Choosing the right college for you: Part II – Financial Aid

Financial aid offers can have a large impact on where you choose to go to college.

Welcome to the second post of our new series on choosing the right college for you. Last time, we discussed the role that the cost of college can play in your decision making process. Another aspect of that issue will be discussed in this post: financial aid.

Financial aid is another important factor to consider when choosing a college, and it generally comes in three varieties: need based aid, merit based aid, and what I’m going to call interest group based aid. Need based aid is probably the most common type, and this is generally how it works: you and your family give the university all of your financial information, and the university calculates exactly how much you could possibly afford to pay, and if that amount is less than their normal tuition, that’s the price they give you. It’s a way to make sure that everyone pays as much as they can. Some schools are more generous than others, and there is usually a cut off point where if your family makes below a certain amount then they won’t have to pay anything. At Harvard, for instance, students from families that make less than $60,000 a year pay nothing (without aid, Harvard tuition is about $50,000 a year). Considering that the median household income in 2006 was $50,233 per year according to the Census Bureau, that could be good news for a lot of bright kids and their families.

Come here for college and we will give you...A BRAND NEW CAR!!!

The second form of financial aid is merit based aid, and generally takes the form of academic or sports scholarships. The most prestigious schools do not offer merit based aid – you have to be outstanding just to get accepted, and they have their pick of the applicants. Merit based aid is essentially a way for less prestigious schools to bribe top students into picking them, and if you are a top applicant, their offers can be quite attractive. For instance, as a national merit finalist (and becoming a national merit finalist can get you $2,500 from the National Merit Scholarship Corporation), when I was applying to college in 2006, not only did one school offer me a free ride, another even offered to pay me to go there (I think one even offered to buy me a car). If you are lucky enough get offers like these, consider them carefully, especially if you plan to go on to graduate school. Remember, if you intend to go to graduate school, you should view your undergraduate degree as a stepping stone to graduate school, since your graduate degree is going to be much more important on your resume. If the school offering you merit based scholarships has a record of getting their seniors into top graduate schools, it might be a wiser choice to go there than to a more prestigious (and expensive) school that doesn’t offer you any merit based aid.

The third kind of financial aid, which I refer to as interest group aid, includes scholarships provided by interest groups, often corporations, groups for religious and ethnic minorities, political groups, and groups for women. These types of scholarships often include need based and/or merit based components, such as a minimum high school GPA and an essay contest. Examples might include the Coca Cola Scholars program, the Ayn Rand Fountainhead essay competition (for young libertarians who believe we should get rid of all government welfare), and the Gates Millennium Scholars Program (for African American, American Indian/Alaska Native, Asian Pacific Islander American, and Hispanic American students with significant financial need). If you can qualify for any of these scholarships, go for it. These are great opportunities for students from all sorts of backgrounds, and a lot of money can be up for grabs here. You do have to really go out and look for them, though. Whoever you are and whatever your background, I encourage you to spend a couple of hours scouring the internet for miscellaneous scholarships to see what you can find. Remember, though, that outside scholarships often count against need based aid offered by the university.

Sometimes getting financial aid can feel like playing poker with the admissions office.

In terms of deciding where to go to college, financial aid essentially adjusts the cost considerations by potentially making more expensive options more affordable (see Part I – Money). Sometimes, however, the financial aid offered may not be enough to make your choice obvious. Fortunately, by the time you find out about financial aid, you’ve generally already been accepted by the school. This can potentially give you a little bargaining power. If they’ve accepted you, then they want you to go to their school: the higher the percentage of accepted students who actually choose to attend their college, the better their rankings are, and for them better rankings = more money. If a school you really want to go to hasn’t given you as much financial aid as you might have hoped for, try calling up to ask about something else – say, study abroad opportunities – and mention to them that you really want to go there, but another school gave you a better financial aid deal and your parents want you to go there instead. If you’re lucky, they might call you back with a better deal, and if not, there’s no loss to you (note: this works better when it’s true, and even then, it depends on how badly the school wants you – if there are dozens of other kids lined up to take your place you may not be in that strong a position).

The nice thing about financial aid is that it can take some of the pressure to make good on your investment off you. If you can get a free ride to college, you don’t have to worry about paying back student loans when you get out of college, which makes it less urgent for you to major in something that’s going to get you a job in that field straight out of college. Of course, you still want to be thinking about your future career plans, but the stakes aren’t quite as high, which can give you time to be a little more creative about finding a career path that balances what kind of work you enjoy and how much money you want to make. As in the last post, think of picking a college as a business decision: the more benefits you get and the less it costs the better. Consider this ratio carefully.

Next time we’ll turn to some of the less quantifiable aspects of choosing a college: college culture and community.

How to Afford College: 5 Tips For Saving College Funds

college savings

Here’s a hard-tcollege savingso-swallow but easy-to-understand three-word fact for you:

College isn’t cheap.

And it doesn’t appear to be getting any cheaper. Cornell Economics Professor Ronald Ehrenberg pointed out that tuition has been known to “regularly outstrip growth in median family income”.

Yikes.

So if you are a prospective college student looking to pay for college, what do you do?

There’s no magic bullet, but here are five ways to fight rising college costs.

#1 Cut Costs
You and your parents have certain necessities to pay for, and those come first. You probably also participate in some activities you love. Those can probably stay, too. But if you stand back and think about it, there may be a few things you consistently purchase small amounts of that you can cut back on. Spending gobs of cash on videogames or collectibles will eat into your college savings if you aren’t careful.

Save the cash for class.

#2 Work
You shouldn’t get a job that will hurt your grades, but the law says you can begin working at 16 years old. If you have enough time, you may want to take advantage of that and get a job. Jobs can not only help boost your back account for college, but help you earn enough money that you may have some to actually spend.

You may even find a job you really like and return to something like it after college.

#3 Invest
If you have a little bit of money and want to grow it, you may want to consider taking a little more control over your college fund. If you don’t have a college fund, you may want to start one. While investing in the market does carry some risk, there are some relatively safe options and funds that are meant to both build your stockpile and protect it.

#4 Find Scholarships
There are TONS of scholarships. In fact, there are so many out there that there is a high likelihood you will find one for you. Get a book with a  good solid scholarship list and find every scholarship you are eligible for, then start applying. Keep an eye out for potential scholarships at school. Don’t be afraid to use the internet. In a short amount of research, you can find all kinds of options. Test Masters offers a scholarship for students who take their courses and score perfectly on the SAT or ACT.

#5 Get Creative
Some businesses actually offer students the chance to make money based on referrals and other processes. Keep your ears open for opportunities offered by businesses and see if you can make extra cash that way. You may want to start with our Test Masters referral program, something that has netted several incoming college students thousands of dollars for their future academic careers.

There are plenty of ways to better your bank balance. Take advantage of all of them.

How To Apply For Financial Aid For College

Applying for college is a long, multi-step process. Even after you get in, there remain many important questions, especially: how are you going to pay for college?

Never fear, that’s why College Compass is here! Applying for financial aid can be challenging, but a majority of students and their families undergo the process and receive assistance. There are two main categories of aid: public aid from the government, and private aid from other sources. Public aid can come from federal, state, or local governments. Private aid comes from private organizations such as banks or other associations interested in advancing education. The aid can come in the form of grants, scholarships, or loans. The first two forms may contain certain requirements to complete in order to receive the money, but do not require repayment of the funds after the educational activity is complete. Loans, on the other hand, require repayment, typically including some form of interest payment.

Despite there being many sources of funds, many of them follow the same application: the FAFSA, also known as the Free Application for Federal Student Aid. That’s right, it’s free… but it is a bit involved. The goal of the FAFSA is determine your Estimated Family Contribution, or EFC. This is the amount FAFSA expects your family will contribute to your education on annually based on their income and assets. Many scholarship programs, even those *not* associated with Federal or governmental student aid programs.

What does all this mean? Basically, if you want scholarships or loans, fill out FAFSA!!! It’s not an optional consideration. To start, go to FAFSA on the web at http://www.fafsa.ed.gov/. There you can either print out a version to work on by hand or submit your application electronically. You will want your parents or guardians involved as the application requires information from them about their resources to complete.

To complete the application, you will have to provide basic information about yourself, financial information about yourself, and financial information about your parents. For more detailed information, check out this FAFSA Worksheet, provided by FAFSA itself. Additionally, you will need to gather the following documents if applicable (list provided by FAFSA):

For the 2011-2012 school year you will need financial information from 2010. You may need to refer to:

  • Your Social Security card. It is important that you enter your Social Security Number correctly!
  • Your driver’s license (if any)
  • Your 2010 W-2 forms and other records of money earned
  • Your (and your spouse’s, if you are married) 2010 Federal Income Tax Return.
    • IRS 1040, 1040A, 1040 EZ
    • Foreign Tax Return, or
    • Tax Return for Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, the Marshall Islands, the Federal States of Micronesia, or Palau
  • Your Parents’ 2010 Federal Income Tax Return (if you are a dependent student)
  • Your 2010 untaxed income records
  • Your current bank statements
  • Your current business and investment mortgage information, business and farm records, stock, bond and other investment records
  • Your alien registration or permanent resident card (if you are not a U.S. citizen)

Yup! You really do need to have all that information! Remember, they *want* to give you money, but they also want to make sure the funds are going to the right person. After you have all your documents and the application, get to work! But, make sure to block out several hours potentially over the span of several weeks to complete the application. You will need a pin that FAFSA provides in order to access and complete the application. After you finish, make sure to save a copy of the full application as well as any documents you used for future reference. Remember, you will have to reapply for FAFSA *every year* you are in school and are interested in financial aid.

A Brief History Of The PSAT/NMSQT

A Brief History of the PSAT/NMSQT: Money Makes the World Go ‘Round.

Okay, so that would be too brief. If you’re still reading, you probably want the full scoop, so here goes… 

The PSAT/NMSQT is no ordinary standardized test. As the qualifying exam for the National Merit Scholarship, the PSAT/NMSQT is the Cerberus that guards the gates to a $2500 scholarship prize and a slew of other desirable benefits — a leg up in the admissions process, the prestige of being a National Merit Scholar, and sometimes even full scholarships to certain universities. When money is involved, the rules are different; when money is involved, everyone wants a slice of the pie. Unlike the SAT, whose changes have historically been content-driven, the PSAT/NMSQT, for better or for worse, has evolved around financial stimuli.

Act I: Introduction
The National Merit Scholarship Program began in 1955 as a privately funded academic scholarship program that rewarded outstanding scholastic achievement. In 1971, the National Merit Scholarship Corporation adopted the College Board’s Preliminary SAT exam (PSAT) as the qualifying test for scholarship consideration, and the PSAT/NMSQT was born. On that glorious day, the sky blazed a brilliant, blinding cobalt, alight with the glorious furor of the heavens themselves as they descended to earth to bless the birth of the chosen test.

Act II: The Asian Invasion
For about ten years, the PSAT/NMSQT lived a quiet, simple life. But the world was experiencing sweeping economic and societal transitions, and our hero soon found itself being swept away with the tides of change.

Between the end of World War II and the early 1980s, Asian immigration into the United States exploded. During the Space Race of the 1960s, America, led by a youthful and charismatic President Kennedy, made its technological leaps and bounds into space, and the United States’ land of opportunity became especially fertile, attracting immigrants from all over Asia, including India and China.  The US even recruited foreigners — going so far as to increase immigration quotas for people with advanced degrees in math and science.  Indian people, soon followed by the Chinese, rushed to apply.

As Asian immigrants began settling into American life, their children started making their way through the school systems. Eventually, these children of immigrant families — who just happened to excel at math — began taking the PSAT/NMSQT, and, despite oft-substantial disadvantages in the verbal section, they would perform well enough on the math section to warrant scholarship consideration.

Coincidentally, around this time, the College Board decided to give the PSAT/NMSQT a face lift to raise its total score from 160 to 240 — by counting the verbal score twice. As you might imagine, with this change, getting a qualifying score became significantly more difficult for a certain group of individuals. No changes were made to the format or content of the PSAT/NMSQT — both the length of the verbal section and the difficulty of the questions remained the same.  This change put certain ethnic groups (guess which ones) whose primary language may not have been English at a disadvantage for National Merit Scholarship consideration.  Luckily, this scoring system didn’t last forever; in 1997, a different group of individuals took issue with the PSAT scoring system and instigated a revamping of the test.

Act III: A Woman Scorned
In 1994, The National Center for Fair and Open Testing (FairTest) filed a complaint against the College Board and Educational Testing Services, accusing them of illegally discriminating against women. Statistically, males outperformed females at the time on the PSAT/NMSQT, and FairTest claimed that the cause of the disparity was the test format, which was allegedly skewed in favor of male students.

As a result, in 1997, the PSAT/NMSQT went under the knife for some more work, and when it emerged, the verbal score no longer counted twice; instead, the College Board added a writing section designed to address the test’s bias. Statistics indicated that women traditionally outperformed men on writing tests, so the addition would supposedly help mitigate the inherent bias of the exam.

At the time of the complaint, both the PSAT/NMSQT and the SAT consisted of only two sections, math and verbal. Both tests were similar in format and contained similar problems created by the same people, but the PSAT/NMSQT was the focus of the complaint. The PSAT/NMSQT is directly connected to money, so it naturally took precedence over its sister test. But this isn’t necessarily a bad thing. Regardless of what — the test’s merit or the scholarship money — actually motivated FairTest’s complaint, the result is a more balanced test that more equitably awards scholarship money to promising young students of both sexes each year.

Act IV: Conclusion
Money changes the game. You can take that to the bank.  The PSAT/NMSQT flies under the radar of many high school students and their parents, but why?  As the segue to a nice scholarship prize and a number of other great perks, it’s no wonder people are so up in arms about it.  Shouldn’t you be, too?

How Do I Become a National Merit Semifinalist?

The National Merit Scholarship is an honor awarded to 2500 high school students every year to recognize their academic excellence. Bill Gates, Federal Reserve Chairman Ben Bernanke, and Amazon founder Jeff Bezos all count themselves as members of this elite group. Most people know that the first step to becoming a National Merit Scholar is to take the PSAT, which is also known as the National Merit Scholarship Qualifying Test (NMSQT), but after that, the process is unclear. You’re simply told to wait for the National Merit Scholarship Corporation (NMSC) to contact you. How exactly does one become a National Merit Scholar?

The NMSC releases some information about what a student must do to become a National Merit Scholar. Students have to take the PSAT during their junior year of high school (exceptions exist for those who are graduating early). About 1.5 million students take the PSAT every year. Of these, the NMSC selects the 50,000 with the highest scores to be selected either as a Commended Student or a National Merit Scholarship Semifinalist. Drawing on these 50,000 students, 34,000 are selected as Commended Students, and are out of the running to become National Merit Scholars. The remaining 16,000 are deemed National Merit Scholarship Semifinalists, and are notified early in their senior year of high school. Of these Semifinalists, 15,000 go on to become Finalists and vie for National Merit Scholarships.

Although becoming a National Merit Scholar is a huge honor, generally speaking, even becoming a Semifinalist is enough to have a significant impact on a student’s educational opportunities. Lists of Semifinalists are released to the media and colleges, who make concerted efforts to contact these students and offer them special scholarships and programs. This is not only because NMS Semifinalists are bright students, but also because colleges stand to benefit in the rankings if more Semifinalists elect to attend. Because becoming a Semifinalist can mean so much to students, there is a heavy focus on what it takes to make the cut.

This step-the selection of Semifinalists-is where the NMSC becomes reticent to divulge information. Semifinalists are chosen on a per-state basis in order to maintain a fair geographic distribution of National Merit Scholars. According to the NMSC, the cutoffs are selected to allow the top 0.5% of each state’s students to become Semifinalists. This means that there are different Semifinalist score cut-offs per state. For example, in 2008, if you scored above a 216 in the state of Texas, you were a Semifinalist; in California, however, the cut-off was 218. They span a fairly large range: roughly from 205 to 220 each year. The cutoffs are generally not published by the NMSC. In fact, they consider the cut-offs proprietary information and have had their lawyers request that bloggers remove the information from their websites.

Because the information is not published by the NMSC, data on the internet can be of questionable reliability. To get an idea of what the Semifinalist cut-off is in your state, you can examine old data and make an educated guess. Generally, the cut-offs do not vary by more than two or three points in either direction. The best way to hedge against those fluctuations and maximize your chances of becoming a National Merit Semifinalist is to prepare for the PSAT thoroughly. Although most students will prepare for the SAT, they often neglect the PSAT, which is arguably more important (because you only get one shot at becoming a Semifinalist). A great time to get ready for the PSAT and the SAT-which cover nearly identical material-is the summer after your sophomore year.