How to Negotiate for More Financial Aid With a little wheeling and dealing, smart college shoppers can pull in generous dollar amounts.
By Penelope Wang

(MONEY Magazine) – The days when parents meekly had to accept whatever financial aid package a college offered are long gone. Today, growing numbers of people are bargaining hard -- and getting great deals. Among the factors in your favor: The shrinking pool of high school graduates has made colleges compete more aggressively for attractive applicants. Pressure from the Justice Department has stopped an elite group of eastern schools from comparing notes in order to make similar financial aid offers to outstanding students. And tight budgets have led many colleges to hold in reserve money that decisive parents can frequently shake loose. For example, Matt Guthaus, 18, pictured at right, was turned down for aid by the University of Michigan, but when his mother appealed, he got a low-cost loan and a work/study job, totaling $3,925, for his freshman year. Stephanie Neild, 18, pictured on page 61, did even better. A straight-A student from Chelmsford, Mass., she was initially offered only a one-year, $2,625 unsubsidized Stafford Loan and a $764 Perkins Loan by her first-choice school, Cornell University (total annual costs: $25,214). Then her father, a high school physical education teacher, learned at a financial aid seminar that he had a basis to appeal Cornell's award. In setting it, school officials had overlooked nearly $10,000 in family expenses, such as his and his wife's commuting costs and his graduate school tuition. Cornell also had overstated the value of the family's home by $17,000. After the father appealed to the financial aid office, Cornell boosted Stephanie's freshman-year award to a more acceptable $6,695 -- the loans plus a $2,570 grant and a $1,500 work/ study job.

Simple economics help explain why topnotch schools like Cornell are more willing to bargain over aid today than they were only seven years ago. In 1987, of the $23.9 billion in aid awarded to 5.9 million undergraduates, the federal government anted up 78%, states gave 6% and colleges kicked in 16%. Last year, however, federal funds accounted for only 74% of the $34.5 billion in grants to 6.3 million students, states put up 6% and colleges had to provide 20% -- a $3 billion hike. Over the next decade, education experts expect the colleges' share will continue to rise, since the federal government is not likely to increase its grants budget significantly. Because schools must stretch the money, their initial offers are increasingly less generous. "In many cases, colleges want to see if you will blink at the price," says Kalman Chany, head of Campus Consultants, a New York City financial aid advisory firm. "So they build room into their financial aid packages for negotiation." For middle-income families, the colleges' willingness to negotiate means that financial aid -- generally some combination of grant, loan and work/study job -- may be easier to get than you might think. For example, a family with $50,000 in income and one child in college is likely to receive aid, especially if the parents have few assets beyond their home equity. And even parents with two children in college, total income above $100,000 a year and few assets outside of home equity have qualified for awards. You can get a rough idea whether your family is likely to obtain aid by filling out the worksheet on page 63. Bear in mind, however, that colleges can bend the rules if they really want your child. "There are many gray areas in the aid formulas," notes Frederick Starr, former president of Oberlin College. "And increasingly, colleges are using aid to shape their classes to ensure that they include students with all the backgrounds and talents the schools are seeking." Indeed, growing numbers of colleges are luring talented freshmen with special grants based on academic merit, leadership ability and special skills. Your chances of persuading your child's first-choice school to boost its offer have never been better. One reason: Since 1992, price-fixing has been forbidden. That year, the Justice Department pressured nine highly selective colleges, including Cornell, Harvard and MIT, to stop sharing financial aid information. The practice had enabled them to make similar offers to attractive applicants, thereby preventing the kids from bargaining for more money by playing one school off against another. Today, an applicant pursued by more than one of these schools often receives offers that differ by as much as $10,000, and negotiating is part of the game. At Williams College last year, for example, 77 of the 450 students who qualified for aid asked for more money, and the college hiked a hefty 80% of their packages an average of 20%, according to Philip Wick, the college's director of financial aid. Moreover, in the past 20 years the pool of college applicants has shrunk 15% to 2.6 million. This has set off an intense bidding war, particularly among second-tier liberal arts colleges. For example, Pittsburgh's Carnegie Mellon University (total annual costs: $23,590) routinely asks its applicants who qualify for aid to give the university an opportunity to match any competing offers. "The amount that we match is usually less than 10% of the total award," says Bill Elliot, Carnegie Mellon's vice president for enrollment. What's more, many small private colleges are now willing to discount their sticker prices by an average of 30%, according to a recent confidential study by the National Association of College and University Business Officers. (The association won't name the schools in the study.) Says Robin Jenkins, the group's director of research: "The price warfare is beginning to resemble the frequent-flier programs in the airline industry." In addition, even without haggling, middle-class families can often win substantial aid by using the rules to their advantage. To obtain the most aid for your child, follow these guidelines: Tilt the odds in your favor. Urge your child to apply to schools where he or she stands the best chance of getting a large offer. In general, these schools will be either private colleges or your state's public schools. "State schools are sticking out-of-state students with higher costs, and most of their aid is earmarked for in-state students," says Chany. Also encourage your child to consider colleges that grant millions of dollars in aid out of their own funds. For example, your son or daughter might focus on schools with large ratios of endowment per student -- especially if he or she seems likely to rank in the top quarter of their freshman classes. You can find those ratios in the information packages that colleges will send you on request; you might also find them in your high school library. Or consult the "Average gift aid" column in our listing of 1,010 schools beginning on page 70. It gives the average grants that colleges made to undergraduates last year out of the schools' own funds. Send in aid forms promptly. In the fall of your child's senior year of high school, you must fill out the Free Application for Federal Student Aid (FAFSA); it's available at high school guidance offices or by calling 800-433-3243. You should apply even if you don't think you qualify for need- based aid, because colleges use this information in processing applications for government loans that are available to all students and their parents, as well as some merit awards. The form will ask for detailed information about your income in the prior year and savings and investments in the current ! calendar year. Using the so-called federal formula, processing firms will then calculate the amount that the federal rules assume you can afford to pay toward college -- what is officially known as your expected family contribution. Many colleges will ask you to fill out additional forms that they use in distributing aid from their own funds. These forms will generally ask for data not included on the federal questionnaire, such as your home equity or the financial resources of a noncustodial parent. Be sure that you mail in all the forms as soon as possible after Jan. 1 -- and definitely by the deadlines of the colleges to which your child has applied. An early aid applicant won't get more money (in most cases, the total aid will be 65% to 100% of your assessed need). But tardy applicants may find that the grants and work/study have run out and have to settle for loans. Make the aid rules work for you. Unless you are certain that your child won't qualify for aid, don't save college money in his or her name. The reason is a quirk in the federal formula. It requires students to contribute 35% of their assets to college costs, vs. only 5.6% for parents. Best advice: If you think your child will be eligible for aid, keep the savings in your name. And don't worry about stashing money in a 401(k) or other tax-sheltered retirement plan, since the federal formula won't include them among your assets.

To take advantage of another quirk in the formula, plan to sell investments earmarked for college costs by Dec. 31 of your child's junior year in high school -- a year before you must fill out the federal aid questionnaire. That's because the formula assumes parents can afford to spend up to 47% of after-tax income on school bills but only 5.6% of assets. Since the formula treats capital gains as income, selling investments a year before applying for aid can help reduce your family's expected contribution to college costs. Appeal a low-ball offer. "It never hurts to ask for more money if you need it," points out Jayme Stewart, author of How to Get into the College of Your ChoiceIand How to Finance It (William Morrow, $10.95). "At worst, the college will simply say no -- it will not revoke the offer of admission or cancel its aid offer as punishment for asking." So you should delay accepting the college's offer of admission to the last possible moment -- up to, but not beyond, the deadline -- to maintain your bargaining leverage as long as you can.

In negotiating for more money, focus on your child's first-choice college. After all, what you really want is the best possible price at the school that most suits your son or daughter. Your appeal's chances will be best if your child is an excellent student or has other sought-after qualities, such as leadership skills, musical talent or athletic ability. If the first-choice college offered less aid than other schools, ask it to match the best competing package. Make sure, however, that the schools are equally prestigious. Don't, for example, expect a Harvard or a Stanford to be willing to match a second-tier school's offer. Consider, for example, what happened to Racquel Sinclair, 19, now a sophomore at Dartmouth College. A native of Jamaica and a graduate of North Salem High School near New York City, she is one of two children supported only by her mother, a food-service worker. Racquel got aid offers ranging from $13,000 to more than $20,000 from seven colleges, including her top three choices -- Colgate, Dartmouth and the University of Pennsylvania. After faxing information about her other offers to the three, she received heftier proposals from Colgate and Dartmouth. Her final choice, Dartmouth, upped its total aid package only $400 to $23,850 but sweetened the deal with a larger grant ($17,175 rather than $16,775), a lower-interest rate loan (5% vs. 7.4%) and $1,800 in work/study. Dartmouth also agreed to pick up her $925 annual health-care fee. In preparing your appeal, compile any information that proves you need more aid. For example, list data that was not reflected in the aid questionnaires, such as support for other relatives or high living costs in your area. Correct any mistakes that you may have made in the aid questionnaires or that the college may have made in interpreting them. Chany estimates that errors occur at least 5% of the time. Then, with a dollar figure in mind, phone the financial aid officer in charge of your child's file. "Be polite, but firm," says Stewart. " Explain that this college is your child's first choice, but you need more money or your child will not be able to attend." Schools will be most sympathetic if you have special reasons for requesting more money -- for example, since you applied for aid, a close family member suffered a medical emergency or job loss. "What we can do in these situations will depend on how much money is left," says Anne Sturtevant, director of - financial aid at Emory University in Atlanta. "So the sooner we are notified, the more likely we can help." It was a change in family income that led to Matt Guthaus' receiving help after being initially turned down for need-based aid by his first-choice school, the University of Michigan. In May, when the 18-year-old's mother was laid off from her $18,000-a-year job as purchasing agent for a Portage, Mich. contracting firm, she asked the financial aid office to reconsider Matt's case. The university ultimately granted him a $2,625 low-cost loan toward his freshman-year costs and a $1,300 work/study job. Follow up your call to the aid officer with a letter restating your appeal and attach copies of any documentation. If you live within an easy drive of the school, consider visiting to make your case personally. If the college is a plane trip away, however, don't go, because school officials may wonder why you can afford a plane ticket but not tuition. What if you simply don't have enough money for your child to enroll in his or her first-choice college? There's no need to panic, as long as you have followed the cardinal rule that college counselors urge on everyone: Make sure your child applies to at least one safety school -- a place that is certain to admit him or her and that you can afford without aid.