If you’ve sat through one of those presentations in which people like us PowerPoint you through the college admissions process calendar, you know that the financial aid piece of this year-long affair comes at the end. As close as possible to January 1 of your child’s senior year, you were no doubt told, you must complete and submit a form called the FATSO…er, the FANTA…no, the FAFSA. While that is absolutely true, we know that financial fit is key to a successful college experience (and beyond), and so guide our students and their parents to focus on the Benjamins at other key points in the process, as well. It starts with a nuanced understanding of the factors that go into making up the college price tag.
You know how the person sitting next to you on an airplane may have paid a completely different price for her ticket than you did for yours? Well, in theory, everyone at a given institution of higher learning may be charged a different amount for the same education. Every school website lists its Cost of Attendance (COA), but only 25% of students pay the sticker price.
There are online sources to help you estimate how much--based on your family’s financial picture--you are expected to contribute to your child’s education. This is creatively known as the Expected Family Contribution (EFC). The financial need formula looks like this: COA - EFC = Financial Need. So if University X’s COA is $45,000 and your EFC is $15,000, your financial need is $30,000. The catch is that most schools will not give you a financial package that covers 100% of that financial need. So even though you have a financial need of $30,000, they may only give you, say, $15,000. Ouch!
Instead of just submitting your FAFSA and hoping for the best, we suggest a more active approach in keeping college costs within your means.
1. Take A Strategic Approach to College Search
There’s tremendous variation in the amount of aid colleges provide—both in terms of need-based aid (aid based on financial factors) and merit aid (aid based on achievements, talents, demographics, or other factors). Instead of being surprised at how much aid is offered at the end of the process, choose colleges up front based on the amount of aid you are likely to get from them. You can find merit aid requirements in the financial aid section of each college's website. Strategically selecting the colleges you apply to based on their need-based and/or merit-based generosity can help you keep college costs within your budget.
2. Check Out the Graduation Rate
Sad to say, the average 4-year graduation rate is 40%. That being the case, many students will need five or more years to finish their undergraduate programs. Those extra years greatly increase the overall cost of college, so a school with a lower COA and lower graduation rate may in fact cost you more in total than a higher-priced school with a higher graduation rate. College graduation rates are published online so check them out. In comparing costs, factor in how the graduation rate at each college may impact your total out-of-pocket cost.
3. Sweat the Details When Evaluating Your Offers
In evaluating the financial awards various colleges offer your student, it is tempting to look at the shiniest object on the page—the amount of aid being offered. But not all aid is the same. Aid offered in the form of scholarships and grants is preferable to loans or work-study. Subsidized loans trump unsubsidized loans. But, ultimately, the amount of aid a school offers is less relevant than the amount you will be responsible for paying. So while one school's offer of $30,000 in aid may seem a lot more exciting than the $10,000 offered by another, focus on your net price and how paying that will impact your and your student’s lives.