Negotiating an Aid Award

When it comes to negotiating and aid award, it’s helpful to understand both how the Professional Judgment (PJ) process works and how negotiating in general works.

With the PJ process, the school has a specific set of constraints and you must work within them. The Department of Education allows schools to make adjustments “on a case-by-case basis only to adjust the student’s cost of attendance or the data used to calculate her EFC.” The reasons for adjustment “must relate to the special circumstances that differentiate him—not to conditions that exist for a whole class of students.” Specific examples cited include “elementary or secondary school tuition, medical or dental or nursing home expenses not covered by insurance, unusually high child care costs, being
homeless or a dislocated worker, recent unemployment of a family member, or other changes in the family’s income or assets.” Included in the above are one-time gains that might have caused the family’s income to be higher in the base year than is typically the case. This might include a one-time bonus, withdrawal or Roth conversion from an IRA account, or a one-time capital gain.

Administrators making these adjustments to a student’s EFC are required to document the basis for the adjustments in writing and recalculate the EFC based on the adjustments. That means that any adjustment the family gets is per school, so the appeal process needs to be done at each school.

When appealing an aid award that is based on your EFC, you need to do the following:

• Document, in writing, the circumstances your family faces that would change your EFC, based on the above.
• Do not request a specific dollar amount. The administrator can only change the formula inputs, not the formula itself.
• Start the process as soon after receiving an award as possible. That’s because there is typically a fixed pool of need-based funds.
• Because the adjustment to a need-based award is school-specific, a better offer from a different school may factor into a school’s willingness to negotiate or adjust on your behalf, but is no guarantee either that the school will negotiate or that they will match the other school’s offer.
• For your own purposes, map out your annual cash flow including loans for each school your student has been accepted to so that you understand the impact on your family (parents and student) of each aid offer. (Use the CFPB’s calculator to do this fairly quickly.)

Remember, this is for need-based awards. Merit awards, because there is some discretion involved, are different. With merit awards, it can pay to delay acceptance or to present offers from different “peer” schools (i.e., schools that have similar academic profiles and admit similar students).

Besides understanding the PJ process, families need to think about negotiation in general. There are some negotiation basics that often seem to fall by the wayside in negotiating aid offers.

• What is your goal in the process? Even though you aren’t presenting an aid administrator with a dollar goal, you should have one in mind based on the college cash flow plan you’ve created for yourself. You should understand what is affordable for your family and whether you’re willing to stretch that by some specific amount for one or another school.
• What will you do if you don’t get what you want? At what point do you walk away? You and your student should know going into the negotiating process what you will accept and what would be insufficient, leading you to choose “plan B.”
• What’s your alternative? If you don’t get a better offer, do you have a financial safety school? Does the dream school have a path that includes community college for a couple of quarters or semesters?

For schools, the aid process is a business decision. There are a certain number of dollars available in grants and loans, and they will be allocated in a certain way across the student body based on a set of goals and values. Families need to look at the process in the same way and use a clear-headed approach to negotiation that includes the possibility of walking away.