What will college cost my family?
This series will take a look at the different benchmarks of the financial aid process mentioned in our previous overview article. We’ll dig deeper into each topic, providing examples and what you should know in order to prepare you for the financial aid process.
Understand the expected cost of college specific to your family
When families ‘shop’ for college, they mostly use the school’s sticker price as a basis for what it will cost. The sticker price is the total cost of room, board and other fees before financial aid. Most families don’t know that they’re able to estimate their Expected Family Contribution (EFC) in order to determine a more realistic cost of college.
When families don’t dig deeper than the sticker price, they can rule out schools that would otherwise be good fits. Just because a school’s total cost is $60,000 per year doesn’t mean that your family will have to pay this full price. What are your chances of receiving need-based aid? What type of merit-based aid does the school provide? These are some of the things that will determine how much families are ultimately required to pay.
There are calculators available online and offered through schools to allow families to gain a clearer perspective on what their cost will be at specific institutions. While these are not as all-encompassing as the resources I use when I work with families, they can be nice starting points. They are not guarantees by any means, but they provide a family with a better idea than the generic sticker price.
By using resources such as this families may learn that the gap between the expensive private college initially deemed too pricy and the local state university isn’t as wide as it originally seemed.
Here’s an example.
Costly College is a private college that has a sticker price of $60,000. More Affordable University is a public college that has a sticker price of $30,000. Based on the sticker prices of each school, the gap in annual cost is $30,000. Easy math, and an easier decision for families that are concerned with how they’ll pay for school.
But if we dig deeper we see that Costly College is able to meet 80% of the need expressed by their students, on average. This is compared to the 40% of need met by More Affordable University.Need is determined by a college using a simple formula:
Total Cost – EFC = Need
For this example let’s use a family with an EFC of 10,000. To give you an idea, this family would have four in the household, including one in college, a combined household income of roughly $80,000 and modest non-retirement savings.
If we run the numbers, we’ll see the gap between Costly College and More Affordable University is a lot slimmer than initially thought.
Costly College Need
$60,000 - $10,000 = $50,000
Costly College Need Met
$50,000 x 80% = $40,000
Costly College Estimated Cost
$60,000 - $40,000 = $20,000
More Affordable University Need
$30,000 - $10,000 = $20,000
More Affordable University Need Met
$20,000 x 40% = $8,000
More Affordable University Estimated Cost
$30,000 - $8,000 = $22,000
I’m not writing this to say that you should expect private schools to cost less than public schools. I’m writing this to illustrate that the gap in cost could be far less than it seems. I’ve also worked with families that have had a lower out-of-pocket cost to attend a private school with a much higher sticker than they would had they attended a ‘cheaper’ public school.
The key takeaway should be to not rule out schools simply based on their sticker price. By applying to the school you are not offering a commitment to enroll. I compare the process to a job application. The family applies to the school, the school offers acceptance and financial aid, and the family gets to decide if they want to accept the offer.
Don’t miss out on a great offer just because you think you couldn’t get the job.