Tompor: How not to be fooled by college award letters
Many times — maybe too many — high school seniors are just so happy to be accepted to their dream school that they don't give a second thought to the financial implications of their college choice.
Then reality sinks in when they start digging into the details of college award letters.
Karrington Baisden, 18, a senior at the International Academy in Bloomfield Hills, Mich., had several college offers on the table by late April — the University of Michigan Ross School of Business, Pepperdine University in southern California, Emory University in Atlanta and Howard University in Washington, D.C.
"My parents are pushing Ross a lot and Howard," said Baisden, who has a 3.8 grade-point average. She received a full-tuition scholarship offer from Howard, but she really wanted to go to Emory. She attended a LEAD Summer Business Institute program at Emory's campus one summer and fell in love with the campus.
"I love Atlanta. I have family out there," said Baisden, who lives in Beverly Hills, Mich., and wants to studying marketing. But Emory was soon out of the running, once Baisden received a revised financial aid package this week that the family didn't find attractive.
So as of Wednesday morning, Baisden said she's going to Pepperdine — her second choice for a California college. For years, she had dreamed of going to the University of Southern California Los Angeles but she wasn't accepted there.
"I really love Pepperdine and what it has to offer me," she said. "I haven't put down a deposit yet, but I probably will this weekend."
Earlier this week, Baisden had no idea of how much money she'd have to borrow and pay back. And she wasn't clear on the tuition costs at each school. She plans to talk over the financial packages with her parents on Friday and go out to dinner then to celebrate the final decision.
"I'm really excited and anxious to see what's in store for me," she said. "I really want to go out of state."
May 1 is what's known as National College Decision Day — the deadline that more selective public and nonprofit colleges want students to meet for making deposits to attend school beginning in the fall.
But it's not a deadline for all schools. Many community colleges and some four-year institutions do not have firm cutoff dates.
The big college decision, of course, should be influenced by where you think you'd be inspired academically.
Ideally, you'd want to pick the college where you can confidently begin the journey toward obtaining a degree and later a job. Maybe, as some suggest, you pay attention to the quality of the cafeteria food or the condition of the dorm rooms. Maybe not.
Financial experts say you want to take a hard look at what's really being offered in an award letter. Is it a free ride or a bundle of college debt? Some questions to ask:
What's your actual price for a school?
One mistake that some families make is focusing on the total dollar amount listed for the aid package on an award letter, said Karen McCarthy, director of policy analysis for the National Association of Student Financial Aid Administrators.
And then, they compare that number across institutions.
"But a $10,000 award from one school that's offering a grant or scholarship is very different from a $10,000 loan," she said.
What you want to know is your out-of-pocket cost. How much money will the family need to pay using savings, money earned from working during the year and by tapping into loans that need to be paid back?
"The net price is the true bottom-line cost that you can use to compare college affordability," said Mark Kantrowitz, publisher and vice president of strategy for Cappex.com.
Net price takes into account your cost after any grants and scholarships.
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"Net cost and net price do not necessarily show up on the award letter," Kantrowitz said. "That's one of the problems."
About 2,000 colleges have adopted the financial-aid shopping sheet, which includes the net price, he said.
The net price is lower than a published price because it's the cost of attendance minus grants or scholarships. So if the school cost $40,000 and you got $10,000 in scholarships, your net price would be $30,000.
By contrast, the net cost can look smaller when it's really not. If the school cost $40,000 and you got $10,000 in loans, your net cost would be $30,000, but you're really paying for those loans somewhere down the line.
Kantrowitz noted that net cost can show up in bigger print on some websites and make it look like the school is more affordable when you're really taking on loans.
"It is always best for families to calculate the net price themselves, to make sure it is actually the net price and that the allowances for the components of the cost of attendance are complete and accurate," Kantrowitz said.
Colleges and universities have been required to provide net price calculators on their websites since October 2011. Such calculators can be helpful to give an estimate earlier in the college application process.
The U.S. Department of Education notes that students can use these calculators to enter information about themselves to find out what students in similar situations paid to attend the institution in the previous year, after taking grants and scholarship aid into account.
The more questions you're asked, the more likely you'll receive an accurate answer.
The net price calculators are useful when considering where to apply, but not when considering where to attend.
"The net price calculators are based on averages, not actual figures. When you're deciding where to enroll, you should determine the net price based on the actual financial aid award letter," Kantrowitz said.
Make sure you take time to understand whether the school practices front-loading — where you'd get more grant money in the first year of school than in future years. Kantrowitz said about half of all colleges practice front-loading.
It's also essential to understand the rules of the game. What's the minimum grade-point average that you'd need to keep a grant or scholarship?
Be absolutely clear about what money might really be a loan.
What are these awards letters really saying?
Brush up on your vocabulary words here.
The National Association of Student Financial Aid Administrators, which represents more than 20,000 financial aid professionals, has even come up with a "Glossary of Terms for Award Notifications."
Parents and students can find it tricky to read and decipher award letters, according to NASFAA.
Pay attention to terms such as "direct costs" — what the student and family pays directly to the college.
And "gift aid" — money awarded that would not have to be repaid, unless the student fails to meet certain terms, such as a service requirement.
Gift aid can be awarded based upon many factors, including (but not limited to) financial need, academic excellence, athletic, musical and theatrical talent, affiliation with various groups, or career aspirations.
What will make you happy?
My son worked hard enough in high school to be admitted to both Big Ten colleges in Michigan, among other universities.
And last spring, he lined up a bunch of baseball caps with college logos on a table, sat down to film a quirky interview with a friend and posted his decision in late April on Twitter.
He began simply: "In the fall of 2016, I will be taking my talents to East Lansing."
Yes, he cribbed from "The Decision" when LeBron James left the Cleveland Cavaliers in 2010 by declaring on a much-watched ESPN special that he was "taking my talents to South Beach." James came back to Cleveland, of course, to get his third NBA championship ring — two rings in Miami, one in Cleveland.
But I love my son's 30-second video — which got 75 likes on Twitter -- for two reasons. One, my son made his own decision. Two, he decided to go to Michigan State University even when others might have suggested a different school. It was not easy. He had good friends going to both big state universities. He saw strong academic opportunities at both schools.
He decided to do what made him happy. And, not surprising, his first year in college was a good one. He's looking forward to returning to the same campus in the fall.
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Contact Susan Tompor: 313-222-8876 or stompor@freepress.com. Follow her on Twitter @Tompor.