When shopping for a car, most people do not intend to pay the “sticker price.” Today most consumers come to the dealership prepared with the necessary information to make an intelligent offer for the car of their choice. Shopping for colleges is similar in many ways. Knowing your family’s Expected Family Contribution (EFC)—the amount each family is expected to pay before any aid is offered—is the foundation for your comparisons. Colleges must then be evaluated separately, based on the amount and type of aid they offer.
The Head, the Heart, and the Hand
Successfully choosing a college often requires factoring the “three h’s”—head, heart, and hand—into your decision.
When a student picks a school using their head, they are citing reasons they think are valid, such as strong academics or individual career aspirations. A key to remember is that it’s advisable to first pick a career, then a major, then the school.
Choosing a school with your heart—or “falling in love” with a school—can be the result of many factors. Maybe it’s the campus, or the culture, or a winning athletics program. Perhaps it’s the school that generations of family members have attended…or maybe it is where a student’s boyfriend or girlfriend plans to go. There is no question that the heart can play a role in the decision-making process.
Finally, there’s the hand, or the financial aspect of attending a particular college. The cost of each college, what that school will deliver, and how long it will take are factors that can also influence college selection. The hand can have a serious impact on the other “h’s” of college selection—and ultimately, your retirement, which is why we will discuss it just a little further.
Public Vs. Private
One of the biggest mistakes the hand makes is to evaluate schools based solely on sticker price. The notion that a public school is more affordable than a private one may not always be accurate.
How do we determine this? First, you should subtract your EFC from the school’s published sticker price (COA) to determine your need—or the “gap.” It truly matters how schools address your family’s need. Many public schools will meet 40-60 percent of your need while private schools can be as high as 70-100 percent. However, statistics show that more than 40 percent of aid is loans, so you have to go one step further to decide whether you’ll be accepting gift aid (“free” money) or self-help (loans). The example below shows the impact both types can have.
Need Met/Aid (60%): $6,000
Unmet Need: $4,000
50% of Aid is Gift Aid: $3,000
50% of Aid is Self-Help: $3,000
Out of Pocket Estimate
Self Help (Loans): +$3,000
Unmet Need: +$4,000
Out of Pocket Expense: $22,000
Need Met/Aid (95%): $28,500
Unmet Need: $1,500
85% of Aid is Gift Aid: $24,225
15% of Aid is Self Help: $4,275
OUT OF POCKET ESTIMATE
Self Help (Loans): +$4,275
Unmet Need: +$1,500
Out of Pocket Expense: $20,775
Length of study should also be a concern. Statistics show students at private schools typically earn a bachelor’s degree in less time than they do at public schools. As a result, even if the private school costs a few thousand more per year, graduating a year earlier can still make the private school the better financial option.
Taking the time to be an informed consumer when selecting a college will be more than worth the time invested – cognitively, emotionally, and financially. Again: your head, heart, and hand at work.