Daniel Barkowitz | September 22, 2006
"So, Enough About Early Admission, Let's Talk about Early Financial Aid"
So, unless you have been living under a rock (not that there's anything wrong with that; I've lived under a few nice rocks in my days), you've probably noticed a fair amount of discussion about early admissions what with Harvard and Princeton making some interesting announcements in the last several weeks. While I don't know anything about MIT's plans for early admission and whether we will be changing our own policies, I thought it was high time someone actually talk about the financial aid implications of all of these proposed changes.
First of all, let's get the timing right here. No one is proposing any changes for the high school seniors who are right now deciding whether or not to apply early, so the earliest any changes would go into effect is for September 2008 admission. This means that for those of you who are looking at applying now, the issue of Early Admission is still a key concern.
The other general confusion around the topic of early admission is that there are generally four possible types of early admissions programs, each with their own "rules." These four are dependent upon two variables -- whether the program is restrictive or not (can you apply to more to one college early or not, also referred to as single-choice), and whether the program requires a commitment of attendance if the student is admitted early (in the general vernacular, "binding", meaning that you have to attend if you are accepted, rather than "non-binding" which allows an answer to the admissions question without any commitment on your part).
You might think of the four options on a simple cross tab, sort of like this:
As you notice, programs which are binding (or which require attendance if you are admitted) are colloquially referred to as "Early Decision" programs, while those which are non-binding are called "Early Action". Obviously, it is important to understand what kind of program is offered at the school to which you are considering applying early (MIT offers a non-restrictive Early Action program) since the type of program offered may have implications on whether you can apply elsewhere and to what you've committed yourself if you are indeed accepted.
So what are the financial aid arguments about Early Admission programs? First of all, you need to understand that financial aid and admissions exist on two very separate (but overlapping) schedules. In the financial aid world, we are required to base our financial aid decisions on the last completed tax year prior to your attendance. For students entering in September 2007, this would be the 2006 information. In order to make a financial aid award for you, we must either have in hand (or you must estimate) the end of year figures for your income, assets, and other information. Keep in mind that the accuracy (or inaccuracy) of the information you provide may have impacts on whether the financial aid adjusts later in the cycle before you begin your program of study. Also keep in mind that the main form used to collect information for the Federal financial aid system, the FAFSA, is not even available for completion until after January 1, making its utility as a data collection form for early applicants nil.
Generally, schools who offer Early Decision programs face a dilemma: if they want to offer early financial aid (and most do, since they know you cannot commit to attending without a financial aid package), the only option is to collect data at a time which is earlier than ideal (say in October or November) and provide you an estimated financial aid package with the early admittance notification. Otherwise, the colleges risk turning Early Decision programs into true "rich-kid" only programs, since you must commit to the institution well in advance of receipt of a financial aid award.
Under Early Action programs, the pressure is somewhat lessened (but not completely eliminated). Since there is no obligation to commit from you to the institution, there is no pressure for the financial aid side to provide an estimated award. These students can be awarded with the regular round of applicants, and receive their aid award with assurances of its accuracy (since, presumably, the school can collect all of the necessary information).
Now, there are always exceptions to these "rules". For example, even though Harvard's Early Admission program is Non-Binding (although they are single-choice), they do provide an early financial aid award to early applicants.
Generally, though, if you are considering Early Admission, my best advice is as follows:
- Do not apply Early Decision to any school unless money is no factor or you are assured the option of applying early for financial aid as well.
- If you do a financial aid application early, make sure that you do your best estimates as to income, taxes, etc. Keep in mind that the aid award you receive will change if your estimates are inaccurate.
- If the program to which you apply is Early Action, and especially if it is non-restrictive, don't assume that your college search is done if you are accepted. Keep your other options open, especially if money is a concern, and don't commit to attend until you have received your financial aid award, and can evaluate your cost.
- Of course (this goes without saying, right?), meet every financial aid application deadline, especially under the Early Action programs. Do not EVER wait to apply for financial aid until AFTER you are admitted (this is true of regular admissions as well). You will be forced to make a decision without the complete facts; you need to make sure you have all the information you need to make an informed decision.
So, financial aid can be a key issue in the world of Early Admissions, but, as you can tell from the post above, it doesn't have to be the "make or break" issue. The statements of colleges who have taken the step of announcing their intentions to eliminate Early Admissions have said that part of the issue is monetarily related. With some careful planning and fore-thought, even the neediest financial aid applicant can navigate these programs in the coming year.
I applaud the efforts of schools like Harvard and Princeton and hope that others follow suit. I do truly hope that these moves, like the announcements of many schools promoting low-income programs (like MIT's Pell Matching Grant) make the dream of a high-quality (but high-priced) education a reality for many more of the world's students. And I look forward to the day (hopefully not too soon in the future) when socio-economic status has truly no impact on a person's ability to succeed. Alas, we have many other issues in our society that have to change before that dream can be realized.
For those of you celebrating Fall Holidays (including Ramadan and Rosh Hashanah / Yom Kippur), may this season bring you peace, happiness and health!
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The author has filed this entry in the "Early Action Versus Regular Action" , "Financial Aid" section; check it out for further reading on this topic. |
Responses To This Entry:
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Thank you for this useful tidbit of information :) I'm having to plan a great deal with how to deal with financial aid and early admission. I'm still not sure what stance to take on the Early Admissions decision as I have not talked personally with anyone about the significance of applying early or not. Since colleges are beginning to remove the option, I'm questioning its importance.
Posted by: Christopher Luna on September 22, 2006 03:02 PM
Dear Mr. Barkowitz:
Thanks a lot for your website; it has been a big help for prospective parents like me.
I have a question regarding your MIT-GO blog (9.08.05), where in the last column of the table, the parents with $50,000 income will contribute somewhere near $8000 (.16*50000) to the cost of attending MIT. However in your blog Parents contribution from Assets (12.04.05),near the end of the paper, you stated that total family contribution is 22 to 48% of available earnings. Assuming no assets, this translates into $11,000 to $24,000 family contribution. Can you explain the discrepancy, or is it my incorrect understanding somewhere?
Sincerely,
TCL
Posted by: TCL on September 23, 2006 12:41 PM
Good catch! The key here is the issue of "available earnings" in the post you refer to, TCL. In that post, the figure of 22 to 48% of income refers to the income left after other expenses have already been removed (Federal, State and FICA taxes, Income Protection Allowance, etc) rather than the percent of gross income. So, in your example, you would need to use the income after all of the expenses are already deducted to determine the contribution.
Let me know if this clears this up, or if you still have questions...
Posted by: Daniel Barkowitz on September 23, 2006 10:52 PM
How do Early Action programs (both restrictive and unrestrictive) hurt low-income applicants? If accepted, the applicant is not bound to that school; he/she is free to attend another school if that school provides a better financial aid package. I can see why Princeton might want to do away with its Early Decision program to help low-income students, but how was Harvard hurting low-income students with SCEA?
Posted by: KY on September 24, 2006 11:16 AM
Thanks a lot for your response; I am with you on your answer but I am still not 100% clear.
Do you define gross income as the adjusted gross income in line 36 of Form 1040? Or is it the total income on line 22 of Form 1040? Or is it neither?
Sincerely,
TCL
Posted by: TCL on September 24, 2006 04:34 PM
Wow! Lots of traffic! Let me try to answer each one of these separately:
KY, I agree with you that early action programs ON THE FACE OF IT, do not cause problems for financial aid applicants, and in fact, this is one of the issues I raised in my post (since I don't believe it to be a make-or-break choice for those who are financial aid eligible). H/P would probably answer this question in two ways: 1) some students, once accepted to EA programs, withdraw or don't complete their applications to other schools thereby reducing their options and limiting themselves to the financial aid offer from the one school (which in H/P's case may be a good offer, but it is limiting), and (probably more cogent) 2) students who apply early at colleges like H/P are generally (warning, this is a MAJOR generalization) more well-off than those who apply in the regular round (is this because these students have other advantages [i.e. better access to guidance counselors, better advice, etc]), so by doing away with the program there is an attempt to even the playing field. But, I am not an expert on H/P's decisions, so it would be best to ask them. If (it is an if at this point, not a when) MIT makes a similar decision, I will explain why and how we did it, but at this point I have nothing more to offer on this one!
TCL, the best answer is neither. If you go back to the original post, you will see that total income is defined as the sum of AGI (Adjusted Gross Income) plus non-taxable income minues income offsets. This is a contructed field used for financial aid purposes and not used elsewhere.
Posted by: Daniel Barkowitz on September 25, 2006 02:58 PM
Thanks for he information, although i am not going into the early admissions program, i still find the overall picture you have painted a simple and accurate one without spin.
Posted by: Nicolas Wilson on September 25, 2006 09:15 PM
Dear Mr. Barkowitz :
Thank you for the information on Part2, it's very helpful.
I started research about financial aid yesterday since my child has been mentioning MIT to me and applying early action. I have some questions about financial aid.
Regarding Part2, you explained how MIT calculates home equity value. I can not find info about custodial account. Since he's a little child, we set up a custodial account and have been prudent on expenses to save for the account. My question is : is custodial account count as parent's or child's account ? And how will colleges treat account like this ?
Sincerely,
Elise Lin
Posted by: Elise Lin on October 1, 2006 07:15 PM
Dear Mr. Barkowitz:
I have been reviewing your different blogs online and have found them very informative and helpful. We have a daughter who attended MITES this summer, loved MIT and Boston, and is currently in the process of applying for Early Action. All the information I have seen regarding applying for finacial aid has focused on the two basic types of families - Married Couple or Single Parent. Her mother and I find ourselves in a different situation and would like to know what category we would fall under in applying or if we do not fit a category what would be the best way for us to proceed. We lived together before her birth and have lived together and functioned as a family ever since but as we were both previously married and divorced, neither one of us wanted to get married again. And we haven't. Can we still file as a couple or under one of our names, and if so, which one?
Posted by: John on October 11, 2006 01:01 AM
