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3 Financial Aid Terms Every Family Should Know

This week, all the major news outlets are reporting on a complaint filed in federal district court in Illinois against 16 elite universities. The complaint accuses these universities of a price fixing cartel designed to reduce the amount of financial aid provided to admitted students.

This is making headlines as the elite universities named in the complaint tout themselves as need-blind institutions. As I scoured each article trying to put the pieces together, I was reminded of how confusing financial aid and the terminology can be for families. While it takes an antitrust expert to understand the legal argument against the defendants, the financial aid terminology being thrown around should be clear.

Here are the terms every family should know:

Need-blind

Only a handful of colleges across the country claim to be need-blind institutions. Being need-blind means that the college is not supposed to consider a student's ability to pay in the admissions process. These institutions claim to keep admissions and financial aid separated. In other words, the fact that a student qualifies for financial aid based on the institution's formula is not supposed to factor into whether or not they get admitted. The colleges that are need-blind are almost uniformly the wealthiest (in terms of endowment) and tend to be some of the most selective when it comes to acceptance rates. 
 
It is important to read the fine print and demand answers from these need-blind institutions. Sometimes the colleges have caveats, yet they rarely share them with the public. For example, a college may tout themselves as need-blind, but may not be need-blind for international students or even students on the waitlist.

Need-aware

Very few colleges that are need-aware will share this publicly so it is difficult to know how many there really are. Being need-aware translates into a college considering a student's ability to pay in the admissions process. This raises the bar to get admitted for a student who qualifies for need based aid. These students have to be stronger and more competitive than their potential full-pay peers. 
 

Need-sensitive

Being need-sensitive is essentially being need-aware. These colleges try to make most of their admissions decisions without factoring in students' ability to pay. That is until they run out of financial aid or begin to tighten their belts toward the end of each admissions cycle.


READ MORE: Changing College Admissions One Word at a Time


 
As with every lawsuit involving a college and its admissions process, a lack of transparency is always at the core. Few colleges are truly need-blind despite what they promote. And even fewer colleges are clear that they are need-aware or need-sensitive. The formulas that colleges use to determine students' financial aid are like trade secrets. I hope for the sake of families that transparency rules the day when it comes to admissions decisions, and financial aid ones too.