Many of our clients are in the midst of applying to colleges. They are also dealing with the reality of a four-year college education costing six figures. How does a family pay for a college expense that is equal to and in many cases greater than the mortgage on their home? What can you do to reduce the cost of college?
Let’s explore what you need to do and think about as you and your student go down this path:
THE “RIGHT FIT”
One of the most important decisions contributing to college cost is choosing the right school for your student; i.e., finding the school that matches your student’s need in terms of areas of study, selectivity, public vs. private, location, campus “culture”, etc. These are more important than cost. Why? Because matching your student’s needs with the college that really wants your student leads to success and lower costs. A student who is attending the right school will finish college in 4 years; not 4 ½, 5, or 6 years. The average time to get a degree today is approaching 6 years. Do the math. That can cost you an additional $20,000 to $60,000!
MAJORS AND COURSE OFFERINGS
Many students choose colleges based on where family members attended, what their high school counselors are pushing, and where their friends are going. Not a sound basis for making a choice that may cost $100,000+. Believe it or not, many students choose a college based on amenities such as dorm rooms and bathrooms! What’s really important here? Does the college offer what you are interested in studying? Don’t know what the student is interested in? Seek help! Do research! Explore!
PUBLIC VS. PRIVATE
Most families look at colleges’ “sticker” price and immediately rule out the higher-priced private school. But look deeper. Most private schools give more financial aid to the right student. And a large percentage of the aid is in free scholarships and grants. If your student has above average scholastic credentials, be sure to apply to a good sample of private schools. One of our families thought that the only choice for their twins was a state school with a price tag of $30,000 or less. We recommended that the girls explore Dickinson in Carlisle, PA with a “sticker” of $60,000 plus. Guess what? Dickinson came in at $5,000 less a year than Pitt per student!
SELECTIVITY
If you have an above average student, consider choosing schools where they will be in the top 25% of applicants instead of the high-profile schools where every student is the cream of the crop. Colleges sometimes called “sub-Ivies”, such as Bucknell, and smaller private schools, such as Allegheny College, know who their competition is and know that they will have to “pay up” to get that excellent student. Colleges want to show great statistics in terms of graduation rates and job placements, therefore, they are willing to pay to get the student who will excel.
HOW DO I FIND THAT “RIGHT FIT”
Students need to apply to at least 10 schools with a good balance between private and public. Why? You need at least 10 because you don’t know which school is looking for your child’s profile. Every year, the game changes. Colleges adjust what they are looking for in new students based on a variety of factors. Did they meet their enrollment goals last year? How well did their endowment funds do? Do their student demographics need adjustment? Is the college promoting a new program and willing to “pay” to attract students? We know that enrollments are declining. The number of graduating high school seniors peaked in the last three years. That means there are fewer students applying to colleges. Colleges will need to compete to find their ideal student match.
FINANCIAL AID OFFERS
Your applications are done. Now comes the time to apply for that financial aid. First, know the deadlines and apply early. There is usually a finite amount of scholarships and grants, and the early bird catches the worm. For most colleges, your application automatically puts your student in the running for scholarships. So, get those college applications submitted in early fall. Do not wait until the final due date. For certain courses of study, such as music, engineering, health care professions, there may be separate applications for specialized scholarships and honors colleges, and there may be an audition required, such as for music. Secondly, understand what forms are needed to apply for financial aid. All schools use the FAFSA to determine aid from the federal government programs. Approximately 500 colleges use additional financial aid forms such as CSS/Profile and their own private forms. Thirdly, understand the forms! Every piece of information collected is there for a reason. Also, understand the definition of each piece of information. For example, what does the form mean by “retirement” accounts? Why do colleges ask for the parents’ highest completed level of education? What is a student asset and why is that important? And there are many more “pitfalls,” so do your homework.
KNOWING THE TYPES OF FINANCIAL AID
Yes, student loans are financial aid! So when you are reviewing that financial aid package, know which aid is free and which aid you need to pay back. Work study is also financial aid.
NEGOTIATE
How do you know that the financial aid offer that you received is a fair offer? You don’t, unless you know what the college has done in the past. More colleges are “holding back” on their offers. In other words, they are willing to pay more if you ask and if you are able to provide a valid reason for more aid. So, do your homework.
LOANS
When all else fails, many families need to borrow money to fund college. And this is where it all begins to fall apart. Most student and parent loans are deferred and cumulative. Deferred means that you don’t have to pay until the student is finished with college, and cumulative means that you have new loans every year stacked on top of what you already borrowed. How many parents and students actually sit down and calculate what all of these loans are going to cost, what will the payment be when college is finished and for how long? Not many. Let us ask you, how many of you would buy a house and not know what your monthly mortgage payment will be? Heads up! Your college loans will approach the size of a mortgage and usually with a shorter time to pay! And guess what? In most cases, you can’t declare bankruptcy on student loans. Recent college graduates are putting their lives on hold because of student debt. They are not buying houses, they are not getting married, and they are not having children. Many students live with their parents. Many parents must delay retirement to pay their share of college costs, or worse, sell their home and other assets to pay off debt. So, buyer beware. Understand what you are getting into before you and your student sign on the dotted line.
Ensphere College Planning Services
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