Top colleges get more affordable

NEW YORK (CNNMoney.com) -- A college education may be getting less expensive at some of the most prestigious schools.

Tuition, room and board jump significantly every year. But changes to financial aid policies at many selective colleges and universities are boosting lower- and middle-income students' odds of getting a better deal.

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In addition, there could be a ripple effect. Colleges want to win good students and don't want the competition luring away potential candidates with sweetened aid packages. "There's a certain arms-race mentality, or a fear that there's that mentality," said Karin Fischer, who covers low-income students' access to college for the Chronicle of Higher Education.

The latest sweetener was announced this week by Davidson College. The highly ranked liberal arts school near Charlotte, N.C., will eliminate student loans from its financial aid packages. Instead, it will provide all its student aid in the form of grants and work study.

Davidson's move is not the first of its kind. But it is a small college with an endowment of just $422 million. The Ivy Leagues and big public universities that have made similar moves have endowments well into the billions, said Jacqueline King, director of the Center for Policy Analysis at the American Council on Education. (See how other schools' endowments rank.)

Princeton got the ball rolling a few years ago when it announced it would replace all student loans with grants and said it would not ask low-income families to contribute much, if anything, to their children's education.

Not long after, Harvard, Yale and Columbia announced they would eliminate student loans for low-income students, as did the University of Virginia, the University of North Carolina at Chapel Hill, and the University of Minnesota. In addition, Harvard does not ask families with incomes under $60,000 to contribute anything toward their child's education, and reduces the expected family contribution (EFC) for families making $60,000 to $80,000.

Stanford also reduces or eliminates the EFC for families making less than $60,000. And last month, it said it would reduce the cap on the annual amount of student loans that an undergraduate is expected to borrow - from $3,500 to $2,000. It also will reduce the expected contribution from families making between $60,000 and $135,000 by changing the way it assesses home equity. The school calculates that the change will save parents an average of $2,000 a year. The school also said it would make an allowance for renters with no home equity, so that their other assets aren't disproportionately weighted.

Emory University, meanwhile, is also replacing loans with grants for those with family incomes of $50,000 or less. And for students whose family income ranges between $50,000 and $100,000, the university will cap the total amount of need-based loans a student must take at $15,000 over their college career.

As beneficial as these types of changes may be to students and parents, they don't necessarily mean a school that has made a change will give you the best aid package, said Kal Chany, author of The Princeton Review's "Paying for College Without Going Broke" and president of Campus Consultants, which helps clients maximize their aid packages.

That's largely because schools use different formulas to assess your expected family contribution. So a mix of grants, loans and work study in your aid package may cost you less in the long run than a mix of grants and work study if the expected family contribution is higher, especially if you'd have to take out a parental loan to pay for part of the EFC.

"The size of the package is irrelevant," Chany said. "What matters is how much do you have to pay and how much do you have to borrow."

And don't be shy about asking your favorite school to review the aid package it offers you to see if they can't do better. Here's how to do so smartly.

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