What do mattresses, new cars, and college tuition have in common?
You rarely pay full price.
When I do college planning workshops, I frequently hear – “that college is too expensive to attend”.
Too many families mistakenly eliminate a school as soon as they see the “Sticker Price”. The result – paying more than necessary for a college education. Why?
Colleges (especially private schools) need to discount tuition from advertised prices to compete with other colleges and universities.
Many families I work with are surprised to learn in many instances a so-called “more expensive” college will cost them less out of pocket than schools with cheaper advertised prices.
How can this be? First, you need to understand how colleges calculate a financial aid package. The primary consideration is demonstrated need. At it’s most basic this is the financial aid formula all colleges use:
EFC is the amount of money you are expected to contribute for one academic year. It is calculated by completing the FAFSA and/or the CSS Profile (not required by every college).
Your EFC is the same regardless of how much a school charges, thus your need varies based on the cost of attendance (COA).
To illustrate, let’s assume your family EFC is $5,000 and you are considering the University of Minnesota (UMTC), the University of North Dakota (UND) and St. Olaf College.
In addition to understanding how EFC is used in financial aid calculations, it is also critical to research (understand) what % of need a college historically meets.
Historically, the UMTC meets 76% of demonstrated need.
UND 64%.
St. Olaf 100%
Will this calculation work exactly the same for every family. No!
Many factors are used to determine a financial aid award, such as how much they want your son or daughter to attend (called preferential packaging – a topic for another day). Preferential packaging determines how much “free” money they will offer in the form of scholarships and grants versus loans.
Yet, the reality in today’s admissions environment – most colleges and universities need to “compete” to enroll your son or daughter.
Ask yourself, can Gustavus Adolphus College really attract all the students it needs to meet its enrollment goals if they charge every student $57,280 (Fall 2018 published COA) versus the UMTC which charged $28,233?
No. Like most colleges, Gustavus will “discount” tuition from their published sticker price for many many students.
Thus, it is really is not uncommon to receive a financial aid award which makes a “more expensive” college if not the less costly alternative, then comparable to a school with a low sticker price. Use this knowledge to your advantage to save $$$ on the cost of a college education.
The best time to eliminate a school is at the end of this process after you have learned what a school is willing to offer you. Not at the beginning, when you see the advertised price!
You have choices.
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