The ever-increasing price of higher education can be a frightful shock for anyone saving for college. The average tuition at public colleges and universities was $19,000 last year, while the tuition at private schools was $33,000, according to the College Board.
But the majority of Americans won’t pay anywhere near that price. Nearly nine in 10 first-time, full-time freshmen at private universities receive some sort of institutional aid, with the average award amounting to 54 percent of tuition and fees, according to the National Association of College and University Business Officers (NACUBO). “It’s just like airline ticket prices,” says financial aid expert Mark Kantrowitz. “Nobody pays the same price as anyone else and very few people pay full fare.”
Colleges often use big tuition discounts in the form of financial aid packages as a means of competing for students to boost their enrollment numbers and look better on college rankings. But you have to do your research to find out about those discounts.
Last year nearly 40 percent of families eliminated specific colleges prior to researching them based the cost of a school, according to a Sallie Mae report. That could be a mistake, especially since some private schools, which have higher sticker prices, may also offer more competitive aid packages.
Lower income students, who are the most likely recipients of need-based aid (the largest proportion of grants given), are also the least likely to be aware of how heavily schools discount, so they may be unnecessarily writing off schools as unaffordable.
Finding your actual price
Experts consider a college affordable if you can attend without borrowing more in total than your projected first year of income. Parents should aim to borrow less than one year of income or the amount they could pay back before retirement. “I would never put your financial future at risk just to put your kid in a specific school,” says West Virginia-based educational consultant Jamie Dickenson.
Rather than narrow your list of affordable schools based on the posted sticker price, use the net price calculator on a school’s website to get a ballpark idea of what your actual cost of attendance would be. You can also compare the net price at multiple schools via the Education Department’s new College Scorecard tool. Having a conversation with a financial aid officer at the school about your family’s income level and your academic profile can also give you insight as to what kind of aid package you’d likely receive.
Your first step toward securing aid for college is filling out the Federal Application for Student Aid (FAFSA). That form is required for federal student loans and need-based aid, but many schools also require it in order to qualify for merit aid and other non need-based institutional grants.
The deadline to fill out the FAFSA ranges from early January through early March (the form is usually available right after January 1), but getting yours in early can boost your chances of getting more aid, since some schools dole out aid based on the date the application was received.
If you’re applying to private schools, you’ll also want to fill out the CSS profile, which is used to determine the school’s own aid distribution. The CSS profile may be due earlier than the FAFSA, particularly if you’re applying to a school for early decision.
Getting merit aid
One factor that goes into how much merit aid a student gets is the competitiveness of the school. The most elite colleges (think Ivies) don’t have to offer much merit aid because they’re already swamped with high-quality applicants.
They tend to have generous cut offs for need-based aid — Harvard, for example charges no tuition to families that make less than $65,000 and about 10 percent of income to families making up to $150,000. Most others are expected to pay full freight.
At second-tier but still high-profile private institutions, where schools have large endowments and are really competing for the best students, merit aid is far more generous. More than 200 schools, including Boston University, George Washington University and Villanova University, offer full scholarships to students based on merit. And some schools offer scholarships to every single incoming freshman.
For your best shot at landing merit aid, compare your academic record to what’s typical at that school. “Look at median test scores and the median academic profile of the school and see where you fall, to put yourself first in line for merit aid,” says Nat Smitobol, a college admissions counselor with Ivy Wise and a former admissions officer at New York University.
When calculating your net cost, remember that many schools “front load” their aid awards, meaning that they’ll give more grants to incoming freshman and then offer less generous packages in subsequent years. That NACUBO study found that the average discount rate drops from 48 percent to 41.6 percent when factoring in all students, rather than just freshmen.
While federal aid dollars are doled out based on a strict formula, schools have more leeway with their financial aid decisions. Many colleges will match a competitor’s offer in order to get a student to attend. “Parents have won out by pitting one school against another to see who will give you the most money,” says Daniel Riseman, founder of Educational Consulting in Westchester County.
When comparing aid packages, be sure to carefully evaluate your award letter, which typically arrives sometime in early April. Many schools include student loan offers in their award letters, but student loans do not actually reduce the cost of college. In fact, they may increase the overall cost of a school after interest rates are factored in.