After all the hard work of getting into college, the next goal is to figure out how to pay for it. Students and their parents rely on their financial aid award letters to help them decide where to go. Costs are carefully considered as well as the scholarships and grants offered to help offset those costs. Budgets are created and decision is made that will impact finances for the next 4 years.
However, as the college years go on some students are shocked to learn that the generous financial aid packages they were offered before they choose their school are now only vague representations. Not only has tuition likely gone up, but their financial aid may have gone down. Money that was assumed would be there all 4 years appears to have only been an incentive to choose the school and students are left to cover the difference.
Yes, this is a real issue and it is not a bait and switch tactic, but is more commonly known as "front-loading" financial aid. Colleges sometimes give more generous financial aid packages to freshmen to encourage them to enroll, which can feel misleading. They do this to attract new students, and they have their reasons, none of which is intended to intentionally trick anyone. However, to avoid surprises, students should research how their aid packages might change after the first year, ask for more aid if needed, and look for outside scholarships.
What is Front-Loading
Generally thought of as a recruiting tactic, front-loading is a practice done by schools to offer larger financial aid packages to in-coming freshmen to encourage them to enroll. Choosing a school to attend requires many considerations, from academic fit to school culture to financial fit. Parents and students look at those initial financial aid award letters to determine which schools are financially feasible and which aren’t. If unaware of this practice, decisions could be made that could later lead to financial hardship later, after physically and emotionally committing to a school.
Why Your Financial Aid Might be Front Loaded
Outside of trying to look more affordable to recruit students, there are other reasons schools might front-load financial aid. These include:
High Dropout Rates for College Freshmen: It's estimated, about 1 in 4 freshman is likely to drop out their first year. If generous aid is offered to the student, removing some of the financial barriers to start, they might be more inclined to stick it out and hopefully finish the degree, they’ve already started to pursue.
Changing Federal Student Loan Limits for Upperclassman: The federal government has imposed loan limits on undergraduate students and those limits increase as the student progresses in their program. For example, dependent Freshman students can borrow up to $5,500 between subsidized and unsubsidized loans. That amount increases to $6,500 sophomore year and to $7,500 for junior year and beyond. Schools may lower gift-aid if they know you are able to borrow more federal money and won’t have a shortfall as a result of their aid reduction.
Changing Family Financial Circumstances: Every year students are required to submit a FAFSA form. This is to evaluate how your financial situation may have changed in the last year and how that will impact your eligibility for the upcoming academic year. This could result in some students being eligible for more need-based aid or it could reduce eligibility if the family has realized increases in the value of their assets reducing the necessity for need-based aid.
Winning Scholarships: Scholarships are a great way to pay for college. They represent a form of gift-aid, meaning you don’t have to pay any money you win back. However, schools, especially state schools, have a finite amount of money they can distribute to the students and if you win scholarship money, they may use that money in place of money they would have otherwise awarded you. This means that a $5,000 scholarship won may not mean that you can skip that federal loan. It may just mean a reduction in your financial aid in the same amount netting you no difference and no financial gain.
That doesn’t mean don’t apply for scholarships. Reducing your reliance of federal and institutional aid, which can vary from year to year, will only serve to help you cover the costs more reliably. Apply for scholarships throughout your entire college experience up to the point of graduation, in an effort to win as much money as you can and reduce the possibility of debt.
How to Plan for Possible Higher Costs as an Upperclassman
When you’re picking a college, make sure to look beyond just the freshman aid. Find out what the average aid packages are for sophomores and upperclassmen, since these can sometimes go down over time.
It’s okay to talk with the financial aid office about your package and negotiate your financial aid in advance of enrolling, especially if another school has given you a better offer. You might be able to secure more money, it never hurts to ask.
Make sure you clarify the type of aid being offered to know whether your aid is based on financial need or on your achievements. Merit aid usually requires you to keep a higher GPA, while need-based aid can change if your family’s finances change. In either instance, you will want to know what is required to maintain your aid levels and continue to receive it throughout your college years.
