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 $1.52 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 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 environment, and the financial cost when beginning this process.
Although we list three major areas of interest, at PayForED we focus on providing families with financial aid information, paying for college strategies and student loan options. We believe that to make an informed decision about college, a family needs to take a broader view and understand the four-year cost of college and envision the financial outcome of attaining a college education including a projection of student loan debt.
To help you better understand the college affordability factors, PayForED has created a list of the important concepts a family should review to help narrow the college decision process. The initial concepts help you customize your financial aid positioning while the last concept involves getting your child engaged earlier in their career planning. With each college you visit, we recommend that you understand your financial aid position at each institution so that when you add in the environment and academic items you will already have this information available.
- Financial Aid Positioning
The Expected Family Contribution 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.
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 also changes in marital status. Each of these factors 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.
A net price calculator estimates the net price of attendance at a college. 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. The federal government requires any college that participates in the federal financial programs to have an NPC on their college website. The federal government provides a template for any college to use on their website, but colleges can also develop their own customized calculators as long as they adhere to the guidelines listed by the Department of Education.
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. The date of the data is usually listed on the college website. The government does not require a specific year of data to be used and so the cost estimates may not always be current. 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 merit policy. Many colleges may be looking for uniqueness or a 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.
- Academic/Financial Reach
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 you compare to their standard. Many of us are familiar with the term called academic reach or just a reach school. Many of the smaller or selective colleges will also include other personal factors such as teacher recommendations, interviews, and other personal achievements in their admission decision.
What is often not discussed is the financial reach. Most schools will promote that they have plenty of financial aid and a student needs to apply. These statements can create a sense of false hope. Most colleges have a targeted revenue amount per student or average financial aid package. A family’s distance from that average financial aid package is not that different than the academic reach discussed above. I would not avoid applying to this college, but I am raising the awareness that your ability to pay can be an advantage. The schools typically have less admitted seats available for high need students.
Most undergraduate students are limited to only $27,000 to $35,000 of federal student loans that they are legally 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 co-sign or sign for the additional student loan. Understanding the different options is important since this will determine the legal responsibility of the loans.
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, deferring the debt as long as possible is the traditional path most people will follow. With the complexities of legal responsibility, repayment options, interest rates, and annual loan limits, taking the federal student loan from the beginning may be a better option for many families.
- Additional Family Cost
One item in the cost of attendance that is often overlooked is the indirect cost of travel for the students who 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.
Another expense that is often overlooked is the travel cost for parents to visit. Most colleges have a parent weekend or other special events throughout the school year. These expenses are not included anywhere and can easily add up to thousands of dollars a year. These travel costs need to be discussed or factored into your decision.
- Graduation Rate
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 whether they do better educationally in a small or big classroom environment should be included in the review of the graduation rates. A lower-priced college may appear to offer better value but if it takes an additional year to graduate the total net cost may actually be higher.
- Retention Rate
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. The college has created an environment for them to be successful.
- Career Center Support
Visiting the college career center 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 but they are at least trying to pinpoint their majors and future careers. This 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 your child 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.
PayForED Software is Helps Build College Lists
The above steps help both students and parents better understand college affordability and building a college list. It requires preparation, analysis and most of all having your child understand the outcome of their college experience. To help you keep your college tour information organized we have created a college tour checklist that the college-bound student can complete after each campus visit. Click College Visit Check list to download this file.
As part of the college decision, colleges have gotten much more sophisticated in their admission engagement process. This will vary by school but it is extremely sophisticated. Schools are tracking website visits, on-campus visits, and other demographic information to screen their applicants. It is recommended that once you have narrowed the college choices, here are steps to consider:
- Visit while the institution is in full session
- Understand that the weather and your tour guide will influence your opinion
- Evaluate transportation on both a cost and time basis
- Collect any student newspapers or publications to read later to evaluate upcoming events & atmosphere
- Read bulletin boards on tours to view daily campus activities
We recommend the college-bound student 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 have an understanding of 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.
Variable with ACH: 3.31%- 12.62% Fixed with ACH: 4.02% - 12.93%
3.64% – 9.74%
2.87% – 10.33%