At the tender age of 18, I made the decision to attend the university that offered me the largest financial aid package, through academic scholarships.
It’s been 17 years since that decision and I’m certain that it was the right call. If I had stuck with my first-choice school, I would have been saddled with nearly $75,000 in student loans by graduation, even after factoring in the university’s financial aid offer and what my parents were willing and able to contribute. My decision to follow the money put me in the position to graduate debt-free and allowed me to take bigger risks earlier in my career.
To put it simply, I gave up going to my dream school so that I could live my dream life.
Choosing a school that enables you to graduate with the least amount of debt, or, even better, with no debt at all, is a message more students need to hear. Many parents and college counselors encourage students to go to the most prestigious college possible, on the mistaken belief that the elite diploma will translate into better opportunities and higher earnings.
Students too often find themselves in over their heads when it comes to paying for college. More than half of students leave school with debt, and those that do owe a median $29,000. On Monday, President Joe Biden announced a plan to forgive the debt for millions of students. Yet the plan will do nothing for future students facing the same quandary about how to finance their education.
That predicament has gotten a lot tougher this year, thanks to the bungled revamp of the federal form that is the first step toward obtaining financial aid.
The revised Free Application for Federal Student Aid, or FAFSA, went online months late and was beset by technical problems when it eventually did become available. That meant the Department of Education couldn’t get the roughly 6.6 million aid applications to schools in a timely manner.
Many colleges are making the situation worse, by refusing to push back the traditional May 1 deadline for students to accept an offer to attend a school. With only three weeks until that deadline, plenty of students are still waiting to hear from colleges and universities about their financial aid offers.
At this point, the schools are the only ones in the position to help. They could start by pushing off their decision deadlines by at least two weeks, if not a month, to enable more applicants to receive all their financial aid offers and make a fully informed decision.
A few schools have taken that step. The entire University of California system set a new May 15 deadline. Other schools have given students until June 1 in light of the FAFSA mess. Shame on the universities who have refused to change their commitment deadlines by at least a couple weeks. Notably, many of them are elite institutions.
Bloomberg News reported that Stanford University was one of a number of schools with large enough endowments to make offers based solely on school funds, with the understanding that these scholarships ultimately would be swapped out for financial aid.
It’s fortunate that those universities found a workaround, but it doesn’t solve the problem that they are insisting students decide in a vacuum. Pressing students to commit by May 1 when other schools have yet to send their financial aid offers could mean accepting an elite university’s offer, but then being on the hook for financing tens of thousands of dollars in education costs. Another college, even one of less prestige, might eventually come through with a more substantial financial aid package that would have allowed a student to graduate debt-free, or closer to it.
Part of this path also might require both parents and students to separate their desire to be associated with a top-ranked institution from the actual value the experience provides. Parents sometimes center themselves in the narrative of their children’s accomplishments — so their offspring’s acceptance at an elite university reflects highly on their parenting and on their self-image. Having a top university splashed across your chest or embroidered on your ball cap may provide an ego boost, but the name alone won’t guarantee a lucrative or fulfilling career.
Students do have another option to cope with this year’s financial aid morass. Most colleges require new students to pay a nonrefundable enrollment deposit to secure their spot for the coming academic year. Students (or parents) with the financial means to forfeit several hundred dollars could simply pay the deposit at a school that is sticking to the May 1 decision deadline.
Then, should a better financial deal arise at an equally desirable college, the student can withdraw their commitment to the first school and switch to the institution that offered a better financial deal.
To be clear, students should never put down seat deposits at multiple schools. Rather, if they receive a better financial aid offer, they should call the admissions department to explain their situation and ensure paperwork is properly initiated. This option does not apply to the early decision acceptance, which is binding.
Losing a few hundred or even a thousand bucks in an enrollment deposit makes sense if the trade-off is saving thousands or potentially tens of thousands of dollars by attending a school that offers a superior aid package.
Thanks to the financial aid I received, I was able to move to New York City upon graduation, work for a late-night talk show (earning a meager salary) and, years later, leave a comfortable job that paid well to try my hand at self-employment. These risks, and the life I lead today, would have been unfathomable if I were facing the mountain of debt that burdens so many college grads today.
© 2024 Bloomberg L.P.
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