Tools for the Financially Wise College-Bound Parent
Today paying for college has become perhaps one of the greatest financial concerns for millions of Americans. This is completely understandable as college costs have risen to an all-time high. Harvey Mudd College for example, sits atop the list of most expensive colleges in the U.S. The cost of attendance (COA) for 2016-17 is a shocking $71,917, an increase of over 70% since their $42,000 COA in 2005. Now for those that aren’t planning on heading out to Claremont California to attend a premier college, the national average COA for all public four-year college is $20,000 and $47,000 for the private nonprofit colleges.
So, if you’re like many parents feeling stress and overwhelmed, here are some tools that can help you make some smarter financial decisions about college and reduce their costs:
- Graduation Rate
The vast majority of students at American public colleges do not graduate on time. Nationally, the four-year grad rate at state colleges and universities is just 33 percent; for private institutions, it is 53 percent. We all know that time is money, so graduating in four years can leas to considerable savings for families. For example, in Georgia the average student takes 4.9 years to complete a 4-year bachelor’s degree. The cost of an additional year of college is $21,756, plus $45,327 in lost wages, equaling a cost of $67,083.
So, take the time and get aligned with colleges that have a good graduation track record – these are the ones that offer the resources students need to graduate on time. An excellent place to start is collegecompletion.chronicle.com. The College Completion is a microsite produced by The Chronicle of Higher Education with support from the Bill & Melinda Gates Foundation. On this website you can check the four- and six-year graduation rates of any college or university. These details will also help you to see that private colleges may cost less than you think.
- Expected Family Contribution Calculator
Well if you didn’t know already Uncle Sam determines what you and your family should pay for college. The Expected Family Contribution (EFC) is a number that determines students’ eligibility for federal student aid. The EFC formulas use the financial information students provide on their Free Application for Federal Student Aid (FAFSA®) to calculate the EFC. Financial aid administrators (FAAs) subtract the EFC from students’ COA to determine their need for a handful of federal student financial assistance offered by the U.S. Department of Education.
Parents often struggle with unrealistic ideas about whether they will be eligible for financial aid. Some parents simply never complete the financial aid applications mainly because they mistakenly assume that they won’t qualify. While other parents are banking on the idea that they will be eligible for a good amount of need-based aid, when their chances are nil.
Many parents assume that there must be an income cut-off that once reached would disqualify them from receiving need-based aid. Unfortunately, there are too many other factors that impact aid eligibility. Although you can get a good idea of whether aid is a possibility – and what schools that are more favorable – by using the EFC calculator on the College Board’s website www.collegeboard.org.
For example, a family with a household income of $90,000 may have an EFC of $14,000. So, at a college with a COA of $50,000 and the EFC is $14,000, the student would be eligible for up to $36,000 in need-based aid.
- Net Price Calculators
Net price is the true amount a student will pay for a college. The “net price” is often the published price of tuition and fees for a college minus the amount of gift aid and education tax benefits a student receives. While most teenagers apply to colleges blindly, without any idea of the school’s merit- or need-based aid. So to prevent making this financially disastrous decision before it is too late for a do-over. Most all colleges have these net price calculators on their website, and please keep in mind that the more details the calculator asks for the more accurate the results of your “net price”.
These tools will certainly come in handy in helping you make a better decision with your college planning. You may also find even more value from a financial advisor, who can provide hands on solutions to help reduce the cost of college for your family.
To learn more about David Fountain, view his Paladin Registry research report.
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