College Financial Aid:The Grand Illusion

Paul R. Wrubel, College Advisor, San Mateo, Ca. www.paulwrubel.com

Again this year, millions of hopeful Americans will complete the FAFSA and CSS Profile forms in order to qualify for need-based financial aid.  They will pay attention to deadlines and try to follow the rules out of an innate sense of honesty and a desire to play it straight.  They will do their job.

For their troubles, the promised outcomes will rarely if ever occur.  Financial aid awards across the nation will reflect a different reality with elusive, shifting rules and an opaque strategy of determining who gets what.  Families at any income and a few dollars left in the bank will be routinely “short-sheeted” by college-produced aid awards.  If a family reporting an income of $65,000 were judged by their financial aid award, you might guess that the family had an income of $90,000 or even more.  For millions of American families the college financial aid system will be a cruel and costly hoax.

For years, there has been a clamor to simplify the FAFSA so that families can more readily apply for need-based aid but with every passing year, it is clear that simplification would merely add to the growing chorus of disillusioned Americans.  What real benefit is there to gain easy access to a theater if the play is bad?  Simplification of the financial aid paperwork would merely add to the audience of disappointed and increasingly angry college-bound students and their families.  But the illusion runs much deeper than mere paperwork.

An actual experience with financial aid looks like this.  A family had submitted precisely the same financial and demographic information to three private colleges, two in Massachusetts and one in Oregon.  Each college received exactly the same numbers.  Two colleges responded with offers that suggested a family contribution of about $19,000 and $32,000 while a third proclaimed that the family did not qualify for one cent of aid making their family contribution a whopping $45,000+ or an assumption of an income of around $150-200,000.  Same numbers, same formula, different outcomes.  Why?

The mechanics of the system aside, the issue is money.  Colleges can’t offer aid if they don’t have the money.  The primary reason for this fiscal deficit is that the federal government and in some cases the state governments, agencies who may have had a hand in creating the system, have failed to contribute sufficient funds to ensure its ongoing viability.  Federal and state contributions in support of need-based financial aid haven’t begun to keep pace with the realities of inflation or any accepted measure of cost-of-living adjustment.  While college costs for families have gone up by more than 100% over the last couple of decades, during that same period the per-pupil influx of public aid has increased only about 20-30%.  Family incomes may have grown by an even smaller increment in that time frame.  The outcome of this scenario leaves the colleges holding the financial aid bag and they simply don’t have the resources to deal with it.  So families try their best to fill in the gap and they usually do so by cashing in their retirement funds or pulling equity out of their homes or taking on more work if they can get it.