EP 015: Financial Aid: Breaking Down the Different Types
In this episode of Admittedly Podcast, Thomas breaks down the different types of financial aid a student can get from schools.
LISTEN NOW
In this episode of Admittedly Podcast, Thomas breaks down the different types of financial aid a student can get from schools. Although it’s an important topic, it’s also highly individual; every situation needs to be analyzed separately.
Thomas explains that there are two main types of financial aid: merit-based and need-based. Need-based scholarship involves a form called FAFSA (Free Application for Federal Student Aid). This form will ask questions that may or may not grant the student financial aid for college or graduate school.
Whether or not the student applies for scholarships, it’s essential to analyze the whole scenario, put together information from all the possible scholarships, and make the decision consciously.
Key Highlights
It's a very individual topic.
There are two main types of financial aid: merit-based and need-based.
Before making a decision, be aware of the investment in the long term.
Analyze if the investment is worth it.
There are services that can help you find scholarships.
There are ways to pay the college back.
It's important to put together a sheet with all the possible scholarships.
At the end of the process, examine what the best scenario is.
About Thomas
Thomas is a parent and alumnus of the University of Pennsylvania. After earning his MBA at the Wharton School in 2003, he moved to Silicon Valley. For three years, he was director of admissions and financial aid at Wharton School. He worked closely with admissions professionals, students, alumni, and professors to create the best possible MBA class.
Thomas has been an entrepreneur his entire life in the fields of finance, agriculture, wellness, and sporting goods. As the founder of Global Education Opportunities, he works with diverse and underserved communities to help them become successful college students. Thomas started the podcast Admittedly because he is passionate about demystifying the application process for parents and applicants.
Related Links
Apply to be a guest: www.thomascaleel.com/apply-for-podcast
Follow Admittedly on Social Media
TikTok: @admittedlypodcast
Instagram: @admittedlypodcast
-
Hello, and welcome to the admittedly podcast. My name is Thomas Caleel. I'm the former director of MBA admissions and financial aid for my alma mater, the Wharton School at the University of Pennsylvania. In this podcast, I don't promise easy answers or quick fixes. But I will use my decades of experience to help you achieve your education goals. Now, let's get started.
Hello, and welcome to the admittedly podcast. I'm your host, Thomas Caleel. And today, we're going to take a brief look at a topic that is very important to most families. And that is financial aid. We've received a lot of inquiries about this in our emails, in our DMs, and I want to address it. Now this is a long, very complex, and highly individual topic. There's no way we're going to cover everything today. So this is just intended to be a very high-level, look at financial aid. And we'll start to break it down in future episodes. And we'll also bring in some experts to talk about from the school's perspective, what financial aid means how you can achieve the best outcomes for yourself and your families. I also want to make sure that we understand that financial aid is going to be different for everybody.
Okay, it depends on where you are in the applicant pool. Are you an athlete? Are you recruited? Do you need all of these things to come into play, we also need to look at the individual schools, some schools have merit scholarships, and some schools only provide need-based scholarships. So all of these things come into play. And again, very individual very important for you to take your time and not be rushed through this process.
So let's start, first of all with what is financially, and in general, there are two different types of the school offer. Some schools offer both some schools offer only one. The first is merit-based financial aid, and what merit-based means is that they have scholarships for certain types of students, they might be athletic scholarships, they might be for students with a certain background or coming from a certain state or town or having life experience, or to increase underrepresented representation. All of these things are very important.
And oftentimes, something you just don't have control over. Why does this happen? A lot of times, it's driven by the donors. So a donor might come in and say, Listen, my partner and I would like to donate X amount of money for a scholarship for students from this particular region of the country, maybe this particular town, or went to this particular school, because that's our background, that's very important to us. We'd like to see more representation there.
Now, those are difficult scholarships to fill. And when I was at Wharton, I would work with my head of financial aid, a wonderful, wonderful, highly experienced person, Sharon Brooks, and she and I would go through these volumes on spreadsheets of different merit scholarships, and we try and figure out how to fit our admitted class into them. And some of them had been on the books for decades, and we hadn't gotten a person from that specific town to apply. And so we just couldn't use those scholarships. So be aware that sometimes you just may not qualify for a merit-based scholarship through no fault of your own.
The other scholarships are based on need and need is tricky need is something that for us students, you will fill out your FAFSA. That's a whole process, it's very clearly explained online, go in, take your time, and do that in advance. It's very important because it helps you understand your family's expected contribution. Now, I know that sometimes those expected family contribution numbers can be breathtaking, right? And that's what the school looks at you once they've admitted you. And they say okay, based on your FAFSA, which looks at your tax records, your income, your assets, this is the amount of aid that we can provide you now, in some cases, those numbers will be set in stone the school is going to come back to you and say this is what we can offer we can offer more. And you know, this is very, very important is a very important consideration.
And one of the things I want to talk about is that if you are in what I would refer to as an underrepresented demographic, so socioeconomically geographically based on race based on gender Many schools will have outreach events. And part of that outreach event will be what they call a pre-read for financial aid, it's very important for you to take advantage of that if you can.
Because what that means is that as you're heading into admission season, you can get tentative pre-offers from schools on financial aid. And they'll say, Listen, if we admit you based on your FAFSA, which you filled out in your tax returns, we can offer you this much financial aid. And that's a very important consideration when we look at the early decision and early action. Right. And those are the deadlines on November 1 that many schools offer.
Early Decision is binding, early action is non-binding. What that means is that if you're admitted early decision, if you apply to a school and you're admitted early decision, you must attend, you signed a contract you must attend.
Now, what many schools discovered was that that scared off some applicants because what you're saying is that you're committing to attend, regardless of the amount of aid that's offered. Now, if you truly can't pay, you can reach out to the school and give them evidence that look, we can't afford the school, it just under no circumstances can it happen. And then try to negotiate your way out of an early decision binding early decision.
But let's be thoughtful, and not put ourselves in that position. Because that's difficult and uncomfortable and unpleasant. Early action is non-binding, which means if you're admitted to an early action school, you can receive your financial aid decision, but still apply to other schools and then make the decision that's right for you and your family. And many of the top schools are starting to shift to early action because they realize that in many families, tuition is an extremely large expense. And it's not something that they can just commit to blindly, especially in some demographics of the applicant pool. And it's something where they're trying to again, increase their, you know, equality and equity and fairness in the admissions process. And they want everybody to come regardless of ability to pay.
But they're also sensitive to the fact that paying these tuition that increase outpaces inflation growth every year, it is difficult for many families who want to be sensitive to that. So please be aware of the difference between early decision and early action, if you have an opportunity please reach out and get that pre-read. Because I'm going to say something that many people find controversial, but I will defend this and I'm happy to discuss it with you send me an email, or send me a DM. But I think that we really need to be tough when we consider the return on investment for our education dollars.
What do I mean by that? What I mean is that there's not a big difference in price between a top-ranked university and a lower-ranked university. Now I'm not saying that a lower-ranked university is worse, and in some cases, they can offer the perfect program for you. What I am saying is, I really want you to think carefully about how much this is going to cost and what your potential return is on that investment.
So I want you to think about not locking you into this, but what do I plan to study? This is something we've discussed, it's an important part of the application. So it's something you need to think about anyway. But I want you to think about okay, what do I plan to study? Do I need graduate school? If graduate school? How much does that cost? How many years am I looking at before I can start earning a salary when I do earn a salary? Am I going to be able to pay this back?
Alright, student loan debt is a major, major topic of concern in politics right now in the zeitgeist. Everybody's talking about it. And we've seen too many students just go to college because they were told that's what they needed to do. saddled themselves with unrealistic amounts of debt, go out into the workforce and realize that there's absolutely no way that they can repay this debt based on their current salary or even their salary in five or 10 years. So I think it's very important for you to be clear-eyed about that.
Now. I am absolutely have been accused of being an education snob. I feel like if you get into one of the top schools in the world, find a way to pay for it. Work, apply for outside scholarships, anything you need to do because the larger effects of going to say Princeton or Yale or Stanford or MIT, those are going to resonate throughout your life. And those are things that oftentimes are worth stretching yourself for. But I would encourage you if those schools are not an option, or it's not something you're considering, to look at a path, for example, through community college, right?
California, Texas, and New York, these states have incredibly well-developed exceptional community college programs that you can attend, you don't need to live in state to attend them. And the best part is going through that process you can attain, you can attain residency in the state, which lowers your tuition costs, do your first two years, get your associate's degree, and then matriculate up into the state university systems, which are oftentimes exceptional. And you can dramatically lower your cost of attending, you get a degree from your final University, and nobody knows any differently. And you receive an exceptional education for a fraction of the price.
This is especially important if you're not getting the financial aid pre-reads that you want. If you're looking at going on to graduate school, the last thing you want to do is graduate, finished graduate school, and be several $100,000 in debt in a field that might not pay as well as you need. And now you've crushed yourself for the next 20, 30, 40 years of your life saddled with this debt, if you want to go into medical school, okay, you probably have a fairly good income future there, as well as other careers.
And so sometimes you need to look at and risk adjust that process and say, Okay, this is a worthwhile investment because, in the end, I will make enough money to pay this off. But please be clear-eyed about that. Don't put yourself in a difficult position that is insurmountable.
In the end. I also want to talk and address there are services that offer to help you find scholarships, if you pay them, nowadays, with Google, with the internet, with all of the resources at your disposal, you don't need to pay people to find scholarships for you. There are certain organizations that will help student-athletes pitch themselves to schools, and some of those can be helpful. I don't want to name any names. I think you need to make your own decisions on that.
But in general, I think careful research and outreach on your part can replicate those outcomes, because it's very important to think about, Okay, how are all the different ways that what are all the different ways that I can pay for college? Right, one of our listeners, Bryson wrote in with a great question. And Bryson asked, "With scholarships, how do schools think about those? Do you have to pay them back?"
And the answer Bryson is, of course, my favorite answer when it comes to admissions. And that is, it depends. Schools will offer a variety of different types of scholarships, we already talked about merit and need-based scholarships. But oftentimes, they will have things like work-study, where you work within the university, maybe in the library, maybe in the academic department, maybe in an administration, you earn a certain rate that they set, and that helps offset the cost of your scholarship. So it's really a great way for you to be involved in the university. And in that sense, you are paying that back.
Many of the top universities, the Ivy League universities came together, and they've set floors, anywhere from $125,000 of total combined family income, sometimes up to about $175,000 in combined family income. And if you are below that, you're you are given a grant. And a grant means that you don't pay for school, sometimes depending on your income level, that will include travel, housing, stipend, all of these things that come into play so that they are really, really trying to diversify their socio-economic base in the class. And they're aware that the cost of tuition is really crushing and off-putting for some families. And they're trying to make that as easy as possible, saying, if you get in, we're going to give you the money to attend, and it's completely cost-free.
Sometimes schools will loan you the money at a low or even 0% interest rate to entice you to come. And all of this will come in your financial aid letter. So once you're admitted, sometimes at the same time, sometimes you have to submit additional information the school will give you your financial aid award. Now, it's very important not to panic when you get that first letter. Okay, wait get all of your letters from all your schools. Think carefully about the schools you want to attend, right? And then reach out to those schools, and be honest with them, say, Listen, our expected family contribution is $40,000, $50,000 a year. And here's why that's not reasonable. Here are our other offers, is there any way that you can match that?
Now, sometimes the school will say, Listen, we empathize, we hear you, we understand, but there's nothing else that we can do. That's our best and final offer. We would love for you to attend. You know, maybe there are work-study opportunities there. Maybe you're in a large city, maybe you're at NYU. So there are opportunities for you to work and earn money to help offset the cost of your education.
And sometimes, though, they will say, Okay, wait, we want you here. Let's go back. Let's see what we can do. After you do that, and you get the best possible offer that you can from the school or schools that you want to attend, then I would recommend hitting the internet and really looking at what other scholarships are out there. There are thousands and thousands if not millions of scholarships available. Does it work? Yes, you have to write essays, you may need to put together a good resume, and you likely will have to interview. And so I think it's important to build out a matrix a spreadsheet of scholarships, you qualify for, what the amount is, and kind of balanced that amount against the amount of investment of time required to get that, right?
So if there's a scholarship that will offer you $10,000, you will want to prioritize that obviously over a scholarship that might provide $500 or $1,000. It's not to say that as you go through the process, you don't keep going after those smaller dollar amounts. Scholarships, because they are important in the end, they can certainly add up. But we do want to get the most return on our investment of time. And then in the end, I think once you've pulled all that together, and you say, Okay, this, I've got my best offer from the school, I've gone out I've solicited external scholarships, and here's the amount of money that I'm going to have to come up with out of pocket my family and I are going to have to come up with out of pocket, then you can make a very clear-eyed assessment of is it worth it?
Right, I'm not somebody who believes that education, regardless of cost is always absolutely worth it, I think it's very important to think about your path, and what you're trying to achieve, right? And how you can best get there, especially if you're looking at graduate school, because it may be that you can hack your undergraduate education to do that less expensively, right through community college route into a larger school, and then flip that into a top graduate program and emerge with much less debt and have a head start on your career.
So, as I mentioned, in the beginning, this is a very complex process, and I know that we're going to continue to get questions on it. We will have students on the show and their families. We're going to talk about financial aid as offers come in from different schools. But I think, you know, please take a deep breath, don't panic. It's scary. Sometimes these numbers are terrifying. You know, I've had students calling me in tears, and just calming them down and saying, Okay, let's break this down. Let's look at it. Let's look at the component pieces. Let's see what the levers are so that we can push what areas are weak in effect, and can we bring this down to a reasonable number?
Thank you for listening. I look forward to hearing more from you in our comments in our emails and answering your questions about finances. Thank you for joining us today. Please take a moment to subscribe to the admittedly podcast and download this episode. I welcome you to share your thoughts and questions with me. You can find us on social media and admittedly podcast. I look forward to continuing our journey together.
