College's Cruel Scam: Giving Financial Aid to the Needy, Then Yanking it Away
In 2010, Amber was a high school senior from a small farm town in Connecticut, when a small women’s college in Massachusetts offered her a generous financial aid package. She had applied to six schools, including a state institution, but had been wooed by the small women’s college in Massachusetts after visiting its campus and being offered a financial aid package consisting mostly of loans and a few grants. The total cost of her tuition and room and board for her freshman year, $26,000, was just $5,000 more than she would have paid had she gone to a state school, so she went with the more prestigious women’s college because, in large part, it had a “better name.”
After attending the New England school for a year and a half, she had to withdraw in 2011 to deal with health issues. When Amber returned in 2012 and received her revised financial aid package, she was shocked to see that her aid was cut in half.
“I couldn't believe this,” Amber told AlterNet. “When I started at the college, the sticker price was about $26,000. By the 2012 academic year, I would have been paying $45,000 a year to go there. When I tried to get this reviewed, I was told that I could have the financial aid office review my package, but it was unlikely I'd get any more money. They said, We can try, though. We recommend you try to pay as much as you can before classes start and then we can go from there.
"Basically, the school expected me to pay almost $20,000 up front, which I could not afford obviously. If I didn't pay the entire amount, not only would I face late fees, but also be unable to register for classes for the following semester.”
Amber ended up transferring to another school, where she earned her degree in December.
Tens of thousands of students have shared stories similar to Amber’s—they were offered one financial package for their freshman year, only to be taken off guard with significantly higher tuition burdens during their sophomore years.
Ben Miller, research director for higher education at the New America Foundation, calls this a “bait and switch.” As Miller wrote in an article for The Chronicle of Higher Education titled “Why Colleges Are Like Cable Companies,” many colleges across the United States offer grants to first-year students that may not be available the following year. In the 2012-2013 school year, 75 percent of full-time freshman received some form of grant aid. Comparatively, just 61 percent of other students were offered grant aid, according to Miller.
Students aged 17 and 18 often aren’t mature enough to ask about decreasing aid over the years, and tend to be blindsided when those grants aren’t offered the following year. Their families, who struggle even to afford the first-year offers, end up going deep into debt trying to make up the unexpected tuition costs. It’s either that, or transfer or drop out.
Another problem is that at least 51 percent of students underestimate how much money they are borrowing to go to school, according to the Washington Post. Many students simply do not realize how deeply in debt they are and how that debt will be with them decades into their adult lives. It is also common for students to have unrealistic expectations about how much money they will make when they graduate, especially in an economy where everyone, including recent college grads, faces a tough job market and wage stagnation.
Miller told AlterNet that colleges and universities are like any other business: they need to generate revenue. Students are the primary sources of that revenue, even those who don’t have much money.
“The thing that really upsets me when I see this is that schools that really can’t afford to take in a low-income student and charge them a reasonable price that they can pay will still accept that student and give them a financial aid package that is so bad that it would be ruinous to their family if they take it or it basically makes the family feel bad about itself because it can’t afford to pay for that student,” Miller said in an interview.
One example of a bad financial aid package, Miller said, is if you come from a family that makes $35,000 a year and borrows $20,000 a year in loans—that’s a bad deal. What makes it worse, Miller says, is many of the families who sign off on these loans are not looking forward to a future where they will be earning a lot more money to service their debt, either because they are older or because they are stuck working in low-wage jobs.
Mark Kantrowitz, senior vice president at Edvisors, an organization that advises people on financial aid, told the Hechinger Report that many colleges and universities use generous financial aid packages as recruitment tools to lure students in, only for the aid to decline after their first years. Kantrowitz calls this front-loading, and says about half of colleges and universities nationwide do it.
A 2013 report by the National Scholarship Providers Association advises colleges and universities to disclose whether or not they front-load financial aid packages, but students and their families need to know it is not a sure bet they will provide such information.
Miller says not much is being done at the federal level to make colleges and universities that front-load divulge that they engage in the practice, so parents and students are left to ask these questions themselves.
“There’s nothing to police financial aid packaging,” Miller said.
Even when parents ask prospective colleges and universities if they front-load financial aid packages, Kantrowitz says “schools aren’t necessarily open about this.” When pressed, they “act dumb” and “prevaricate” he told the Hechinger Report.
The results of front-loading are devastating. According to BestColleges.com, 37 million Americans, more than half of them 39 or younger, collectively carry a whopping $1 trillion in outstanding student loan debt. The same website provides a list of schools that offer the most reasonable financial aid packages to families that make less than $48,000 a year.
Amber says she carries about $27,000 in debt from both schools she attended; her mom is carrying the majority of her debt, which she estimates is around $50,000.
The Princeton Review also provides a list of schools that offer reasonable financial aid packages. Many on the list have huge endowments allowing them to finance low-income students.
Another way for students to avoid front-loading and bait-and-switch tactics is to consider that their final decision on where to spend four or five years of their life is as much a financial investment as it is an academic one.
In hindsight, Amber says she should have been less concerned about the name of the school and focused more on finding an institution where she could get a great education without taking on debt she will be strapped with for years.
“I don't feel like it was worth it pursuing the private women’s school,” she said. “Even though I had a miserable time in community college, which I attended in between transfers, I would have saved a lot of money. I didn't like the school I transferred to, but at least I have my degree.”
Amber asked that AlterNet not use her name nor the college in question.