Sharing College Costs with Children

Andrew2199
Wed, 05 Jun 2019 00:09:55 +0000

@twoinanddone raises the issue of how merit aid should figure into the strategy. I agree that a good strategy should provide a strong incentive for the student to maximize merit aid. Is reducing student costs by 1/3 of the merit aid amount enough incentive for a student?

Interestingly, S20 is looking at multiple colleges that have transparent merit aid policies. The higher the ACT/SAT score and the higher the GPA, the higher the merit aid. Some provide their merit aid matrix on their website or in mailings. Others can be easily reverse engineered through their net price calculators. In his case, I gathered the info, showed him the matrices and explained that if he is able to raise his GPA to X and/or raise his ACT/SAT score to Y, he would save $ and his parents would save $$ over four years. His reaction was positive. He translated his personal savings into hours worked at his last summer job and was excited by how much he could “earn” by prepping more for standardized tests or spending more time on his studies. So, even at 1/3, it appears to provide good motivation. Would capturing 100% be more motivating? Yes.

One concern to keep in mind if you decide to let kids capture 100% of any merit aid is that merit aid policies differ dramatically from school to school. Many schools provide no merit aid at all. It simply does not exist. Others offer it to a few, but the student must be very special to receive it. And then there are schools where everyone who is admitted gets merit aid and a fairly high amount. It’s kind of like the variety of retail approaches…some stores mark up the price and then offer big “sales”.

If you are applying the same strategy to multiple children who are attending schools with different merit aid approaches, equity will be an issue. And, you will be giving your child a very strong financial incentive to select a school with heavy merit aid even though another school might have a lower net price but no merit aid.