College Affordability has become a vital piece of the college decision for many families. Finding the right fit college that incorporates all the college-bound student’s key items within an affordable price tag can be a daunting task. With U.S. student loan debt over $1.6 trillion dollars, families continue to face a future of rising college costs and increasing debt.
Part of the problem is the lack of net cost transparency during the application and college selection process. The college selection decision is emotional for both the student and the parents. Many colleges promote the total amount of financial aid that was given out in the prior year which just adds to the emotional expectation and hope during the admission process. To build a good list, families need to weigh the academics, the campus environment, and the financial cost when beginning this process.
To help you better understand the college affordability factors, PayForED has created a list of the important concepts a family should review to help improve your college decision. Families need to focus on the outcome of a college education and not just admissions. Here are 9 tips for making a better college decision.
Financial Aid Positioning
The Expected Family Contribution or EFC is the amount a college will use in estimating a student’s financial need. Many people mistakenly believe that the EFC is one number. The actual calculation is really four separate numbers that are summed together: parents’ income, parents’ assets, student’s income, and student’s assets. Each of these components has separate rules and allowances.
At PayForED, we are striving to add the transparency that is missing from this process both at the list building stage and at the college selection process. Our College Cost Analyzer generates customized numbers that help families find the best college value, avoid excessive student loans, and make informed decisions.
When computing an estimated EFC number, families need to take into consideration that this number may not remain the same over the four years your child is in college. Factors that can change your EFC is the number of children in college at the same time, changes in income and changes in marital status. Each of these events may change your financial aid positioning.
Having a four-year outlook of your EFC will enable a family to see how their financial positioning may change and how it impacts tuition costs. Understanding these EFC changes may also help a family better utilize their financial resources and debt structure.
Every college that receives federal financial aid is required to have a Net Price Calculator (NPC) on their website. This calculator estimates the net price of attendance for that college’s costs, but it is only for 1 year. This is calculated by taking the cost of attendance and subtracting eligible grants and scholarship aid based on a family’s current financial strength. Some colleges have an advanced net price calculator that includes merit school scholarship information.
In reviewing a college’s NPC, a family should understand that not all net price calculators are the same as far as accuracy and detail. As a rule, the more questions the NPC requires the more accurate the NPC estimate will normally be. As an example, the NPC that requires parents to answer questions related to dividends, interest, and home equity will provide a better estimate. Families should also check to see if the NPC listed by the college has the most updated cost of attendance.
A recent University of Penn Study found that 40% of the college studies had data that was 3 to 4 years old. It is important to get a second opinion before making your application decision. Please note that these NPC are estimates and are no guarantee of your final award.
Historic Gifting Policy
The gifting policy of a college comes in the form of scholarships, grants, loans, and work-study. Each school has its own unique gifting policy and it is useful to investigate their policy during your list building. The National Statistics of Education makes it easy to quickly search for data trends on financial aid for colleges. The gifting policy is important because institutions only provide 1 year of financial information at a time.
Merit Aid Possibility
When creating a college application list, students should have a mix of schools. If the student is trying to maximize their merit aid chances, they should apply to schools where they will be in the upper 25% of applicants as far as GPA and standardized test scores. Discussing this list with your high school counselor or college planner will give a student a better insight into the requirements of the institution’s merit policy. Many colleges may be looking for uniqueness or special talent for their college. Other colleges have specific scholarships to reward students who have established or accomplished a specific community service activity. Scholarships are not always based on a student’s grade or athletic talent. This is where the student needs to do their homework and investigate the colleges they may be interested in attending.
Most colleges have a minimum academic standard or a range for their admitted class. This is typically based on a student’s standardized test scores, Grade Point Average (GPA) and the strength of the academic courses taken. Depending on the college, these factors will be reviewed to see how the student compares to their standard. Many of us are familiar with the term called academic reach or just a reach school.
What is often not discussed is the financial reach. Most colleges promote the amount of financial aid issued last year and it is normally a very high number. These statements can create a sense of false hope for many families. Most colleges have a targeted revenue amount per student or average financial aid package. If a family’s need is greater than the average financial aid package it means the student has a financial reach. This is often not explained to families during the application process. The PayForED admission matrix helps families minimize this stress by showing both a student’s academic and financial aid position at each school before applying to the college.
Most undergraduate students are limited to only $27,000 to $35,000 of federal student loans. These loans are call Direct Stafford Loans. These loans are legally the student’s responsible to pay back. If additional student debt is needed to fund a shortfall, a parent or other person will be directly or indirectly responsible for these other student loans. This other person will need to be a co-signer or sign for the additional student loan. Understanding the different options is important since this will determine the legal responsibility of the loans and repayment options.
By creating a four-year cash flow analysis, a family will be better be able to identify college funding shortfalls and improve their debt structuring plan. Part of this analysis needs to include a review of the various student loan repayment methods as well as identifying whether loan forgiveness is an option.
Due to these complexities, student debt structure does not always follow the traditional rules of borrowing. In most cases, students should utilize the Direct Stafford loans starting their freshman year.
Additional Family Cost
One item in the cost of attendance that is often overlooked is the indirect cost of travel for the student’s family cost when they are attending a college farther from home. Many schools will include the round-trip cost to get to and from school once a semester. The additional cost of returning home for holidays or family emergencies are not included in the amount.
The travel cost for parents to visit is not included in the cost of attendance. Most colleges have a parent weekend or other special events throughout the school year. These expenses can easily add up to thousands of dollars a year. These additional costs need to be discussed or factored into your decision.
College graduation rates can be reviewed on the National Statistics of Education site. This statistic is very important because it predicts the probability of a student graduating on time. The information is available for 4 years and 6 years. The best tip to save money is to have your child graduate in 4 years. Currently, the national average of college students graduating in 4 years is less than 40%. Finding the colleges with higher graduation rates should be part of the research your child does during their college search.
Knowing your child’s ability to learn and where they will be more successful is important. A lower-priced college may appear to offer a better value but if it takes an additional year to graduate the total net cost may be higher.
The retention rate of a college is the percentage of the college’s first time, first-year undergraduate students who return to the school the next year. Families should inquire about this number. If the retention rate at a school is low, then students and parents need to find the reason for this problem. Retention is directly related to the graduation rate. Academic struggles, affordability, family problems, and homesickness all are factors that may affect the retention rate. Depending on the study, approximately 35 % of students will transfer within the first 2 years of college. Finding schools with higher retention rates will improve your probability of graduating on time and reduce the risk of additional expenses due to transferring. The higher retention rate indicates that the school has a better understanding of the required partnership that needs to be fostered with the college student.
Career Center Support
Visiting the college career center or speaking to someone in this office should be mandatory when trying to build the college list. This office and the college’s department chair offices are the connection to life after graduation. Students may not know their exact career path, but they need a resource to help them pinpoint their majors and future careers. The college career center is the best place to gather information.
Understanding your future career should include work environment, salary, and educational requirements. During your visit, you need to ask if the career center helps with job placement and ask for data on the historical job placement of the majors the student is considering.
In today’s competitive environment, employers are expecting graduates to have an Internship or Co-op experience. This should be another question to both the college and career center. Having this information will improve your student’s outcome and help them to become successful.
College Lists Building Summary
The above steps help both students and parents better understand college affordability and how to build a college list. It requires preparation, analysis, and most of all having your child understand the outcome of their college experience.
We recommend the college-bound students focus on the purpose of a college education and not just being educated. A good college discussion should include majors and career possibilities as well as starting salaries. The student should understand any future debt that may be needed to get to graduation. Having a multi-year plan will help families maximize their resources and alleviate some of the emotional stress involved in making the college decision.
At PayForED, we are striving to add the transparency that is missing from this process both at the list building stage and at the college selection process. Our College Cost Analyzer generates customized numbers that help families find the best college value, avoid excessive student loans and make informed decisions.