Demystifying Financial Aid
by Kristina Brooks
As part of the tide of gloomy economic news, the uncertain future for student financial aid has become a regular topic for reporters and worried families alike. By mid-February of this year, the number of federal financial aid forms filed had risen by 20% over last year, while a headline in the Los Angeles Times of December 27, 2008, bemoaned “Students learn too late the costs of private loans.” Parents are confused; students are anxious. What is the future of student financial aid, and how is Scripps preparing for it?
“Our guiding principle continues to be that we don’t want finances to be a reason a student doesn’t come to Scripps,” says David Levy, who has been director of financial aid at the College since September 2008, after serving for nearly 19 years at Caltech as director of financial aid and director of educational outreach. “Less than half of the students at Scripps pay the full amount of their costs.”
In fact, Scripps is one of a small number of colleges that promises to meet the full demonstrated need of its eligible aid applicants through grants, scholarships, low- or no-interest loans, and employment. This is an area of some confusion, as many colleges and universities pledge that they are “need blind” in their admission process, meaning that they do not consider applicants’ ability to pay. However, these schools often do not meet the full need of their admitted students.
A recent report by the National Association for College Admission Counseling (NA CAC) found that, while 93% of public and 81% of private institutions claim to be need blind, only 32% of public and 18% of private institutions promise to meet the full financial need of accepted students. Thus, “gapping” is prevalent, a situation where a college admits a student but provides an aid package that falls short — sometimes far short — of meeting that student’s financial needs.
When Angela* applied to Scripps in 2008, the total cost of attendance was “very scary,” she said. Neither of her parents had attended college, and Angela had been on scholarship at a private, all-girls school since seventh grade. Her father’s small landscaping business in Dallas was heavily dependent on both weather and general economic ups and downs. However, Angela “was willing to take out loans because I so strongly believed in Scripps’s values and felt I couldn’t easily find this kind of education.”
Angela applied to Scripps Early Decision, a binding agreement that holds the applicant to attend the College if she is accepted. “My first reaction when I saw my financial aid offer was ‘Wow, that’s a lot of money they’re giving me.’ I was really comforted by Scripps’s promise to meet my financial need.”
But how is “need” determined? Step into the world of financial aid, a complex zone somewhere north of college admissions and south of managing a stock market portfolio. Lesson number one: every student who wishes to apply for any Federal grant, loan or work-study program must file the FAFSA , or the Free Application for Federal Student Aid. Scripps also requires that first-year applicants complete the CSS PR OFILE. Like most colleges, Scripps uses the PR OFILE and FAFSA information to perform an eligibility calculation to determine each student’s “need” and fulfill it with grants, institutional scholarships, and other financial aid.
For middle- or upper-to-middle income families, this calculation can be a major pitfall in the financial aid process. A family’s definition of “need” and a financial aid officer’s definition are often at odds.
“We employ national standards and formulas,” says Levy. “Based on the information a family provides, we determine the amount that family can realistically be expected to contribute. However, numbers may not always tell the whole story, so we are open to other situations and circumstances.”
Each family is like a snowflake, though, with a set of financial circumstances unique to itself. Are there other children in college? A non-custodial parent with financial resources but no intention of contributing to college tuition? Unexpected medical expenses? A job loss after the FAFSA was filed? A huge stock market loss? Obviously, one form cannot cover every drop in income or loss of assets.
While campaigning, President Obama pledged to eliminate the six-page, more than 100-question FAFSA form, which just about everyone agrees is both intimidating and overwhelming. Many families resort to professional services just to fill out this form. Students whose parents did not attend college or whose first language is not English face special hurdles in completing the form themselves.
“I had to figure out the CSS PROFILE and the FAFSA myself,” reports Angela, who is now a first year planning to dual major in sociology and Chicana/o studies. “I got to know David Levy and Ms. Doty very well through phone calls to make sure all my documents were in and filled out correctly. I also had a couple of outside scholarships, such as the Gates Millennium Scholarship, and Scripps had to communicate with those organizations to work out my package.”
Wendy*, a sophomore dual major in English and legal studies whose mother is not fluent in English, also filled out the forms herself, with the help of her older sister, who graduated from Scripps in 2005. Wendy recently had reason to contact the Office of Financial Aid for assistance in the middle of the year.
“My family had a financial hardship recently, and I contacted David Levy and Virginia Miller, senior associate director. Even in light of the general economy, they were so helpful and accommodating. Virginia suggested that, instead of applying for more federal aid, I take out a Scripps revolving loan so that I wouldn’t have to repay it until after graduation.
Additionally, a new resource that the financial aid office was able to offer Wendy was a book stipend that she could use at the Huntley Bookstore on campus or online to purchase up to $400 worth of books for her semester’s classes.
“We try to remain sensitive to a family’s situation throughout the year,” says Levy. “We’re there for them throughout a student’s entire career here. I had a case this morning with a Scripps family that suffered a $40,000 reduction in their college savings plan. Basically, in a situation like that, we do a brand new eligibility calculation.”
Angela also faced an unforeseen financial catastrophe when a pipe burst under her family’s home in August 2008. Although her family had already received their bill from Scripps for the upcoming school year, the financial aid office made last-minute revisions in light of the estimated $16,000 in repairs that the family faced.
“I was so committed to Scripps at that point that I was ready to take out loans. However, I feel well taken care of at Scripps and know that Mr. Levy and Jan Doty [administrative assistant] are going to be supportive.”
Several students in fall 2008 seemed to have difficulties with the Office of Financial Aid, however, difficulties that were rumored to result in students withdrawing from the college for financial reasons.
David Levy acknowledges that there were problems with financial aid awards this fall, in part because of hitches in the initiation of a new electronic loan application process and in part because the College’s major private lender, Bank of America, stopped issuing loans. However, he says that any students who withdrew from the College in the fall did not do so because of changes in their financial aid packages.
“We were late in getting awards out,” Levy admits. “Although we were attempting to streamline the loan application process, the new system had some glitches and we got forms from students later than required. Also, when Bank of America dropped out, students had to find another lender. That was happening to college students everywhere.
“Students were concerned because they got their bills, and there was no financial aid on them. People got very upset and worried, and there were allegations that students were leaving the College because of a lack of financial aid. We had about 90 appeals by the end of August.”
To tackle the problems and the escalating anxiety, the Office of Financial Aid addressed each appeal, trying to contact every family by phone, letter, and email, and extended payment deadlines.
“We became more proactive than we’d been in the past,” explains Miller. “We used to contact students only, but that led to delays. In general, students are here to get an education. They don’t always know the details of their financial aid situation. We now communicate with students and their families, and we find we’re getting more timely responses from parents.”
To effect real change, the office went beyond putting out the brush fires and began addressing systemic problems.
“When I got here, I realized that students didn’t understand the award letter brochure,” says Levy. “We formed a student focus group, revised the brochure, gave it to the students, and then rewrote it again based on their comments and suggestions. When we heard students complain about how difficult it was to find campus jobs for their work-study, we initiated online listings they can access 24/7, rather than having to physically consult a notebook in Career Planning & Resources.”
How does work-study fit into a student’s aid package? At Scripps, the first $6,000 of need is met with a grant from the College: the equivalent of erasing $6,000 from the total on a student’s bill. Sixty-five percent of all financial aid awarded by the College ($11 million annually from Scripps’ resources), in fact, is grant money: free money with no strings attached. After this, the student is offered up to $1,800 in campus employment through the federal workstudy program, and up to $4,000 in low-interest student loans.
“I feel that the purpose of work-study is to give back to the community when Scripps is giving so much to me,” says Stephanie Kang ’11, who has been working in the Office of Admission for the past two years, averaging about five hours per week. “It’s nice to be able to interact with so many prospective students and their families, too.”
Lisette*, a senior psychology major, has also found that working while going to school has its advantages. Her parents’ divorce in the middle of her college career threw a wrench into her financial aid situation. From taking out $1,000 to $3,000 in loans her first two years, Lisette suddenly found herself wondering if she would have to transfer her junior year. However, after a combination of financial help from her grandparents, a Scripps scholarship for juniors and seniors, increased loans, and both workstudy and on-campus employment, Lisette was able to stay at Scripps through her senior year.
“It’s really different having to be financially responsible for myself,” says Lisette, who is currently working three on-campus jobs as a tutor, teaching assistant, and research assistant while completing her honors thesis. “I watch my bank account much more closely, and I definitely have less free time. Academically, though, I actually get better grades because I have better time management.”
Learning to manage their own finances has been a valuable step for all of the students interviewed for this article. To facilitate this growth, David Levy and his staff have initiated an open-door policy, with four staff members available for confidential conversations with individual students about their financial aid. Students are now assigned one financial aid counselor, who will work with them over four years. The staff has also met with several groups on campus, including Wanawake Weusi and Chicana/o Studies, to initiate discussions about making the College affordable, specifically, for women of color. Workshops this year on financial literacy and management and credit cards and identity theft have enabled all students to become more financially savvy.
One area that remains of broad concern to most students and their parents is loans: how much debt should students expect to graduate with, and will loans even continue to be available in the current economic climate?
At Scripps, loans are capped at $3,500. However, families may choose to take out more loans when their willingness to pay falls short of their ability to pay the college bill. In these cases, parents are much wiser to seek federal PLUS loans on behalf of their children. These non-need-based loans have a fixed rate of 8.5%, as opposed to interest rates as high as 18% for private loans. Unfortunately, private loans are the fastest growing segment of the loan market, accounting for some $15 billion this year. Parents and students are often unaware until too late that these loans incur a heavy burden.
“We’ll try to work with families to steer them toward parent loans,” says Levy. “The College decided years ago to try to limit the amount of money students would have to borrow because we didn’t want to impact their career choices because of indebtedness.”
The average loan indebtedness of a 2008 Scripps graduate is just over $13,000, which compares very favorably to the $20,000 average indebtedness for an American college student today. Wendy, who plans to attend law school after graduation, estimates she will have a total of $12,000 in no- or low-interest loans to repay. Angela finds it “definitely comforting to be debt-free [when I graduate] because I plan to go on to graduate school and ultimately want to go into the non-profit sector. Not having debt will make a big difference to me.”
While Lisette chose to take out more loans because of her complicated family situation, and faces about $25,000 in loans to repay, she is proud to be financially independent and completely knowledgeable about her own finances.
“I’d encourage students to start working with their parents on their financial aid applications at the beginning of their college career,” she advises, “so that by their senior year, they can do it themselves. A lot of seniors are shocked by what they owe. I managed to keep my loans down by being proactive and going to the financial aid office for help.”
And that’s just what the financial aid staff likes to see. “My favorite part of the job is working with students and families,” says Miller. “We want them to understand there’s a friendly face here they can talk to, that they don’t have to come here only when they have a problem. That’s the message we want to get across.”
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