Financial Aid Appeal Pitfalls
It's well under way at college and university Financial Aid offices-"packaging season." For financial aid administrators, particularly at four-year institutions, February through May is the busiest time of the year. And, after packaging (that is, the process of determining and creating individual financial aid awards for admitted students) slows down, the "appeals" process begins.
Financial aid appeals (requests from parents and/or students to offer additional financial aid, particularly grant funds) may or may not play a valuable role in meeting new student enrollment goals. However, appeals are both time consuming and time sensitive. Managed incorrectly, they can lead to unnecessary financial aid expenditures with no additional enrollment-thus exceeding the established budget, increasing the discount rate, and lowering net tuition revenue, even if enrollments increase.
Clearly, leadership in both Admissions and Financial Aid should be involved in the process in order to provide a balanced approach to meeting all institutional goals, including not only the size of the class, but other critical attributes-for example, quality, diversity, and net tuition revenue. Given the dicey nature of this business, here are some of the more common pitfalls that should be avoided while processing financial aid appeals.
While the notion of sending a low initial financial aid offer and waiting to see if the family appeals is tempting, this practice is risky and not recommended. Some families are sophisticated and/or determined enough to contact the Financial Aid office and request additional financial assistance. Others, however, may be so deterred by an unaffordable offer that they mentally move on to the next more feasible option. Instead of saving the institution financial aid, this policy may lead to lost enrollments and ultimately lost net tuition revenue. Ideally, the best financial aid offer should be presented either at the time of acceptance or immediately after.
Whether your institution's policy ranges from no consideration for appeal requests to a willingness to negotiate packages-or that policy lands somewhere in between-it is critical that staff in Admissions, Financial Aid, and any other office involved in recruitment activities understand and can communicate the steps a family must follow in order to initiate a secondary review.
Establishing the following ahead of time will be advantageous for everyone involved: a description of the appeals process; a list of the committee members who will perform the review; specific guidelines under which an adjustment will be considered; and the sources and amounts of funds available to award. General information for prospective students and their families about the appeals process may also be included in the financial aid section on the institution's website, as well as in print materials sent along with award letters. A clearly defined policy will discourage frivolous requests and make the process more efficient overall.
Armed with various financial aid award letters that present different out-of-pocket costs for the same student, parents often see this as an opportunity to "negotiate" a better deal by playing one school against another, as if buying a car. Not only are colleges not car dealerships, but most financial aid officers cringe at the mere thought of negotiation. Avoid entering into this bidding war!
Typically, this situation occurs when merit aid is included in the financial aid award. Since merit scholarship criteria differ from one institution to another, and amounts can range from no merit aid to full tuition scholarships, it is common for students to see vastly different offers from similarly priced schools and little (if anything) that the aid administrator can do to bring the awards closer together.
On the other hand, appeal requests may fall under the principle of "professional judgment," which gives financial aid administrators the authority to make adjustments under special circumstances. When these adjustments are made, the results may cause one institution's financial aid award to differ significantly from another. Keeping in mind that the first financial aid offer should be the best, limiting increases to these professional judgment cases (or cases where need was not met initially) is highly recommended.
Remove any emotional influence and stick to consistently applying the institutional policy for awarding financial aid. Families are often "coached" to have the student initiate the appeal request and use tactics that may personally affect the decision-maker(s), such as declaring that "attending school X has always been my dream," or stating an ultimatum/threat like "my child will attend school Y if you do not increase the grant."
Arguably, the most frustrating factors for parents and students are the inability to speak with a financial aid administrator directly, and the failure of a financial aid officer to send a response to an appeal request. Regardless of whether an increase in financial aid is offered or the award remains the same, communicating the decision (preferably in writing) is the right thing to do. Even if the appeal request is denied, a written response provides an opportunity to include information about various financing options, such as monthly payment plans or parent loans, that can help make attendance affordable. Note: The timing of the appeal response can be as critical as the initial award letter. As students and parents are trying to bring closure on this major decision, a prompt reply will be noticed and appreciated.
Communication is important in other ways, too. For many parents and students, the financial aid process itself is daunting. Award letter designs vary, as does the information disclosed with the offer, creating confusion and sometimes misunderstanding. A common example occurs when parents compare only the bottom line, or total financial aid. In many cases, additional financial aid may not be necessary, but a bit of counseling would be invaluable. Comparing the grants versus loans within the total offer may make a huge difference in cost to the family. Also, some institutions include federal PLUS loans and/or private alternative loans in the financial aid offer and others do not.
Therefore, comparing the two bottom lines is often apples to oranges. When a family appeals for additional financial aid using the argument that another institution provided a better offer when in fact the actual out-of-pocket costs or total loan debt at the other institution would be higher, the best response would be a telephone call to explain the differences in a way that can be clearly understood.
Finally, don't be afraid to just say "NO." When the circumstances do not warrant an increase, explain the decision with professional courtesy and provide options for the family to finance the balance due should they decide to enroll anyway-which is likely, given that the yield on admits who appeal their financial aid is typically higher than the overall yield on the class regardless of the appeal decision.
Last, but certainly not least, don't forget to track data on who appealed, the date of the request, what the decision was, and the amount of additional grant and/or loan offered. When combined with existing data on the student record (such as financial need, estimated family contribution, SAT and GPA scores, and admissions rating, if applicable) and maintained over time, the patterns in yield rates can be very telling. Comparing yields by appeal decision (approved or denied), grant vs. loan offer, and academic rating may demonstrate trends that can assist with future awarding policies.
For example, if admits who appeal yield consistently at 55 percent, whether or not they receive additional funds, compared to an overall yield of 32 percent, increasing grant offers would only lead to lost net tuition revenue (NTR). If, on the other hand, the yield on denied appeals actually drops below the average yield of 32 percent, small increases in grants could lead to larger enrollments and possibly additional NTR.
In summary, use data to drive the decision when a family appeals for additional financial aid. In order to do so effectively, you must track the request and the decision to use in analysis with other characteristics. Do not succumb to pressure and threats to match other offers! And, communicate in a timely, professional manner, regardless of the outcome. All of this, in combination with a clearly defined policy that is applied consistently, will make the process more efficient for everyone involved.
Kathy Kurz and Jim Scannell are partners in the enrollment management consulting firm Scannell & Kurz. Samantha Veeder, formerly the director of Financial Aid at Hobart and William Smith Colleges (N.Y.), is the firm's senior consultant. They can be reached via their website, www.scannellkurz.com.