for their scholarship offerings and there is no cost to have access to their wealth of information on the college process.
In summary, the vast majority of colleges utilize direct cost reductions to get the best blend of good students and paying customers. Their business approach is simply to get the family to pay as much as possible and still get the student to attend. Never forget, college is a business!