Winning the Financial Aid Lottery

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Know where the money is. Some schools are more generous than others. The schools with the most money are typically private ones, which sit on their own institutional pots of financial aid. The Ivies and other wealthy schools have large endowments that allow them to provide generous aid packages. Schools that don't share the same star wattage but want to compete for high caliber students will sometimes ante up even more cash. They understand that some applicants will reject a fabulous financial package if an Ivy League institution welcomes them without giving up a dime.

In contrast, public schools typically don't have as much discretionary financial aid to toss around. At public schools, financial aid packages will often be filled with federal loans. Lower income families, whether they attend a private or a public school, will often qualify for a federal Pell Grant, which doesn't have to be repaid. Typically, these grants are reserved for families with income under $40,000. Public and private institutions will provide subsidized federal Stafford Loans to low to middle-income students. Eligibility is determined by a federal formula.

A student who doesn't qualify for a Pell or subsidized Stafford, can obtain a regular Stafford, while parents can take out a federal PLUS loan. Once again, you can obtain these regardless of whether the school is public or private. Unlike private schools, state institutions can't always offer financial aid beyond the federal program. Ironically, while families who expect their kids to go to state schools worry about being qualified for financial aid, the assistance will often be strictly loans.

Be leery of the numbers. If your child gets accepted into a school that brags that it meets 90% or 100% of its students' financial need, you may feel like celebrating. But hold off on the confetti. You need to know what's behind those numbers.

You're not going to be happy if a school meets 100% of your financial need with a package of loans. It's far better to find schools that back up their promises with grants, which don't have to be repaid.

You can learn whether a school is typically miserly or generous by looking at its profile on CollegeBoard.com. Once on the site, type the name of a college in the College QuickFinder and then click on the Cost & Financial Aid link. Using Muhlenberg College as an example, College Board indicates that the school meets 91% of a student's financial need. The breakdown was $19,116 in grants and $3,398 in loans.

Don't let the price tag fool you. Plenty of families assume that expensive schools are superior to cheaper ones. That belief is so pervasive that some schools have jacked up their prices to generate more foot traffic.

Higher tuition, however, doesn't mean that a school is sinking more cash into its academic programs. Some schools inflate their price as part of what insiders call the Robin Hood admission strategy. The school boosts its sticker price and then uses the excess cash to offer more assistance to the candidates it covets. While private schools use this strategy, some public colleges and universities try something similar for nonresident students. Often the out-of-state tuition is much higher at public universities, but a school will offer to cut the price in the form of a scholarship for the most desirable nonresidents.

In contrast, other schools, particularly those that serve a region, keep their prices lower and offer less financial aid because of the more reasonable cost of an education there. They use their cost advantage as a selling point.