According to a new parent survey from the research firm EAB, “College Costs” are the top parental concern when it comes to their students and college. Well duh! With “Cost of Attendance” inching close to six figures at some schools ($93,892 at University of Miami; $93,184 at NYU; $80,142 at University of Michigan – out of state), even the most prepared parent will be up tossing and turning, wondering how the heck they’re going to pay that — or why they should!
BUT… don’t reach for the Zyquil just yet.
The report — much like what’s being said in the national education narrative — fails to mention that for most Americans, there is plenty to do to avoid paying these prices. It does not explain that almost no one should pay these ridiculous sticker prices. That MOST of the students at these schools — and all schools – get a discount or that the discount rate is above 55%.
The fact is that no product or service other than health care (especially hospital care) has a more confusing pricing structure than higher education. Your anxiety is completely understandable; BUT it is also based on a false premise. Despite what you may think, you do NOT have to be forced into a dubious choice between sacrificing your future or that of your child’s.
The prices that you see published on a college’s website — the price that’s keeping you up at night — are sticker prices…opening bids, if you will. They are not what MOST (as in more than 80% of you who are reading this) SHOULD pay. Not even close. Paying them for your child’s dream college is NOT an inevitable fate.
We need to have a new, more accurate (albeit less well known) conversation about college costs. Bottom line: you should NEVER pay retail for college. Period.
The million dollar (or close to it) question, therefore, should be HOW do you Do That?
What can you do – what steps can you take, what mistakes can you avoid to ensure that your child enjoys a great education at a great college and graduates in 4, not 6 years, at a FAIR price, without debt and with the skills and and desire to succeed in a career that’s right for them?
I’ll grant you this -it’s not a sexy, click-bait type question.
But it’s the right question if you want to make sure that you’re not needlessly over-spending for college or limiting your child’s college options or that they’re not the next poster child for student debt or what not to do in college.
What can you do (or avoid doing) to shave tens of thousands of dollars off the price of your child’s dream colleges?
Here’s the deal: College is a business — how they set and then discount prices is deliberate and strategic — and it is intended to accomplish two things: 1) to build the most impressive ‘class’ and 2) to meet a pre-set net tuition objective for that class. The business office is far more concerned with tuition revenue as an aggregate; and less concerned with what each individual student is paying. And therein lie the potential opportunities (as in the proclivity of schools to use ‘discounts’ to incentivize desirable students – applicants who will ’round out’ their class)…and landmines (e.g. mistakenly believing that you need to be ‘poor’ to qualify for need-based aid).
— Do you know, for example, which colleges will offer Institutional Merit-Based Scholarships (hint: NONE of the Ivies or so-called baby ivies).
— Do you know whether your primary home equity will be considered in a calculation of your net worth? At Stanford or USC, they don’t; at most other selective private universities they do, and at still others, they only consider home equity as a factor of your income. This can have huge implications for middle-class families with substantial home equity.
— If you’re a small business owner, do you know how to properly value it for financial aid calculations? It’s definitely not the same valuation you’d use when applying for a mortgage.
— How about your 529 or your Prepaid tuition plan? Is that your child’s asset or yours? If you picked child’s you’d be wrong and it could cost you a ton.
There’s so much more, but this blog post is already way too long. The key takeaway is that there is an absolute intersection between college admissions, gross price and your net, what you’ll actually pay for your kid. The good news is if you nail this connection BEFORE your child even begins to narrow down their college list, you’ve struck gold, literally.
The challenge is that colleges will apply their own guidelines to the standard methodology…which makes it so much more complicated. For starters, you should identify your Student Aid Index (SAI) while your student is in the second semester of 10th grade – and definitely before January of 11th. This number is unique to every student, and is based on parent and student income from what’s called the prior prior year, or two years prior to high school graduation; parent and student and assets; as well as several other factors (age, family size, marital status, among others). So for students in the Class of 2025, for example, the income tax year in question is 2023, and so on. 11th grade parents, you are NOW on a clock, as colleges will use this year (2024) as your first base income year. If there are any adjustments for you to make, now is the time to understand what those might be and their impact.
I get that it used to be that you could wait until you know where your child is attending college before really looking into how to pay the bill. Today, the inverse is true!
You should not decide where your child should apply until: 1) she or he has at least some understanding of what they’re hoping to gain from their college education; and 2) you fully understand the amount of financial aid and other non-need inducements that you may be eligible for at each school that is right for your child.
Having this information and USING IT to your advantage is the key that unlocks everything else in the college admissions process…not to mention, it’s the reason so many of my clients sleep soundly at night. I’ve been collecting data on this for going on 18 years and I have real-world proof that despite what you may currently think, you DON’T have to go broke, drain your retirement or take on student debt to pay for your child’s dream education.
In just a few short weeks from now, we’re going to be holding a special webinar ‘College Funding 101: How to Cut Your College Costs by $8,000 – $80,000 Per Year’. During this class I will be pealing back the curtain on what I do to help families — of all income levels and student abilities (I’ll share real world proof of high income earners getting five-figure discounts) — enjoy, on average $33,000 per year in institutional discounts (scholarships and grants). We’ll discuss the formulas used by public and private universities to determine need, how we determine the generosity of each university you’re considering, which colleges pay for ‘test scores’ and how to ensure that you do not accidentally ‘leave money on the table.’ It is appropriate for ALL families with college bound, HS students. To see a full list of the topics we’re covering, or to save your seat, click here.
