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How Much College Debt Is Too Much?Guest Contributor
Most parents are shocked when I tell them to ignore the college sticker price printed in the book, catalog or on the college website. “Why do they ‘say’ it costs X amount of dollars and not charge that?”
Because while most can’t pay the price, some can. It’s the same with any commodity: houses, cars, airfare, vacations. They post a price because many will pay that price; others, who can’t, search for the bargain.
Enter the college admissions process with the mind of a bargain hunter and you’ll be pleasantly surprised at what you will pay.
When my daughter was looking at colleges, the initial shock of the high cost stopped us from considering several schools. What we learned quickly helped us put some of those colleges back on the list. There is a difference between the sticker price posted by the college and the actual price you will pay if your student is admitted. Sometimes colleges with the highest sticker price end up costing far less than a college with an affordable sticker price.
Most families ask how much it costs to attend college, which means they are asking for the sticker price. But the question should be, “What will this college cost MY STUDENT to attend?”
Ron Lieber, author of The Price You Pay for College, has observed, “I have never come across a consumer decision that inspires more confusion or emotion than this one.”
Every college and university lists a sticker price which is also referred to as the cost of attendance (COA). This price includes tuition, fees, room and board, books, supplies and miscellaneous expenses. There may be variations in the cost of attending a particular school based on the housing and meal plan options selected or the number of credits a student takes per semester.
Sticker prices vary widely depending on the type of institution: public or private, large or small, elite or less selective, etc. (Location/region affects sticker prices, too.) They range from the most expensive four-year college in the U.S. with a yearly COA over $75,000 to the least expensive with tuition less than $3,000. Private colleges and universities tend to be the most expensive with state schools for in-state residents being the least.
Don’t let this price scare you. Few students, if any, end up paying the full sticker price. "The fact that sticker shock is turning students away — that's a mistake," says Andrew Kelly, an education policy scholar at the American Enterprise Institute. He suggests students broaden their search and be less concerned with the sticker price and more concerned with the value of the education.
Net price — what you will actually pay — is sticker price (COA) minus any financial aid provided by the college and the federal government.
Financial aid is based on your family's income, the size of your family (especially if you have more than one child in college), and your student’s academic achievement. Aid is offered in the form of grants, scholarships, work-study, and sometimes federal student loans. Schools offer aid based on financial need, a student's "merit," or a combination.
Students who complete the FAFSA (Free Application for Federal Student Aid) receive an EFC (Estimated Family Contribution). Don’t be frightened by this number! Colleges use it to determine the amount of financial aid they award to accepted students, so it most likely won’t be what you pay after the dust settles. Colleges design financial aid packages to help bridge the gap between their sticker price and what your family can afford to pay.
Data collected by the National Association of College and University Business Officers (NACUBO) revealed that on average in 2021–22, colleges discounted tuition for first-time, full-time, first-year students by a record 54.5 percent.
Merit aid awarded by the college will discount what you pay and this may be significantly less than your EFC. The amount varies depending on the college, your student’s place in the applicant pool, and the amount of aid each college allocates for incoming students. Merit aid is different from need-based aid, and students without financial need can be offered scholarships designed to entice them to a school. It’s important to note that not all colleges will meet your student’s demonstrated financial need — this is known as gapping.
Ron Lieber explains in an interview with NPR that merit aid or discounting is “much more about who you are, about your profile, about grades and test scores and other kinds of tangibles and intangibles.” These intangibles can be anything from the number of applicants a college receives, how many students and which students they need to attract, and the college’s financial situation.
At private universities — especially wealthy, elite institutions with large endowments — almost no one pays full price, and the net price is significantly less than the sticker price.
You will find the least wiggle room at public universities, especially if your student falls in the middle or lower range of applicants the school typically accepts. Though their sticker price might be lower than a private university, especially for in-state students, sticker and net price may differ only slightly. However, some public universities offer scholarships to lure out-of-state students with good GPAs and high test scores and they may also have scholarships for top in-state students.
To give you a sense of the difference between sticker and net price, look at the national averages reported by CollegeData.com. The average net price paid by full-time students enrolled in private nonprofit four-year institutions in 2020–21 is $26,820 vs. $54,880 in sticker price. In comparison in 2020–21, the average net price paid by full-time students enrolled in public four-year colleges is $19,490 vs. $33,220 in sticker price.
When comparing colleges financially prior to deciding whether to apply, it’s a good idea to use a Net Price Calculator. Most colleges have a calculator on their website that will ask a series of questions about family income, assets, household size, academic achievement, and other factors to determine your net price. If you can’t find the calculator on the college website, you can also use the U.S. Department of Education Net Price Calculator.
The good strategy when searching for a good financial fit is to research every college’s financial aid footprint. This will give you the college’s sticker price, the average aid award per student and the average amount a student pays for their college. This will provide you with an estimated net price. The best resource available for these statistics is College Navigator.
Ron Lieber suggests another option — go to the school and ask. You can call a school and ask them to do a merit aid pre-read based on your application information. This will give you a clear picture of your net price without having to comb through databases and be unsure of the figures they provide.
In conclusion, don’t let the sticker price scare you. Colleges understand that each student’s financial situation is different. That’s why all colleges offer some form of financial aid to their students who complete the FAFSA.
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