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Paying For College During Hard Times

You don't need to score 2400 on your SAT scores, have a 4-point GPA and graduate with honors to do the math right on this one.

With university and college endowment funds hurting from market losses, college students seeking financial aid for the upcoming academic year will have to hunt harder and play smarter to win the tuition assistance they need.

At the same time, of course, the economic downturn has forced thousands of families that would normally be positioned to cover the cost of tuition to seek need-based financial aid, forcing a growing number of applicants to vie for fewer resources.

“If you talk to financial aid officers they’ll tell you that applications nationally for financial aid are up about 20 percent this year,” says Phil Day, president of the National Association of Student Financial Aid Administrators. “That’s on top of the 16 percent increase we saw last year.”


Indeed, financial services company TIAA-CREF reports the average college and university endowment was down 23 percent between July 1, 2008 and Nov. 30, 2008, the most recent months for which data are available.

Collectively, they lost nearly $95 billion in total value during the 5-month period with losses distributed equally among all institutions—both public and private.

That’s a far cry from the 11.1 percent average annual return those funds enjoyed between 2002 and 2007.

“Market losses are putting the squeeze on institutions generally,” says Brett Hammond, chief investment strategist for TIAA-CREF. “Public and private schools are feeling pressure on all kinds of spending, including scholarships.”

Uneven Playing Field

For its part, the University of Wisconsin-Superior says it will dole out nearly $100,000 less in endowed scholarships this fall, while Eastern Washington University in Cheney, Wash. says it will provide just $100,000 in scholarships this academic year—down significantly from the $500,000 it has provided in years past.

Day says many colleges and universities, which are still preparing their financial aid packages for 2009 – 2010, are doubling back to be sure parents are contributing as much as they can towards tuition.

“We know that this is happening and it’s not out of the norm, but it’s taken on added significance given the economy,” explains Day. “Schools are trying to do everything they can to maintain a level of commitment to students, but at the same time they are going through the process of reassessing and making sure that the expected family contribution is an accurate reflection of what their capacity really is.”

If a financial aid office determines that a family is able to contribute more, based on the information provided on the Free Application for Federal Student Aid (FAFSA), he says, school officials "may be having some conversations with parents to ante up a little more.”

Before you go buy that lottery ticket or tell your child to settle for a career in acting or food services, be aware that not all schools, of course, are reducing financial aid in response to endowment losses.

Interest earned from endowment funds, which are trusts created by large gifts to a university, are just one source of revenue used to finance programs, including scholarships. Tuition and private gifts are the other major components from which operating budgets are derived.

Many schools are opting to maintain their financial aid programs and instead raise tuition or increase enrollment to offset the expense.

They can also maintain their level of giving by drawing more from cash reserves in the hope the market will recover and replenish their endowments going forward.

The National Association of Independent Colleges and Universities, which represents the majority of private colleges, notes 92 percent of the schools it surveyed are increasing their financial aid budgets by an average of 9 percent next year.

Private schools—particularly Ivy league institutions, which have opened the financial aid taps in recent years, have the largest endowment funds and are often better positioned to weather market storms.

Harvard University, for one, has already affirmed its commitment to financial aid for 2009 - 2010.

The Ivy league school, which has doubled the amount it spends on undergraduate financial aid since 2004, said in December it is projecting a 30-percent drop in the value of its endowment for the upcoming school year and planned to increase tuition and fees by 3.5 percent.

“There is pain and institutions are trying to figure out where to distribute that pain,” says Hammond. “Most schools will do their very best to maintain the financial aid already promised to current students. The most difficult decision they face is what they will do for the next class coming in.”

Scoring The Most Money

Students who require financial aid but haven’t decided which school to attend—deadlines for initial deposits are generally due in May—should spend the next few weeks shopping around to ensure they get the biggest bang for their tuition buck.

“It could be argued that the student is actually in the driver’s seat because a lot of institutions are alert to the idea that they need to lock in their enrollment goals as early as they can,” says Day. “Think carefully about what you’re prepared to pay and invest in your college education and make sure that you’re getting the best deal you can.”

You’ll have the most bargaining power at middle-tier public universities, he adds, which are struggling the most to maintain enrollment as cash-strapped students opt for lower-priced schools.

Just be sure you don’t rule out brand name schools on sticker price alone.

In response to the financial strain many families are experiencing in today’s economy, a number of schools are announcing affordability initiatives that include tuition reductions and tuition freezes. Other private schools are matching public university tuition and offering guaranteed graduation within four years.

“Private colleges are taking unprecedented steps to make sure they stay accessible and affordable to students from all backgrounds in these difficult times,” says Tony Pals, a spokesman for the NAICU, which posts a list of private schools with affordability programs on its Web site. “No student should be scared off from applying to private college just because of sticker price. Nearly nine out of ten students at private colleges pay less than list price.”

He adds any student whose family has experienced a significant decline in financial circumstances in the last few months should “absolutely contact the financial aid office at the college that interests them even if they already filled out the FAFSA. Let the institution know as soon as possible.”

Depending on your family’s financial circumstances, of course, you may also consider attending a community college for the first two years and then transferring into your original top choice. You could save $20,000 or more and end up with the same degree as those who attended all four years.

Staying Close To Home

Another way to keep costs down? Think local.

Daniel Webster College in Nashua, N.H. this year announced incoming students who graduate from 37 select high schools throughout the state will pay $15,000 for the 2009-2010 school year, rather than the published price of $26,357 for 2008-2009.

Boston University also announced last year it will replace student loans with grants for Boston residents who graduate from Boston public high schools, while Fairfield University is providing full tuition scholarships to graduates of high schools of its hometown of Bridgeport, Conn. with annual family incomes of under $50,000.

Bargains aside, Day says be sure to get your FAFSA form in as soon as possible—even if you think you don’t qualify for aid.

“You can fill out the FAFSA anytime, but all students who haven’t done so should get it in in a hurry,” he says. “You never know. Even though you may not be eligible for federal grants you may still be eligible for state grants or local institutional college aid that comes out endowments. The FAFSA form covers all of those.”

With more applicants vying for fewer financial aid dollars, the sooner you apply the better.