Kiplinger 100: Best Values in Private Education

College rankings are, for the most part, useless. I believe that college selection is an individual choice that cannot be summed up by rankings. Still, many students chase the same elusive top schools, as though "winning" admission to one of them is the only means by which their high school success (and future success) can be measured. Yet, what may be the #1 school for one student may not be on another students radar. I don't know how that gets factored into rankings.

Kiplinger's, as usual, provides some specific, targeted advice in their current article, Kiplinger 100: Best Values in Private Colleges. The idea behind their rankings is to compare colleges, both research universities and liberal arts colleges, on the basis of the quality of their education versus the relative costs to the students and their families. Also, the article brings to light some disturbing issues that many students face at this time of year.

When Andrew Kositsky applied to colleges several years ago, complicated circumstances prevented him from receiving much family support or qualifying for need-based aid. Rather than abandon his dream of attending an Ivy League institution, Kositsky, of Lummi Island, Wash., considered borrowing $100,000 to foot the bill. "I thought it would be worth it because I'd only go to college once. I wanted the decision to be made irrespective of money."

Fortunately....

Then he talked to Caltech, where a flexible approach to financial aid meant that he could attend a top program without mortgaging his future. "Not only was Caltech understanding in the first place, but it was also willing to listen in case the dynamic changed," says Kositsky. His package, which includes federal and institutional aid, covers about three-fourths of the cost. Kositsky and his family pay the rest.

When Kositsky graduates next year, he plans to share his enthusiasm for math by teaching, a profession he couldn't have pursued had he been saddled with six-figure debt. This brainy kid now recognizes a no-brainer: "Looking back, I'm glad I made the choice not to take out those loans."

I suspect that all too many students (and their families) approach paying for college more in line with Kositsky's first statements - "I only go to college once..." is a familiar refrain.

So, which colleges do manage to blend high quality education, while remaining light on the wallet? The top 10 universities are as follows:

Rank	Name	State	Undergrad. Enroll.	Admission Rate			Total Costs	Cost After Need- Based Aid	Need Met	Aid From Grants	Cost After Non- Need-Based Aid	Non-Need- Based Aid	Average Debt
1	California Institute of Technology, Pasadena	CA	891	17%			$41,595	$14,270	100%	96%	$11,777	20%	$5,395
2	Yale University, New Haven	CT	5,409	10%			$44,000	$16,068	100%	93%	$44,000	0%	$14,306
3	Harvard University, Cambridge	MA	6,649	9%			$44,655	$16,338	100%	92%	$44,655	0%	$8,769
4	Rice University, Houston	TX	3,185	25%			$37,364	$20,475	100%	84%	$31,210	25%	$14,166
5	Duke University, Durham	NC	6,534	22%			$44,532	$20,604	100%	86%	$20,516	6%	$24,391
6	Princeton University, Princeton	NJ	4,906	11%			$45,412	$18,944	100%	93%	$45,412	0%	$4,370
7	Massachusetts Institute of Technology, Cambridge	MA	4,066	14%			$44,650	$20,406	100%	87%	$44,650	0%	$19,748
8	Emory University, Atlanta	GA	6,510	37%			$43,428	$22,192	100%	77%	$25,443	10%	$22,175
9	Columbia University, New York	NY	4,225	11%			$45,844	$23,062	100%	82%	$45,844	0%	$16,080
10	University of Pennsylvania, Philadelphia	PA	9,841	21%			$44,790	$23,074	100%	80%	$44,790	0%	$21,133

Now, this is an impressive list of schools. They are Top 10, after all. But, how realistic is this collection of schools to the average - heck, even top college students. Only one school admits more than one-quarter of their applicant pool, and Emory (37%) is still no guarantee for most students. 60% of the schools on this list (the Ivies and MIT) offer no merit-based scholarships, so if you don't want to open the pocketbook at these schools, you need to exhibit financial need. Even the schools that do offer merit awards only do so for the top of the applicant pool, or students with special talents that the university seeks.

You can find the complete list of liberal arts colleges here. The statistics are going to be eerily similar. Here, four of the Top 10 admit more than one-quarter (Davidson, Washington and Lee, Colgate, and Wellesley), but only one admits more than one-third (Wellesley - 34%). Getting in will be more than half the battle here, too. Five of the ten do not offer merit-based scholarships, either.

Scour the lists, though, as there are a number of schools that admit a good percentage from their applicant pool, and offer excellent merit-based scholarship opportunities. A brief, cursory glance yields a list including these choices:

Centre College, KY - 63% of their applicant pool admitted; 83% receive some merit aid.
DePauw University (IN), Austin College (TX), Wabash College (IN), Agnes Scott College (GA), and Illinois Wesleyan all admit more than 50% of their applicant pool and offer more than 50% of their admitted students merit-based aid.

On the university side, Trinity University in San Antonio, TX meets the same 50/50 profile. So does Case Western Reserve (OH), Whitworth College (WA), Drake University (IA), Gonzaga University (WA), Butler University (IL), and Valparaiso University in Indiana.

It seems to me that based on those results your best bets for affordable quality schooling can be found in Indiana and at some of the country's better faith-based schools. As with everything else, though, these rankings should be taken at face value, and only considered as part of the college admission decision process.

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Financial Aid Independence

A Long Overdue Response...sorry...I was out of town for a few days and then the real world kicked in. We have been absolutely slammed at work with folks visiting from out of town. Trust me - it is not a complaint, but when I get home, the last thing I want to do is sit down and write some more.

Still, I promised a commenter on an old thread a response, and I hate to have it buried in the recesses of a year-old post. The commenter wanted to know about "principle residence" and how a second home might qualify the family for additional aid benefits.

If we own second home (recreation) about 45 minutes from primary, is there a way in Junior year our son can claim living on his own at the second home address (maybe paying us rent)so that he can obtain more benefits on financial aid? In essence they would NOT look at parents assets??

There are a number of factors at play here, and the first thing that I would suggest is to contact the financial aid office at the schools that you are considering to see if they have any advice. The reason for this is that while there are some universal guidelines, every school has the opportunity to administer financial aid under the auspice of "professional judgement," which allows for some leeway in some unusual circumstances. My answers below should be considered "common practice," what you might expect at MOST schools.

1. Living at a separate address (especially a house owned by a student's parents) does not mean that you are independent for the sake of financial aid. Generally, there are four (common) circumstances in which a student is considered to be independent for the purposes of financial aid.
(a) The student reaches the age of 24 during the year in which aid is awarded;
(b) The student is married;
(c) The student is a single parent, with custody of child(ren);
(d) Both of the students parents are deceased.
(a) and (d) are not really things that one can control (members of the Menendez family are obviously excluded), but just circumstance. I would not recommend engaging in (b) and/or (c) EXCLUSIVELY for the purpose of gaining additional financial aid. Why do colleges enforce this rule? Students who are not dependent on their parents for funding their education are dependent on the university for funding their education. It is in the school's best interest to ensure that students and families are linked for as long as possible.

2. Some schools have residency requirements that require students to live on campus for a certain number of years. Other schools link their academic scholarship offers to living on campus. Be sure that you are aware of all the rules regarding housing and residency before considering this as a plan to reduce costs on housing.

3. The second home may be killing your chances at financial aid now. While equity in your primary residence is considered an excluded asset, the same is not the case for a second (vacation) home. While you can use a mortgage to offset the value of the second home, it is still considered an asset, and the net value will be included in the FAFSA calculation. If you own the home outright, this could be substantial. Also, some private colleges may view ownership in a second home as a luxury and may be less willing to provide additional need-based institutional aid.

I hope this helps. Further, I hope that my delay in responding was not too inconvenient for you.

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Stuff You Oughta Know About Filing the FAFSA

This is actually Part II of a previous post. I know it was promised "tomorrow." I don't suppose you are willing to believe that today is yesterday's tomorrow?

I was talking about things you can do (legally and ethically) to reduce your EFC and increase your chances of getting a favorable aid award from colleges. What follows is a list (by no means complete) of some suggestions to help you do this. If you have any ideas of your own, please post them in the comments section. The advice included is that which should be considered for filing the FAFSA, and assumes their Federal Methodology. Some universities consider additional information not submitted on the FAFSA -- the more people game the system, the more colleges have to figure out a way to get the accurate picture they need to dole out their resources.

There are some key things to keep in mind. Analyzing this type of information is not something that most colleges are fond of. An argument can be made that these actions are designed to make wealthy people, who can theoretically afford to pay for college, appear "poor" to get something for nothing. I have yet to meet too many folks who can simply write a check to pay for college, and until those folks become the rule rather than the exception, I think it is a good idea to share some tips. Also, remember that these ideas are those of some guy you are reading on the Internet -- a guy who does have some experience dealing with these situations, but a random "guy" nonetheless. This advice should not replace talking with financial aid professionals at the schools you are deciding between (all schools' Financial Aid offices operate differently), your tax consultant, or a certified financial planner. If you want to know, keep reading...

Plan BEFORE You File
Filing the FAFSA is pretty much the same thing as taking a photograph of financial picture at that one specific date. Your income, assets, marital status, and all other circumstances are all static at that time. If you plan on following ANY of these suggestions, you will receive the most benefits by doing so BEFORE you file.

Reduce Your AGI
This doesn't sound like a good plan yet, does it? You might be thinking, "the best way for me to pay for college is to make LESS money?" Well, no. If you just want to "PAY" for college, then just make MORE money, and write the college a nice, fat check. Since that isn't likely to happen, maybe my idea has some merit. First, we are talking about "Adjusted Gross Income." There are ways to do this:

Increase contributions to your IRA to the maximum allowed. This is something that you can still do for the 2005 tax year. 2005 IRA contributions can be made up until April 15, 2006. If you are planning ahead, have your employer withhold a greater amount of your income for your 401k/403b contribution.

Minimize your capital gains. In most cases, capital gains are treated like ordinary income for the purpose of determining EFC. Try to schedule selling stocks for which you will have a large capital gain either before your child's junior year of high school (before the tax year for which you will be filing your first FAFSA) or late into your child's junior year of college (after the tax year for which you will be filing your child's last FAFSA). For tax purposes, you can use capital losses to offset regular income, but for FAFSA filing, this is generally not the case. You can, generally, use capital losses to offset capital gains, but you would do best to check with the college's Financial Aid Office to check first.

Postpone your annual bonus. Some companies will allow you to defer your annual bonus, some will not. It doesn't hurt to check. Since your child is likely to be in college for more than one year, this is really only delaying the inevitable. But, in the course of one year, you may be entitled to more aid, and you now have one more year of time to plan for next year.

Take an upaid leave of absence. OK...this one seems a little drastic, but if you were considering it anyway. Included in this suggestion is to reduce salary taken from your own business (works if you are a C Corporation). There will be an increase in the value of the business (an asset), but that usually has less negaive reprecussions than income or savings.

Reduce Your Savings
Now that I've got you making less money, you should also spend frivously that which you have saved until now. Ummm...no. But, the two things that are considered above almost all else in determining eligibility for financial aid are the parents' income and assets. The first asset that is called upon in determining EFC is cash on hand -- money in your savings. Making that number lower is one way to increase eligibility for aid. How to do this:

Increase contributions to your IRA to the maximum allowed. Remember, this is something that you can still do for the 2005 tax year. 2005 IRA contributions can be made up until April 15, 2006. Is this starting to sound like deja vu? It should. Maxing out your retirement contributions reduces your income and reduces your cash on hand. Retirement savings are considered excluded assets when calculating EFC. Even better, funds held in a Roth IRA can be used for higher education expenses. Are you with me? Making the $4,000 annual maximum contribution to your Roth IRA reduces your savings account by $4,000 for calculation purposes, but if you choose to use the money to pay for education, there is no penalty for early withdrawl. Also, as was discussed above, increasing your 401k/403b contribution for next year will shelter more money that would otherwise be savings.

Reduce your consumer debt as much as possible. In addition to saving a considerable amount on high interest credit card debt, paying off your credit card balances will reduce the amount of cash you have on hand. Most outstanding consumer debt is not considered when determining financial aid. In addition to credit cards, this also applies to car loans -- so, paying off the SUV will reduce your savings, save you money in interest payments to the bank, and allow you the flexibility of an additional +/-$400 per month.

Pay down the mortgage on your primary residence. Equity in your family's primary residence is not considered at all in determining financial aid. Also, the mortgage on a second home can be used to offset assets -- debt which is secured by property is considered in the need analysis.

Don't transfer money to your soon-to-be college student. This goes against what your tax planner has been telling you for years, no? Yes, you can reduce your TAX obligation by gifting money to your children. However, getting aid to pay for college has nothing to do with your tax obligation. First of all, any money that you give to your children becomes their assets -- and that has a number of ramifications. They may choose to use the money for college, or not. It's their money. If they do choose to use the money for college, chances are they will eliminate all or most of their chances to receive aid. Students' assets are calculated differently in the Federal Methodology -- they are expected to contribute a much greater percentage of their earnings and their assets to their education.

Don't wait to make impending purchses. There are a number of items that are excluded from the Federal Methodology of determining EFC. Cars, computers, school supplies, clothing, and believe it or not, boats are excluded assets when determining EFC. I am not suggesting that you go out and blow all of your money, but acquiring excluded assets with cash will increase your chances of receiving financial aid. If you were planning on purchasing a new car anyway, then you should do that BEFORE you file the FAFSA. Keep in mind, though, that student assets are treated much differently than parent assets. So, buying your little angel a $35,000 BMW for their high school graduation gift seems like a good idea (does it, really?), student assets are counted differently and should be factored into that decision.

There are a few more topics to be discussed, including 529 Plans, Grandparents, the students' actual financial situation, and "special circumstances." I will try to get that post done and up in the next day or two, but I am done making promises.

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