Changes to financial aid cause hardship for continuing students

Recent USC alumnus Kevin Herald graduated a semester early, but not because he finished his coursework before the standard four years as an undergraduate. Herald dropped his second major in theatre so that he could graduate with his political science degree in December, instead of receiving both degrees in the spring, because he does not want to incur the expense of another semester in college.

Herald originally chose to attend USC after high school because of the stellar financial aid package that was offered to him.

“I came here with a lot paid for,” Herald said. “There was very little in loans. It was mostly grant aid.”

Before the start of his sophomore year, however, Herald said his financial situation changed drastically. His sister graduated from college, causing his Estimated Family Contribution (EFC) to skyrocket. His financial aid award suddenly consisted largely of loans, which replaced a significant amount of the grants he received his freshman year.

In addition, Herald’s parents were unable to acquire the Parent PLUS loan, a federal fixed-rate loan for parents of dependent undergraduate students, because of bad credit. Their house had been foreclosed on several years earlier, and the foreclosure was still on their credit report.

Just before his junior year, Herald said his loans increased even more, while grants continued to decrease.

“There was a lot of freaking out over what we’re going to do,” Herald said. “[The Office of Financial Aid] only suggested getting loans from other groups, but that comes with significant interest. I’m one of four siblings, and they don’t calculate that my parents are saving up for college for my younger siblings, plus trying to save for retirement and pay off debt. They’re just like, ‘What can you pay?’”

Herald is just one of many students at USC who has experienced significant changes to their financial aid packages during their time as a student. Though the Office of Financial Aid warns that any change to a family’s circumstance could affect the EFC — which is calculated separately by the federal government and the university — many students and their families are nonetheless faced with the challenge of paying for an education at a higher price than they planned.

Meeting full need

According to USC’s financial aid website, more than 60 percent of students receive some type of financial assistance. Financial aid consists of a combination of grants, loans and federal work study allotments, which allow students with financial need to work part time to earn money for college.

Dean of Financial Aid Thomas McWhorter said that USC operates by a policy of meeting the “full need” of its students.

“USC evaluates the financial strength of a family each year and provides a financial aid award to meet the student’s need,” McWhorter said.

In the “Frequently Asked Questions” section of the Office of Financial Aid website, it is stated that USC attempts to maintain the initial award offered to students, but only under specified conditions.

“USC makes every attempt to offer the same amount of aid to students every year—assuming that you meet all deadlines and renewal criteria, your family circumstances remain the same and funding is available,” the website states.

One of the most significant factors in determining the amount of aid a student will receive is the EFC. The EFC is determined by the federal government for the distribution of federal aid, such as the Stafford Loan, using the Free Application for Federal Student Aid (FAFSA) form. USC also determines EFC separately using a process known as institutional methodology, since the university is providing the primary share of the need-based grant funding, McWhorter said.

Institutional methodology adjusts for losses and changes allowed in the federal tax return system that do not generally affect a family’s ability to contribute to educational expenses and might include additional review of assets such as home equity and business worth, according to McWhorter.

“There are things that work on both sides of the equation,” McWhorter said. “In the majority, institutional [methodology] probably will lead to a higher family contribution [than federally determined EFC], but there are instances in which it results in a lower contribution.”

McWhorter said several factors might cause a student’s financial aid package to decrease in the years following his or her freshman year, including an increase in family income or assets, a decrease in the number of children in the family who are enrolled in college or a failure to complete the application on time.

The EFC for a student also might change due to job loss or reduction; a change in income; a one-time income, illness or medical expenses; payment for private elementary or secondary education, among other financial situations. McWhorter said special circumstances are reviewed, which might decrease the EFC and result in a larger aid award.

According to Mark Kantrowitz, a nationally recognized expert on student financial aid and senior vice president and publisher of            Edvisors.com, a website dedicated to financial planning for college, what students might consider a minor change in family circumstance could have a drastic impact on financial aid awards.

“Every $10,000 difference in student income will correspond to a $5,000 difference in the amount of aid a student receives,” Kantrowitz said. “Every $10,000 difference in parent income is a $3,000 difference in aid. The number of children in college at the same time can also have a tremendous effect on aid eligibility.”

“Bait and switch”

According to Kantrowitz, changes in aid during a student’s time in college are not uncommon.

The practice of a decreasing grants in favor of loans for continuing students is known as “front loading” of grants. Front loading of grants means that the financial aid package a student receives as a college freshman is more generous than the financial aid package he or she receives as a sophomore, junior or senior, according to Kantrowitz.

“It’s a form of bait and switch,” Kantrowitz said. “They’re trying to recruit a student as a freshman, and once they’re there, they are much less likely to switch to a different institution.”

Front loading of grants is evidenced by examining whether a student’s overall amount of aid has remained the same from year to year but the amount of grants decreased and the amount of loans increased, compared to the overall amount of aid changing.

According to McWhorter, USC does not front load grants for freshmen.

“USC does not have a policy of front loading grants to incoming students and decreasing them in subsequent years,” McWhorter said. “We’re going to evaluate the family’s financial strength each year though because federal aid is year dependent. So every year we’re collecting information on income and assets, which also change. Changes in loan and grant amounts are general more of a result of a change in family circumstances.”

According to the National Center for Education Statistics, 59 percent of first-year students at USC received grants, while 62 percent of the overall undergraduate population received grants in the 2012-2013 school year. Also that year, 34 percent of USC freshmen received loans, while 38 percent of upperclassmen used loans to finance their education. The report, however, does not indicate the average ratio of grants to loans for students.

Aside from a policy of front loading, Kantrowitz said other nuances of the financial aid system might cause loans to increase as grants decrease.

The Stafford Loan, a form of fixed-rate federal financial aid, has a higher maximum loan amount for college sophomores, juniors and seniors, than for freshmen. Kantrowitz said schools often award loans before grants, causing the total loan amount to increase, while the previous amount of grants decreases.

McWhorter confirmed that this increase in loan limit for older students could lead to changes in grants.

“Over time there is an increase in the amount of loan and work, and it’s not a reduction against the grant. It’s not unusual that you will see a reduction [in grants] only based on those increases,” McWhorter said.

In addition, when a student wins a merit-based scholarship, grants are also often reduced.

“One  of the common misconceptions is that outside scholarships can help with the family contribution,” McWhorter said. “Where federal aid is involved, I have to count it as a resource. Family contribution is just that, from the family.”

According to McWhorter, USC makes an effort to preserve need-based grants for students who receive need-based scholarships, but most often, a new merit-based scholarship will reduce a students’ loan and work-study award.

A heavy burden

Allison Begalman, a junior majoring in writing for screen and television, said that a reduction in her work-study amount from year to year during her time at USC has caused her financial hardship and emotional distress.

Begalman has worked at five different jobs in her three years as a student. When she received a lower number of work-study hours for her sophomore year than for her freshman year, Begalman was forced to take on a second, non-work-study job to supplement the newly lowered earnings from her first job as a student worker in the Annenberg School for Communication and Journalism.

Begalman believes her financial aid package changed so drastically because she received a one-time, merit-based scholarship from the School of Cinematic Arts during her freshman year, which would apply to her sophomore year tuition.

Working two jobs in addition to her classes was stressful for Begalman. She eventually quit her job at Annenberg in order to dedicate more time to her higher-paid, non-work study position.

“I felt really bad having to leave Annenberg,” Begalman said. “My boss was really good to me, and I liked the people, but I had no choice financially.”

In her junior year, Begalman’s work study amount was raised, but she chose to remain at her non-work study job because it still provided her with a higher salary than her work study allotment and she enjoyed the work.

During her sophomore year, Begalman appealed the changes to her work-study amount, but her appeal was denied. According to McWhorter, the Office of Financial Aid has processed more than 1,000 appeals so far in the 2014-2015 school year. He said more than 90 percent of the appeals were approved and resulted in an adjustment to students’ financial aid awards.

“[Granting an appeal is] based on our ability to find something we didn’t do correctly the first time, or there’s additional circumstances that should be looked at, or we’re going to exercise professional judgment,” McWhorter said.

McWhorter also acknowledged that in some instances, a student’s appeal might be approved, but no additional funds will be awarded. This situation occurs if the Office of Financial Aid recognizes a change in circumstance but those circumstances do not account for additional need. For example, if a student is granted an appeal to lower a high EFC, but the new EFC combined with the aid award is above the price of tuition, no additional funds will be awarded.

John Zamora, a junior majoring in international relations, is no stranger to the appeals process. He appealed his financial aid award as an incoming freshman and prior to his junior year.

Zamora said that his appeals were granted, but as an upperclassman, the new award was given in mostly loans with some grants, and as an incoming freshman, the amount was covered in full by grants.

“I know that loans are considered financial aid because the rate is subsidized while you’re in college, but I don’t really consider them aid because I still have to pay that back,” Zamora said. “I basically have six months after I graduate from college to get a job to support myself and to start paying off all this debt.”

Zamora applied to colleges as a QuestBridge Scholar, a program that matches high-achieving, low-income students with colleges that can meet their financial needs. Though he feels that USC is generous in the financial aid they give to students, he said the changes to his financial aid package have been a source of anxiety during his time at USC.

“It’s stressful for students because I feel like most low-income students have parents who aren’t great with these things,” Zamora said. “So all the stresses aren’t really on the parents, it’s on the students. Because if you go home and say, ‘It’s going to be thousands more for me to go to school this year. I hope you can afford that,’ that’s on you, you have to deal with that so that you can earn your degree.”

McWhorter acknowledged that many students and families are unsatisfied with the amount of aid they receive, including those students whose parents are dealing with financial burdens other than paying for college, such as personal debt. Consumer debt is not considered in any of the Office of Financial Aid’s calculations.

“Obviously I say I provide full need, but that’s my calculated need I hear from families, and I know some families think this is great, but others still think they have more need than I’m willing to recognize,” McWhorter said. “That’s the hard part of the job.”

Though Herald graduated early, he will now have to face the burden of paying off his student loans sooner than he originally planned.

“I don’t know where my future is headed,” Herald said. “I could be making $20K or $200K. I don’t know if the outcome is even going to be something that is worth it. You come to USC for the opportunity, but things can go in such a different direction. In not choosing to major in business or engineering, I feel like I made a mistake. Me doing liberal arts, why did I do that?”

Herald stressed that he believes the Office of Financial Aid needs to use a more holistic approach to evaluating students’ individual need for financial aid, rather than just taking the numbers into account.

“They have an algorithm, but they don’t understand anything beyond the math,” Herald said.