Common mistakes can cost families thousands in college aid - USA Today article

Common mistakes can cost families thousands in college aid
USA TODAY
Sandra Block
Posted 12/25/2006 9:47 PM ET

The Greek historian Xenophon once observed that "fast is fine, but accuracy is everything." That's good advice for knife throwers, and it's also pertinent if you're planning to apply for financial aid for a college-bound child.
To qualify for federal financial aid, as well as state aid and grants from many colleges and universities, you must file a Free Application for Federal Student Aid, or FAFSA. The Education Department will begin accepting applications for the 2007-08 academic year on Jan. 1. Financial aid experts typically urge families to file as early as possible. This year, though, it's important to take your time. Otherwise, you might overlook recent changes in the law that could increase your chances of getting financial aid.

The biggest change concerns the way state-sponsored 529 college savings plans are treated. The Deficit Reduction Act of 2005, signed into law in February, clarifies that 529 plans are considered the parents' asset for purposes of calculating financial aid — even though their dependent child is usually named as the beneficiary. Likewise, the law states that prepaid college tuition plans and Coverdell education savings accounts are the parents' assets.

The distinction is crucial, because student-owned assets can torpedo your child's eligibility for financial aid. In calculating how much a family can afford to pay for college, the federal formula for the 2007-08 school year counts 20% of assets owned by the student. For parent-owned assets, the maximum assessment is much lower: 5.64%.

Under the new law, custodial 529 plans owned by a dependent child aren't counted at all, says Joe Hurley, founder of SavingforCollege.com. Custodial 529 accounts are usually created when parents transfer a Uniform Gifts to Minors Act account to a 529 plan. (UGMA accounts allow parents to invest in mutual funds, stocks and other securities on behalf of children who can't legally invest on their own.)

Hurley believes the treatment of custodial 529 plans is an unintentional loophole that Congress will eventually close. But even if it does, custodial 529 plans will most likely be treated as the parents' assets, he says.

Kalman Chany, author of Paying for College Without Going Broke, worries that many families will inadvertently report 529 savings plans, particularly those in custodial accounts, as student assets on their FAFSAs.

Families may also miss a change in the law that affects small-business assets, Chany says. Parents who are business owners are no longer required to report the company's net worth on the FAFSA if the business is family owned and controlled and has fewer than 100 full-time employees.

The government rarely corrects FAFSA errors that reduce the amount of aid a family is eligible to receive, Chany says. "A few mistakes could cost you thousands of dollars."

Time is your ally

Check the deadlines for the schools your child is interested in attending. A handful of private schools impose January deadlines for FAFSAs, but most schools don't require you to send in your financial information until February or later, Chany says.

While it's important to meet deadlines, you're usually not rewarded for filing early, Chany says. Taking your time will reduce the chance of making a costly error. There are other benefits to waiting, including:

•The size of your assets could decline in the first few weeks of the year. When you fill out the FAFSA, you report income based on the prior year's income tax return, in this case 2006. But you're supposed to report your assets and liabilities as of the date you sign the form.

For that reason, if you know you'll have to pay some large bills early in the year, you may be better off waiting to file your FAFSA, says Rob LaBreche, president of consumer marketing for College Loan Corp. Paying those bills will reduce your assets, and possibly increase your eligibility for financial aid.

•You may want to transfer a UGMA into a 529 plan before applying for aid. UGMAs, and their cousins, Uniform Transfer to Minors Accounts, are still considered the child's assets in the financial aid formula, which means they'll be assessed at 20%. One way to solve that problem is to convert the UGMA to a 529 custodial account, in which case it won't be counted at all. But this step shouldn't be taken unless you're confident it will increase your eligibility for aid, Chany says.

Here's why: To make the transfer, you'll first have to liquidate the UGMA and pay capital gains taxes on any investment gains. If you make the transfer after Jan. 1, the gains won't be included in your 2006 income, so it won't affect the income you report on this year's FAFSA. But you must file the FAFSA every year if you want to continue receiving financial aid. So capital gains reported in 2007 could reduce the amount of aid your child receives next year.

The Education Department has posted information about the changes in financial aid rules at www.fafsa.ed.gov.

Sandra Block covers personal finance for USA TODAY. Her Your Money column appears Tuesdays. Click here for an index of Your Money columns. E-mail her at: sblock@usatoday.com.

College Q&A - questions about financial aid - WSJ article

Family Money
College Q&A
Answering readers' questions about financial aid
By ANNE MARIE CHAKER
December 18, 2006; Page R6

From navigating 529s to 401(k)s, saving for college makes many of us want to dial 911.

It's a dizzying area of personal finance, and the rules for federal aid continually change with the political climate. Earlier this year, the Republican-controlled Congress lopped off nearly $12 billion from the federal student-aid program. Now, with Democrats about to take control of Congress, college affordability is back on the agenda. Big promises range from interest-rate cuts on student loans to restoring some expired tax deductions for tuition.

Meanwhile, the rising cost of college continues to outpace the overall rate of inflation, and knowing how to save wisely has never been more crucial. We hope that answering some of your queries will help clarify things a bit -- and perhaps ignite more thoughts and questions from you. As always, you can email us at reports@wsj.com3 with puzzlers we might answer in future columns.

* * *
When marrying my second wife, it was always our understanding that her kids' college education would be her and her ex's responsibility, not mine. Now we find that my finances will be assessed, potentially lowering the amount of aid available to my stepdaughter, who plans to enter college next fall. My wife cannot afford tuition on her own, and her ex's inability to contribute could jeopardize my stepdaughter's chance of going to the school she wants. How do we make the best case for financial aid?

If the child has lived the most in your household in the year prior to applying for federal aid, that makes your wife the "custodial" parent. That, in turn, makes her the one responsible for filling out the federal aid form. As her spouse, you are required to report your income and assets, too. The government considers you a source of support regardless of any previous agreement you may have had with your wife.

The problem with that rule, as you point out, is that it lets the noncustodial parent off the hook. "There are a lot of situations where this doesn't make a lot of sense," says Joe Paul Case, financial-aid director at Amherst College, Amherst, Mass.

But many private institutions, including Amherst, will focus mainly on the two natural parents, rather than the custodial household, in judging how much of their own aid to give. So while the federal formula might not be as generous in your situation, some schools can fill in any shortfalls in federal funds with their own institutional resources.

* * *
When colleges base their financial aid on parent income and assets, do they include a 529 plan in their calculations? I am contributing to such a plan that was set up in the beneficiary's grandfather's name (I am the great-grandfather) in order to avoid it being counted. Was this a good strategy?

It is indeed a good strategy when it comes to qualifying for federal aid. The federal formula for assessing how much a family can pay for college is strictly focused on the finances of parent and child. So 529 plans opened by grandparents go uncounted in the federal calculus.

In distributing their own aid, however, colleges often look at all 529 plans that name the student as beneficiary. So even if the strategy works for the federal-aid calculation, it won't necessarily work for the institution's own aid assessment.

* * *
I have an 18-year-old scheduled to enter college next fall, and have $165,000 saved, about one-third of which is in a Uniform Gift to Minors account (the rest is in a 529 plan). My adjusted gross income of over $200,000 a year makes it unlikely that I will qualify for need-based aid. Should I move funds now from the UGMA account -- containing a mix of stocks and bonds -- to a 529 plan? The advantages of having the funds in a 529 are clear, but I like the flexibility of maintaining two college pools.

You're right that your income probably puts you out of the running for need-based aid, so your planning should focus on how to maximize the amount you have available for college after taxes.

If you liquidate the UGMA to transfer that money to a 529 account, you'll pay capital-gains taxes on those funds. But from then on, that money will appreciate tax-free in the 529 account, whereas if the money stays in the UGMA, any investment gains will continue to be taxed.

Taxes aren't the only thing to consider, though. You will want to take a hard look at the returns you've achieved in the UGMA, suggests Mark Kantrowitz, publisher of FinAid.org4, and compare them with the returns you'd likely see in a tax-free 529 plan. If you seem to be doing a lot better in the UGMA, even with the taxes, then that's a strong reason to stick with what you've got.

* * *
Since our son was a baby, we have saved diligently for college. However, I think we made one big mistake. One of his mutual funds is not in his name; with college two years away we would like to switch it to a custodial account. Is that possible at this late date?

It's not too late to switch ownership of any college-savings funds you have, but in doing so you don't want any account to be in your son's name. That's because when you apply for federal need-based aid, only as much as 5.64% of parental savings is considered available for college, compared with 35% of savings in the child's name -- though the latter rate will drop to 20% starting July 1, 2007.

Your best bet is probably a 529 account, set up in your name and naming the child as the beneficiary. A married couple can contribute as much as $24,000 a year to a 529 without incurring gift taxes.

There is also an "accelerated gift" option that allows a donor to exceed the annual limits by averaging the gifts over a five-year period.

* * *
I have been saving for my daughter's education, but it's entirely in my 401(k) plan. I will be retiring in another four years or so. Rather than take out money now from my 401(k) as a taxable distribution to pay for her tuition, would it make more sense to finance part of her education through loans -- and repay after I'm retired (and at a lower tax bracket)?

Withdrawals from your 401(k) plan to pay for college are taxed and also carry a 10% penalty, so you may want to avoid paying for college that way.

One alternative is borrowing from your 401(k) -- that way you avoid the taxes and penalties, and the interest you pay goes right back into the account, so in essence you're paying it to yourself. However, you will still lose out on any investment gains you might have made on the amount you borrow.

Mr. Kantrowitz, the FinAid.org publisher, suggests federal loans are a better way to go, because while you will pay interest to the lender instead of to yourself, that amount is likely to be less than what you would give up in investment gains by borrowing against your retirement plan.

--Ms. Chaker is a staff reporter in The Wall Street Journal's Washington bureau.

Write to Anne Marie Chaker at anne-marie.chaker@wsj.com5

Finding in-depth info on colleges WSJ article

Kids & Money
Finding in-depth info on colleges
By JUNE KRONHOLZ
December 18, 2006; Page R6

The campus green is edged with giant oaks, and the cafeteria serves fresh sushi. But are those reasons to choose a college?

Thanks to a proliferation of data-crammed Web sites, they don't have to be. In return for budget and research support and access to federally backed student loans, state and federal governments are asking for more information than ever from public and private colleges -- and making it available to consumers.

That adds up to far more information than you'll pick up by touring campuses, reading glossy viewbooks or scanning college guides -- which tend to be heavy on social details (major frat scene, for instance) and fairly light on the school budget or how long it takes to graduate.

Some of the government data are probably of interest only to planners or social scientists: The Texas Higher Education Coordinating Board Web site, for instance, includes a building inventory for every campus. Other information seems of debatable use. The Education Department reports how many professors on each campus hold Ph.D.s, although graduate degrees are now fairly common.

But other data say a lot about a school by describing the kind of students it attracts, how successful it is at retaining and graduating them, what they study, how much aid they receive and whether those graduates find jobs out of college.

When the federal government reports that Vanderbilt University awards 14% of its bachelor's degrees in engineering, that suggests an on-the-ball department that will be aggressive in recruiting teaching talent. When it says 1% of the Nashville, Tenn., school's undergraduates are over 25, it means this isn't a commuter campus for part-time students. And when it says 63% of students receive some financial aid, Vanderbilt's $49,812-a-year price tag for tuition, room and board and fees looks less daunting.

Broad Descriptions

The first place to look for information is on the Education Department's College Opportunities Online Locator, or Cool (nces.ed.gov/ipeds/cool3). This site is almost impossible to find if you don't know the address. And though a color map or two have been added in the past year, it's not much to look at.

But the site offers both a broad description of thousands of colleges and a search engine. When I told Cool that I was interested in an electrical-engineering program at a private school with fewer than 5,000 students within 200 miles of my ZIP Code, it proffered 93 choices.

A search for a chemistry program at an Evangelical Lutheran Church-affiliated school within 500 miles produced four results. And a search for a Chinese program in Colorado produced one result: the University of Colorado at Boulder.

The next step is to go to the Education Department's Federal Student Aid Web site (studentaid2.ed.gov4), which goes well beyond scholarships with information on programs, graduation outcomes and even whether the school has a marching band. A search on the site for Rice University in Houston yielded 22 pages of information, including that 173 employers recruited on campus last year and 53% of the graduating class had an offer of a full-time job within six months.

Details From States

Some states offer up still more detail about their public universities on Web sites maintained by their state board of regents.

For instance, in 2005 the University of Florida offered twice as much in work-study grants as Florida State University -- useful news if your child wants to help work his way through school. Such information is available at flbog.org5.

The Texas site (txhighereddata.org6) reports, among other things, that 89% of Texas A&M engineering graduates passed their licensure requirements -- an indication of the rigor of the program -- and that 63% of the University of Texas freshmen placed in the top tenth of their high-school class. That top 10% get automatic entry to the state university of their choice, so that's a clue about how hard it may be to get one of the remaining seats -- and how highly local students rate the Austin campus.

Ohio's Web site (regents.ohio.gov7) lists the grade-point averages of the juniors at 13 public universities (they're all around 3.0).

Making Comparisons

Consumer demands for information also have driven the development of plenty of nongovernment Web sites.

The National Collegiate Athletic Association (ncaa.org8) lists graduation data on athletes -- an indication of what each school expects of its sports stars. The Association of Jesuit Colleges and Universities (ajcunet.edu9) has a search engine. The National Association of Independent Colleges and Universities (naicu.edu10) provides links to its members' self-assessment studies.

The College Board site (collegeboard.com11) allows you to compare two or three colleges, although the information isn't particularly deep. When I tried to compare Miami University in Ohio and Marquette University in Milwaukee, it offered up each school's admissions scores, tuition, size and acceptance rate -- basically what you would find in any college guide.

But the College Board site does help narrow the choice with another interactive tool that lets you set such criteria as whether the college offers study-abroad programs, wired dorms, freshman housing, an urban setting, lots of or only a few international students, a preadmissions interview or Division I football.

The Princeton Review site (princetonreview.com12) offers much of what's in its paperback guides, but adds two factoids about student loans: whether students borrow directly from the federal government or go through a private lender for government-backed loans, and which lender that will be. The interest rate is the same for students.

Peterson's, a unit of student-loan provider Nelnet Inc., which also publishes college guides, includes a scholarship search engine on its site (petersons.com13), along with the usual data about majors, admissions dates and college life. The tool told me my high-school senior qualified for 247 little-known scholarships, including those offered by the America's Junior Miss foundation, the Koomruian Armenian Education Fund and the Arizona Police Corps. Alas, I have a son, he isn't Armenian and doesn't live in Arizona. A Peterson's spokeswoman says "it is possible" that scholarship groups didn't adequately describe their grants in a questionnaire the search engine scans to determine eligibility. She adds that she had the same problem when she entered her own information.

That brings up a caution about any of these Web sites: They all rely on information provided by the colleges, are subject to computer glitches and aren't always up-to-the-minute.

And however much they tell you about a college, most kids still make their choice based on some vague, indescribable sense that they fit on one campus, but not another. Which is why a stroll across the college green and lunch in the cafeteria aren't a bad idea either.

--Ms. Kronholz is a staff reporter in The Wall Street Journal's Washington bureau

The College Essay: Expert Advice - WSJ article

The College Essay: Expert Advice
December 14, 2006

College essays give students a chance to set themselves apart from thousands of other applicants. But where should students start when every word counts? The Wall Street Journal Online emailed admissions directors at three universities and asked for their take on college essays, including what role they play and how admissions committees go about reading all those essays. Brown University's James Miller, Harvard College's Marlyn McGrath Lewis and the University of Virginia's John Blackburn gave us their answers.

* * *
Q: What role does the essay or personal statement play in the admissions process? How much weight does it receive?

BROWN: The essay plays a role slightly less important than the student's high-school performance. High-school performance carries the most weight, and is most important. Everything else -- testing, essays, recommendations, etc. -- carries about the same weight.

HARVARD: Because we use no formulas in admissions, or in evaluating applications, there is no specific "weight" assigned to the essay. The importance of the essay depends on the case -- and on the extent to which an essay deepens or illuminates our understanding of the applicant.

VIRGINIA: Although we do not place numerical weights on the various factors we consider in an applicant, we count them as important in our coming to know the students better. We see the essays as a means for students to talk to us. They can say whatever is important to them and in doing so, give us a more human sense of who they are. We intentionally shape our several questions so that any student can probably find one that speaks to her or him and lets that person respond in a way that is unique.

Q: What makes a good college essay? How can students stand out among the crowd?

BROWN: Essays that have simple themes, are personal and focused are most effective.

HARVARD: A good essay extends the admissions committee's appreciation of the candidate, helps us to understand better "what makes him or her tick."

VIRGINIA: We think a good essay question is one that separates the best students from those who are not as strong. In the same manner, a good essay is one that gives the admission deans a deeper look at the student -- it permits us to go well beyond the numbers we see on the transcript. After all, we are building a community of people and without an expression of their human qualities, we would be left with only statistics.

They can stand out from the crowd by being themselves in their writing. Simple, plain language can be a persuasive part of the application.

Q: Are there any topics or techniques that students should avoid?

BROWN: Don't write travelogues, don't rehash yesterday's editorial, and don't use gimmicks.

HARVARD: It would be hard to proscribe specific topics, though I would advise using common sense in choosing a topic. As to techniques, legibility and clear expression are good techniques to use, always.

VIRGINIA: Our parents always said not to discuss politics and religion at the dinner table, but some students write magnificent essays about either, both or just about any other subject. It all depends on how the writer handles it.

Q: How do you feel about online-editing services for college essays?

BROWN: Not worth the time or money.

HARVARD: We expect applications to be a student's own work, honestly presented.

VIRGINIA: We ask our applicants to sign a statement on our application that the work is their own, and we take them at their word.

Q: About how many essays is your committee responsible for reading? And how do you divide the work?

BROWN: We read 18,000 to 19,000 applications per year -- each application has four to six short and long essays. So, we read a lot. Applications are divided up among admission officers regionally.

HARVARD: We received last year about 23,000 applications and each one is read carefully at least once. Assignments are made by geographic area. The first reader is the officer responsible for presenting the case -- and other cases from assigned areas -- to the admissions committee, and other officers read folders as well. Often, essays (and other materials from the folder) are read in committee meetings, sometimes more than once.

VIRGINIA: We ask our deans to read 30 to 35 applications per day, and that includes the essays. On many days, they can't get them done in normal working hours and so they take them home at night or over the weekend to complete. Our process is holistic, and so we do not separate any part of the credentials for evaluation unless it is a portfolio for art or a tape for drama or music. We consider everything in the folder and within the context of the school or community.

--Jennifer Johnson5

URL for this article:
http://online.wsj.com/article/SB116535550774741500.html

Colleges Expand Early Admissions WSJ article

Colleges Expand Early Admissions
Ignoring Harvard and Princeton, Many Schools
Add Ways for Students to Get a Quick Decision
By ZACHARY M. SEWARD
December 14, 2006; Page D1

When Harvard and Princeton universities announced in September that they were nixing early admissions beginning next year, both schools expressed hope that other institutions would follow their lead. They're still waiting.

Unwilling to concede an edge in nabbing top students and unmoved by arguments that their policies are inequitable, many colleges have redoubled their commitment to early admission. In fact, many schools have come up with inventive new variations on early decision, whereby students get a quick answer and an advantage in the admissions process.

The regular application deadline for most schools is around Jan. 1, but early admission starts much sooner. Some colleges now offer a second round of early decision, special fast-tracked applications and sometimes both. They've added new terms, like "instant decision," to the expanding vocabulary of college admissions. A few, such as University of Vermont and Tulane University, have begun sending out "snap apps" to desirable candidates -- unsolicited applications that include a promise of a faster-than-usual decision and a waived application fee. And in a trend that has alarmed some people, the college admissions application process has extended into the junior year of high school.

This week, thousands of students who applied to college through early-admissions programs are likely to learn their fate. The envelopes and emails will cap a season of increasingly complex options, requirements and deadlines for already stressed-out college applicants.

At Rensselaer Polytechnic Institute in Troy, N.Y., students can apply through two different programs that promise faster decisions than the regular admissions process. There's "early decision," with a Nov. 1 deadline, in which the applicant promises to attend if accepted. Then there's "early action," in which the applicant doesn't have to commit to attend if accepted. It also has a Nov. 1 application deadline.

Rensselaer also offers a streamlined process, dubbed "Candidate's Choice." Under that program, aimed at students who have visited or expressed interest in the school, Rensselaer promises "fewer questions" on the application and an admissions decision within 28 days, faster than regular admissions, where rulings take about three months.

"You have students who, if we're near the top of their list, we certainly don't want to have them doing back flips for us," says James Nondorf, Rensselaer's dean of admissions, explaining the fast-track application as less "confusing or stressful."

All this comes on top of the well-established "rolling admissions" programs that many state schools and some private colleges rely on, in which applications are considered as they are received and until the freshman class is filled. There may be no deadline, but guidance-counselors encourage their students to apply early to gain an edge.

The National Association for College Admission Counseling, which sets admissions policies for its 1,650 member colleges and universities, has expressed concern that there is such a thing as too early. At its annual meeting in October, the association updated it rules to state that colleges can't offer admission to students before Sept. 15 of their senior year.

The latest permutations of early admission "were creeping out of the 12th grade, and it was only getting bigger and bigger and bigger," says Ken Fox, chairman of NACAC's admissions-practices committee and a high-school guidance counselor in St. Louis. A survey by NACAC this year found at least 132 colleges that offered admissions decisions before September of the senior year. Some accepted students during their junior year in high school.


Applicants often like early programs not only for advance notice of their fates but also because most schools give preference to students who apply early. Schools prefer the programs because they say students admitted early are more likely to attend. Early-decision programs generally elicit a signed promise from students that they will attend if accepted, and enforcement hasn't become an issue.

At Dickinson College in Carlisle, Pa., high-school seniors have no less than five different options for applying, and four of them begin with the word "early."

"We get more and better students this way," says Dickinson's dean of admissions, Seth Allen. He notes that when Harvard and Princeton announced they were doing away with early admissions, he attempted to calculate how Dickinson would fare if it made a similar move. "If we were to do that, Dickinson would have admitted, boy, 70% more students than we did last year" to fill up the freshman class, says Mr. Allen. "I think we would have far less control in crafting the makeup of the class, in order to make sure it's diverse."

Critics of early admissions have long argued that such programs are under-utilized by lower-income families and "advantage the advantaged," as Harvard's interim president, Derek C. Bok, put it when announcing his school's decision. Affluent families have more resources to help students work the application system. And several studies have shown that students who need significant financial aid are less likely to commit early to one school because they want to compare aid packages among several schools.

But many top schools, including the University of Chicago and Northwestern University, have unequivocally said they will retain early admissions. Even Harvard and Princeton, for that matter, have acknowledged that they will continue to offer a form of early admission to recruited athletes to remain competitive in Ivy League sports.

Macalester College in St. Paul, Minn., has instituted second-round early decision, known as "ED2," for students who weren't ready to commit in November or, perhaps, were rejected by the school at which they applied for regular early decision. Skidmore College in Saratoga Springs, N.Y., also offers ED2. A NACAC survey last year found at least 69 schools that offered multiple rounds of early decision.

Students can apply online under most schools' early-decision and early-action programs. The newest fast-track-type applications are generally on paper, but some schools accept online versions for those programs as well.

Some colleges are turning to so-called instant decision, in which students are informed on the spot or within just a few days after an interview with an admissions officer. In recent years, the approach has been adopted at smaller schools like Bloomfield College in New Jersey and many historically black colleges, which can suffer from low enrollment.

But the latest vanguard in early admissions is "snap apps" or "fast apps," applications that have no special deadlines and often are sent to thousands of students who might not otherwise apply. The applications, in use at the University of Vermont and Baylor University, among others, arrive in mailboxes with some information about the student already filled out. (The data come from search services like one at the College Board, which keeps student test scores and tries to identify promising candidates.) Some colleges waive the application fee, which can exceed $100, and minimize requirements for these fast-track applications, making it exceedingly easy for students to apply. Decisions often come sooner than with regular applications.

Marina Santiago, a senior at Citrus High School in Inverness, Fla., applied to Tulane in September after the New Orleans school's "personal application" arrived at her home. "I hadn't really even considered it," she says of Tulane. "But because the application fee was waived and I didn't have to write an extra essay, I thought, why not?"

She says she was accepted four weeks after she applied and is now waiting to hear if Tulane will offer enough financial aid for her to attend.

Tulane has relied heavily on these types of applications to try to maintain enrollment levels after Hurricane Katrina. The strategy has succeeded in attracting applicants -- a record number applied last year, even though the school shut down for a semester -- but hasn't yet translated into enough warm bodies in Tulane's freshman class. This year there are about 1,000 first-year students, down from pre-Katrina levels of 1,600.

"It's a double-edged sword," says Earl Retif, dean of admissions at Tulane. "You're trying to make it customer friendly, but then because it's easier, students can apply without as much thought. Do they actually want to come here, or are they just putting another stamp on another envelope?"



Write to Zachary M. Seward at zachary.seward@wsj.com

Weighing the Costs in Public vs. Private Colleges - NYT article

December 13, 2006
Weighing the Costs in Public vs. Private Colleges
By JONATHAN D. GLATER
New York Times

As parents and students cope with the ever-rising cost of higher education, many debate whether attending private institutions — which charge far more than public universities — is worth the expense. Is the quality of the education better? Will students have more access to their professors? Will those professors be more distinguished? Do students make important contacts that pay off later in life? Are any such advantages worth going deeply into debt?

Tuition and room and board at private four-year colleges now add up to more than $30,000 a year on average, and rose by 81 percent, more than double the inflation rate, between 1993 and 2004.

Financial aid provided by private institutions, even to the upper middle class, has grown more than tuition — by 135 percent over the same period — and some universities provide substantial assistance to low-income students. Still, the dollar amounts are hard for most applicants to ignore.

Selection of a college, public or private, often turns on more than just money, of course. As Stephen Joel Trachtenberg, the president of George Washington University, put it, “Picking a college is like falling in love.”

Still, students, parents, college officials and high school guidance counselors have strong opinions about the value of a private education. Below is a sampling of views.

PEYTON RANDOLPH HELM

President, Muhlenberg College

There are certain things that most public colleges and universities cannot offer, said Mr. Helm, explaining why he thinks a private education, even at a small institution like Muhlenberg, in Allentown, Pa., is worth the cost.

“What private liberal arts colleges provide is very high quality and high sticker price,” Mr. Helm said, adding that “the sticker price is not necessarily the cost and it’s not necessarily the value” because of financial aid.

Mr. Helm stressed nonfinancial benefits, too. “The better, the more prestigious the institution, the more you have small classes and you have direct interaction with your professors,” he said.

Many private institutions have large classes, but Mr. Helm described a classics course he teaches with just 10 students.

“Some of them have been brilliant from Day 1, and there’s one of them whom I could barely get to open his mouth who came out with something brilliant” in the last days of the term, Mr. Helm said.

“If I had a class of 150 people, or 500 people, or 800 people, that isn’t going to happen,” he said.

Students may more easily get into courses they want at private colleges, Mr. Helm said. “If you’re not going to graduate in four years because you’re not going to get the courses,” then a public education may not be the best choice.

STEPHANIE A. BALBACH


Student, Indiana State University

Ms. Balbach, 18, a freshman, said she got a good deal at Indiana State, in Terre Haute, thanks to a pair of scholarships covering most of her costs. She does not think she is missing anything by choosing a public institution.

Even though her parents had saved to help pay for Ms. Balbach’s college education, she said, money was an issue. She considered three colleges, two public and one private, none too far from her hometown, Evansville. Indiana State offered the best deal. “Right off the bat they said, ‘Here are three scholarships that you would fit the criteria for,’ ” she said.

When she visited the university, she was even more impressed. “I immediately met the undergraduate dean, I met the director of the department I was interested in,” Ms. Balbach recalled. She added that although the university had more than 8,600 undergraduates, she felt she would not be a faceless number.

Her scholarships cover $12,396 for tuition, room and board; Ms. Balbach has paid a few hundred dollars for books and other expenses. She plans to major in insurance and risk management.

“This whole agenda that was lined up for me, when I saw that, I thought, ‘Wow,’ ” she said.

JENNY RUSSELL

2004 graduate, University of Redlands

Ms. Russell, 24, loved her time at Redlands, a private university in Southern California with just under 2,500 undergraduates in its liberal arts college. But she said the expense was not worth it; this year tuition, room and board was $36,000.

Even with money from scholarships and other financial aid, she graduated with about $50,000 in debt to accompany her major in creative writing. Coping with the debt has been hard.

“I’ve been a cocktail waitress, a bartender, I worked at a grocery store, I did market research, I sold tickets for the Phoenix Symphony orchestra, and one tragic day I sold vacuum cleaners door to door,” said Ms. Russell, who now lives in Tempe, Ariz., and works as a telemarketer, selling advertisements for a telephone directory.

Ms. Russell, whose father works in construction and whose mother is a hotel reservations clerk, said she had first planned to attend San Francisco State University. But money would have been a problem at the public institution, too.

“At a lot of the state schools, there are a lot of problems with housing,” Ms. Russell said. “If your parents are making $21,000 a year, combined, you’re not going to be able to afford an apartment nearby.”

JIM CONROY

High school counselor, New Trier High School

Before anyone can figure out whether private education is worth the price, students and their parents need to know what the real price is, said Mr. Conroy, chairman of post-high school counseling at New Trier, in Winnetka, Ill. That means ignore the stated tuition.

“Don’t close the door yet until you see what kind of financial aid the school can offer,” Mr. Conroy said. Even when the tuition appears out of reach, applying — and waiting to see what aid may appear — is worthwhile, he said. “Colleges offer many types of financial support,” he said, adding that at some institutions, “60 to 65 percent of the kids are on some form of financial aid.”

But in the end, Mr. Conroy said, students and their parents must still decide what is the best deal for them. “Each one of these families is making a value decision,” Mr. Conroy said. “Families have said to me, we will pay for that school, we will not pay for that school. We will extend ourselves and sacrifice if he gets into — and you can name them, Harvard, Yale, Princeton — but we are not sacrificing for the next tier.”

F. KING ALEXANDER

President, California State University,

Long Beach

Anyone asking Mr. Alexander whether a private college education is worth its price gets an unequivocal answer.

“The answer is no,” Mr. Alexander said, adding that high price does not mean high quality. “A lot of schools, particularly up in New York and New England, they want everybody to believe that.” He described what he called the Chivas Regal effect in which, he said, “the bottle looks great, but what’s inside doesn’t taste better.”

There may be benefits to students at the most elite colleges, Mr. Alexander said, including those in the Ivy League, where classmates who end up working in important and influential places can help one another later in life. But he added that most private colleges probably cannot achieve the same “network effects” and still charge several times the tuition of most public colleges.

Plenty of people who are now rich and powerful went to public colleges and universities, Mr. Alexander said. “Steven Spielberg went to Cal State Long Beach,” he said. “He’s doing all right.”

CAROLE K. BELLEW

Parent

Ms. Bellew is helping Luke, one of her two sons, attend Bryant University, a private institution in Smithfield, R.I., with 3,200 undergraduates. Tuition, room and board for his first year come to about $35,000, Ms. Bellew said, but her son received a merit scholarship that covers about $15,000. Other scholarships, including one from Cambridge, Mass., where Ms. Bellew lives, have brought the total amount due this year down to about $10,000. Luke has borrowed as much as he can on his own from the federal government, taking out Perkins and Stafford loans.

Ms. Bellew said she had hoped her son would apply to a public university, but he did not. After comparing what Bryant and the University of Massachusetts would cost, she concluded that with the aid, the two institutions were only about $5,000 apart.

“To me, it’s worth another $5,000 to give him the support I think he needs,” she said, adding that her son had learning disabilities and that she preferred him not to be one of nearly 20,000 undergraduates at the University of Massachusetts.

Ms. Bellew looked into private loans, but found she did not qualify, because until she changed jobs recently, she earned too little money.

“When you’re 60 years old and you’re financing a kid’s college, it’s a little bit scary,” Ms. Bellew said. The money she is drawing on, she continued, “is basically my retirement.”

JUSTIN R. ERICKSON

Student, Grinnell College

Mr. Erickson knew he wanted to go to Grinnell, in Iowa, from the start, and so far at least, he is sure it is worth it.

“When I visited, I loved it,” Mr. Erickson said.

His parents were worried about the money, he said, and warned him he would have to borrow. His younger sister will soon be ready for college and will need help to cover her costs, too.

He looked at the University of Wisconsin-Madison and applied there and to the University of Minnesota. But when he applied to Grinnell, he asked to be considered for early decision, pledging that, if accepted, he would enroll.

“I think it’s worth it,” he said, citing the small classes and the “small-town feel” of the campus.

He said he was unafraid of working hard to make attending the college possible. “I’ve had a paper route since I was 12,” Mr. Erickson said. Last summer he had two jobs, working more than 12 hours a day sometimes, to build up his college savings. He and his family have to come up with about $20,000 a year, after federal student loans and a $15,000 scholarship, to cover nearly $37,000 for tuition, fees, and room and board at Grinnell.

“The first semester, we’ve been able to cover, and we’re hoping next semester as well, but we’re not sure,” Mr. Erickson said. “It depends on how much my parents will be able to contribute. It will be interesting to see what happens down the road.”