Filling That "Unmet Need"
College financial aid packages often fall far short of tuition costs. A pro offers some tips about making up the difference.
By Carolyn Bidga

(MONEY Magazine) – First you get your kid into college. Then you get a letter from the financial aid office telling you how much the school is willing to offer in loans, which you have to pay back, and grants, which you don't, as well as work/study and the like. There may be a line in there that reads "unmet need." That's what's left after you subtract all your loans, grants and scholarships and whatever you can pay out of pocket from a school's tuition and fees. In other words, it's the amount you still have to come up with.

Cindy Bailey, the College Board's executive director for education finance services and a former financial aid officer, says the situation is tough but not hopeless. There are loan options many parents don't know about, she notes, as well as strategies for squeezing a bit more out of financial aid offices.

Q. How much financial aid is out there?

A. There are still grants to be had. That's the good news. Institutions are devoting more and more money all the time to their grant programs. But grant aid is not growing as fast as loans. We found that grant aid per full-time student grew about 5% in 2003-04, while loans grew at three times that rate.

Q. So families have to go deeper in the hole?

A. Costs are going up and federal programs have not kept pace. Families are turning to loans, especially nonfederal loans that have higher borrowing limits.

Q. What's the best way to compare packages if your kid is accepted to more than one school? Should you just go with whoever offers you more money?

A. What you want to do is compare apples with apples. Break everything down into four categories: What does the school expect the student to contribute? What does the school expect the parents to contribute? What portion of the financial aid is grant? And then what portion is money you either have to work for or repay? Don't assume that a $20,000 package is better than another for $12,000. You need to look at how much of that is grant, self-help and the family contribution vs. just looking at the bottom line.

Q. What should you do first if you get an aid offer that just isn't big enough?

A. Most schools don't have the money to meet full need across the board, meaning there's a gap even after the award and the parents' contribution. So when your kid gets his financial aid package, draw up a budget. Look at what your expenses are, the choices you need to make or holiday jobs [your kid might need] to take. That's the first order of analysis: Can we make this work? And then if it still falls short, that's when you go to the financial aid office.

Q. What's your best move for convincing them to increasetheir aid offer?

A. Your best shot is if you can deliver new information. Parents lose jobs; there are extraordinary expenses or new information that wasn't available at the time you filled out the forms.

Q. Will financial aid officers negotiate with you?

A. I would not use the word negotiate because it really rankles financial aid people. This is not Let's Make a Deal. The word I might use is appeal. If you show them your budget and are still short a couple thousand dollars, then maybe the financial aid officer can meet you halfway. So if your contribution is $10,000 and you think you can give only $8,000, then together you can work on a plan to get it to $9,000.

Q. Which approaches don't work with financial aid officers?

A. If you just look at the bottom line and say, "NYU is giving me this. What can you do?" It's really hard to use one school against the other because you don't know the dynamics. There are different endowments and priorities.

Q. So once you've maxed out aid from the school, what alternative financing sources are available?

A. There are a lot of good scholarship search tools on the Web. We have one on our site []. Some states are getting very concerned that their residents aren't able to afford their state universities. North Carolina has a need-based program that's trying to help low-income families. But a lot of states are focusing on merit: Georgia has the HOPE Scholarship, and Florida has a program called the Florida Bright Futures Scholarship that has to do with getting really good grades.

Q. How do you find out about these programs?

A. I think through high schools, talking to guidance counselors. You can look on state websites [go to /SHEA.htm for links to your state]. College financial aid offices are a good source. They try to be clearinghouses for information like that.

Q. What are the best loan choices for students?

A. Federal Stafford Loans should absolutely be the first source. There are two categories: subsidized and unsubsidized. A subsidized Stafford is available to families that show a financial need. The "subsidy" is that the government pays the interest the whole time the kid is in school. Unsubsidized is available to families that do not show need. What that means is the student is obligated to pay the interest on the loan while he or she is in school. What that doesn't mean is they have to sit down in their dorm room and write a check every month--the interest accrues until repayment.

Q. Which are the best loans for parents?

A. A parent's best choices are the PLUS loan, a federally guaranteed loan for parents of undergraduates, or a home-equity loan.

Q. How do you choose between a PLUS and a home-equity loan?

A. For parents who are sitting on a lot of home equity, a home-equity loan is a good choice because you get that tax deduction [on the interest you pay, up to certain limits]. It depends, however, on the interest rate as well as other costs: Are you paying points? Do you have to get the house appraised? PLUS loan rates right now are so low: 4.17%. And with the PLUS loan you don't have to show that you have good credit, just the absence of bad credit. I would look at both options. Do a balance sheet. Then you can compare the benefits and costs and make your decision that way.

Q. How can you tell if a school is just too expensive for you?

A. When you are piling on the loans as a freshman. You could decide in the middle of your freshman year that you don't want to be a vet. You don't want to drop out that first year and have $10,000 in debt.

Q. For kids with a few years until college, is there anything families should be doing now?

A. You can start looking around for scholarships. And the other thing you should be doing is taking good AP courses where you might get college credit. Think of the needs at different schools: athletic teams, bands, debate teams. If you've got a talent or something that you've really accomplished, you can draw that to the attention of the college. And then they might say, "I have some money to throw into the mix."


The family of the average four-year private college student has to shoulder more than a third of the bill alone.

SOURCE: College Board estimates.