Negotiation and Professional Judgment

Negotiation refers to the idea that you can haggle with the financial aid office to get a better financial aid package. Very few schools do negotiation, and those that do, do so only according to set policies. Colleges are not car dealerships, where bluff and bluster will get you a better deal. You cannot play one school off another, to get them in a bidding war for a student. Students are effectively commodities, with very little bargaining power.

On the other hand, colleges do have the authority to make adjustments to a student's financial aid package in cases involving unusual circumstances through a process known as Professional Judgment.

Most cases of negotiation are simply misidentified cases of professional judgment. For example, a family might get two different financial aid offers from similar schools, and try to negotiate with one school to match the other school's offer. The first school asks the family whether there were any unusual circumstances that they told to the second school but not the first. Sometimes it is merely a matter of the second school getting more recent information. In other cases the school's financial aid application might include questions designed to elicit information about unusual circumstances. When the first school finds out about the unusual circumstances, they are able to make an adjustment to compensate for the unusual circumstances. This often results in an improved financial aid offer.

Understanding the Process

Regardless of whether you call it negotiation or professional judgment, it is important to understand how the process works in order to maximize the amount of student aid. FinAid has an extensive section devoted to the topic of professional judgment from the perspective of the financial aid administrator. Although this section contains more than 100 pages of principles, philosophy and examples, it includes a lot of jargon and technical analyses. Rather than force you to read it, here are some of the key points:

• Congress delegated the authority to college financial aid administrators to make adjustments when there are special circumstances.
• Special circumstances are anything that differentiates the family's finances from those of other families, especially anything beyond the family's control.
• Special circumstances can also be anything about the family's finances during the prior tax year that is not reflective of the finances in the upcoming award year.
• Examples of special circumstances include an actual or anticipated job loss or salary reduction, death of a wage earner, high unreimbursed medical bills, unusually high child care costs, private elementary and secondary school tuition, parents themselves enrolled in college, unusual capital gains and other one-time events.
• The decision of the financial aid administrator is final. There is no appeal to the college president nor to the US Department of Education.
• Professional judgment is driven by documentation. It is best to provide the financial aid administrator with documentation of the unusual circumstances. The best type of documentation is documentation that is verifiable and from a neutral third party.
• Financial aid administrators are not allowed to change the family's expected family contribution directly. Instead, they can change the inputs to the formula. The adjustment to the input data elements is driven by the impact of the special circumstances on the family's finances. The formula then calculates a new family contribution from those inputs. Thus the amount of the adjustment is largely dictated by the circumstances, not how hard a bargain you drive.
• It pays to be polite. Trying to argue with the financial aid administrator or to intimidate the financial aid administrator will backfire. Your goal should be to get the financial aid administrator on your side by providing him or her with information that any reasonable person would consider to be sufficient for an adjustment.
• Most people who become financial aid administrators get involved because they like helping people. They are not the enemy. Their mission is to distribute limited student aid dollars fairly, and to try to ensure that every student is able to afford college costs through a combination of loans, grants, and work-study.
• Don't gripe about how hard it is to make ends meet on your salary. Most financial aid administrators earn less than the families they serve, so such pleas for sympathy will fall flat. Focus on the facts, not emotional appeals. You will get a better response by acting professionally.
• Sympathy only comes into play when the financial aid administrator is trying to decide whether to allow an adjustment for the special circumstances. The financial aid administrator is more likely to feel sympathetic and adjust the package when the extenuating circumstances are involuntary (i.e., something over which you had no control). But in most cases the evaluation of special circumstances will be made on a purely objective basis.
• Most financial aid administrators will not make an adjustment when they feel that the family is trying to game the system.
• Professional judgment is not a bargaining session, where the amount you're asking for has an impact on how much you get. The extenuating circumstances and their impact on your finances is the driving factor, not how much you ask for. In fact, it is a bad idea to ask for a specific amount. Instead, provide detailed information about the special circumstances. When the financial aid administrator decides whether or not to allow an adjustment, the amount of the adjustment will usually follow from the nature of the special circumstances.
• The family has the primary responsibility for paying for college. The government and the college only step in when the family's ability to pay falls short. The focus of need analysis is on ability to pay, not willingness to pay. Even with professional judgment, the amount the government expects the family to contribute will be painful for most families. (Part of the reason the contribution is painful is caused by the formula ignoring certain forms of consumer debt, such as credit card balances and auto loans. But then again, the formula also ignores the value of the family car and other real property. Financial aid administrators will not make adjustments for consumer debt or car maintenance, but it doesn't hurt to provide the school with a more complete picture of the family's financial situation.)

The financial aid administrator is the final authority. If the circumstances merit, they can adjust the financial aid package to compensate, no matter how much the change. But the key is the financial aid administrator has to be able to document the circumstances and their financial impact on the family, and show how this affects ability to pay. Typically this is by adjusting the inputs to the financial aid formulas, and letting the formula compute the new aid package. A financial aid administrator cannot (and does not) give you more money simply because you ask for it, or because he/she sympathizes with you, or because his daughter is in love with your son. Everything has to be justified in an objective fashion. The US Department of Education audits the universities very frequently, and if a professional judgment case is not supported with documentation and clear reasoning about the relationship between the unusual circumstances and ability to pay, the school will have to repay the aid to the federal government. So aid administrators are always extremely careful to document their cases and to provide backup for their decisions.

Professional judgment is initiated by the family writing a letter to the financial aid administrator at the school asking for a "Professional Judgment Review". At some schools this is called a "Special Circumstances Review". The letter should summarize the unusual circumstances and include copies of the documentation. The letter should be short and stick to the facts, instead of burying them in a long-winded plea for help. The financial aid administrator may ask for additional information and additional documentation.

Do not include the letter with your original FAFSA application, as it will be discarded. The letter should be sent separately to the student's college.

Some people who promote the idea that you can negotiate with colleges recommend that the student and not the parents contact the school. The reasoning is that the student is the one seeking help, not the parents, and it is harder to say no to a student who desperately wants to be able to attend the college. After all, it is ultimately the student's decision of where to go, so pleas for help from the student are more heart-rending. Unfortunately, although this probably doesn't hurt, it doesn't help either. The negotiation process with colleges is driven by documentation of special circumstances, not emotional appeals. Personal requests for help may have more of an effect in getting a student admitted off of the waiting list than for improving a school's financial aid package.

Schools that Negotiate

An unpublished 1996 survey of 1,492 colleges conducted by the National Association of Student Financial Aid Administrators and the College Board found that only 1% of public colleges and 2% of private colleges frequently or always adjust financial aid packages to reflect other college's offers. The survey also found that 5% of public colleges and 10% of private colleges adjusted financial aid packages in response to the family's stated inability to pay (i.e., a professional judgment review). Nationwide, approximately 5% of Pell Grant recipients are the beneficiary of a professional judgment adjustment. (The survey was repeated in 2001 with similar results.)

This indicates that although very few schools "negotiate", there are nevertheless a handful that do. Most of those that do use a rigid policy to determine when they will match other school's financial aid offers. Usually the schools will only match offers from a limited number of schools that the college considers to be its peers (i.e., similar quality schools for which the college competes for students). Usually the peer schools are in the same geographic area and cost about the same. The schools never get into bidding wars for students.

Leveraging refers to the practice of offering slightly better financial aid packages (usually by only $500 or $1,000) to middle income students who are predicted to have a 3.75 or higher GPA at the college. Research has shown that "sweetening the pot" for middle income students is an effective inducement to enroll, but not for lower income and wealthy students.

Some colleges have switched from using their own need analysis methodology for the awarding of the college's own funds to using the Federal need analysis methodology. This usually gives a little more aid to a handful of students, since the institutional methodology considers some aspects of the family finances that are ignored by the Federal methodology. The administrative savings often balances out the slight increase in the financial aid budget.

Although most colleges practice need-blind admissions, where financial need is not considered when selecting which applicants will be admitted, this is not necessarily the case for students admitted off of the waiting list. If you are waitlisted, often the quality and frequency of your contacts with the admissions office will determine whether you are admitted off of the waiting list. But sometimes indicating a willingness to forgo financial aid will get you admitted. But you should never do this if you cannot afford to attend the school with no financial aid, as such students will not get any aid, not even in subsequent years.

One area where a few schools will sometimes negotiate is their outside scholarship policy. A school's outside scholarship policy dictates how the school reduces the financial aid package when the student wins a private scholarship. Federal overaward regulations require the school to reduce the financial aid package to compensate for outside scholarships when total aid exceeds demonstrated financial need. So the school cannot increase the amount of financial aid you receive. However, there is a little wiggle room in deciding how to reduce the aid package. For example, the school could reduce loans before reducing grants. Since grants are better than loans, replacing a loan with all or part of an outside scholarship will benefit the student. The schools that do this kind of preferential packaging will only do so for students who are bringing in a large amount of outside scholarships.

A growing trend among third tier institutions is to award academic (merit) scholarships, often called the "Presidential Scholarship" or "Trustee Scholarship". These scholarships are awarded by the admissions office or the office of the university president, not the financial aid office. There are a limited number of such awards, and they are highly competitive. The goal of these awards is to attract talented students to the school.

If you want to try negotiating with a school, present a better offer from a competing college and indicate that you will matriculate at the school if they will match the other school's offer. If the school is one of the few that matches other institution's offers, they will ask for a copy of the other school's award letter. They will compare it with their own financial aid package, and also the costs and student budget at each school. If there is a genuine different in out-of-pocket costs, they might match it (or at least come a little closer) or they might not.

The schools that will match offers from competing schools are open about the practice and encourage the students to submit competing offers. For example, Carnegie Mellon University is famous for its willingness to reconsider its original offer. This doesn't mean you'll necessarily get a better offer after the second review, just that they are willing (some say eager) to take a second look in response to new information, including better offers from their competition.