Sticker-Price versus Actual Cost of College
Estimating the cost of college can be a little bit like estimating the cost of open heart surgery. The total out-of-pocket costs can seem to have very little to do with the real costs of the procedure, and each person likely pays a different amount despite receiving the same care.
Recognizing that choosing a college is, at least in part, a consumer decision, how can students and families anticipate their costs and budget appropriately? First, it’s never too early (or too late) to begin planning and saving for college costs. Despite what you may have heard, families who save money wisely through careful investments are not harshly penalized for those investments by the financial aid system. A qualified financial planner can assist you with this.
Both the federal government and individual colleges and universities provide financial aid to assist students with financial need. There are two primary methods for determining financial need: the FAFSA (using the federal methodology) and the CSS Profile (using the institutional methodology). Each college determines which method it will use. Both forms collect information about a student and family’s assets, income, and family structure, and based on that, calculate the Expected Family Contribution (EFC). However, a student needs to wait until his or her high school senior year to complete either of these forms, and that can be pretty late in the game for responsible planning and budgeting.
It’s possible to get a pretty good estimate of EFC by completing the questionnaire available on the College Board’s website. This estimator incorporates information required by both the FAFSA and the CSS Profile, and is a great place to start when building a projected budget. In general, the lower the EFC, the greater the student’s financial need, and the more likely he or she will receive some sort of federally subsidized need-based financial aid.
Each college is required to post its overall cost of attendance (COA), which should include the cost of tuition, room and board, fees, books, travel and incidentals. The difference between a college’s cost of attendance and the family’s EFC (Expected Family Contribution) represents the student’s financial need, which might be met through need-based financial aid. But what if the family’s EFC is actually higher than the cost of the college? In that case, the student will be eligible only for merit-based financial aid.
In addition, not all colleges have the resources to meet students’ full need. Some colleges will discount their costs significantly for students with outstanding credentials. You can get an idea of how well a college meets financial need or discounts tuition with merit aid through using its Net Price Calculator (NPC), found on the college’s website. Be aware, however, that some NPCs are more thorough than others, and will do a better job of predicting a student’s out of pocket costs.
To find out more about saving for college, estimating the actual cost of college, and learning how to maximize the chances a student will receive merit aid or have their full financial need met, consider working with a college admissions consultant or a financial planner who can answer your questions in more detail.