Planning for College Costs: A Guide for Families

By Liz Agather, Agather College Consulting

Over ten years ago, when my daughter was looking for a college, I had no idea how much college would cost. I spent hours researching her crazy-long list of 25+ performing arts schools as we firmed up "our family scholarship" and removed colleges that were over our budget.

Full disclosure: In planning, I missed the $7,500 conservatory fee added to her tuition each year as a requirement for her major. The experience left me passionate about helping families understand financial fit and hidden costs.

Talking about money can feel uncomfortable, so it can be helpful to use car analogies—because college, like a car or house, is a consumer purchase and often the biggest purchase beyond a home.

My ranges are a Chevy is $20,000-$30,000, a Toyota is $30,000-$50,000, a Mercedes is $50,000-$70,000, and a Lamborghini is $70,000+. I realize the ranges are broad, but the goal is to get families to start thinking about their total budget for 4 to 5 years.

You may have Mercedes/Lambo finances but want Toyota pricing. You may be willing to stretch for a Top-20 “Lambo” school but not a lower-ranked one. Families value different things—what matters is understanding those values early so the college list reflects financial reality.

Where does a family start?

Step 1: Run Net Price Calculators (NPCs) and Student Aid Index (SAI) Estimators

Every family should run NPCs at every school on the college list and keep screenshots for potential future appeals. NPCs are not perfect, but they are a directional data point for families. Just Google the name of each college and “net price calculator.”

Run two SAI estimators (MEFA.org and FSA.org) with and without the breadwinner's income. Do not include retirement assets or the value of your home.

Warning: If you enter incorrect data, the SAI/NPCs will be inaccurate

(garbage in, garbage out). 

True Story: A family ran the Wake Forest NPC and was later shocked at Wake’s offer. A Wake Forest rep told me they could see the input for the NPC and that the family left out assets in the calculation, so the NPC was incorrect.

Note: A student's SAI is consistent across colleges; the institutional EFC for CSS Profile schools will vary from school to school. Some Profile colleges will factor in home equity, and others may not require a non-custodial parent to submit in a divorced family. Only ~200+ colleges use the CSS Profile. Google CSS Profile participating schools for a list.

Step 2: Understand the nuances of a very complex, college-dependent system.

Most families who hire me are not going to get federal benefits beyond the opportunity to take out an unsubsidized student loan. For my North Carolina students, attending an in-state public college will almost always be the most cost-effective option. In some states, it is less expensive to leave that state than to attend an in-state public university.

Families and students need to understand that:

• Controlling college costs starts with the college list since the majority of scholarships (AKA discounts) come from the institution a student attends.

• Institutions are businesses that care about the family’s ability to pay, not willingness. These businesses care about their institutional priorities, which often include the 3 R’s (revenue, rankings, and bond ratings). 

• Financial aid includes scholarships, grants, work study, and self-help aid (loans). When a school reports the net price for a student with X income, it often includes loans.

• Students can "chase merit or prestige" but typically not both. Ivy League and top (T20) colleges tend to award only need-based aid, not merit aid.

• Most families use previous income (savings), current income, and future income (loans) to pay for college. 

• Many colleges utilize strategic enrollment management to meet their institutional priorities, which can sometimes include giving a full-pay student a merit scholarship (discount) to yield a student. 

• Cost-aware families should focus on a low net price, not the largest merit scholarship/discount, since the net price reflects the actual cost of a college for that student.

• The results of filing the FAFSA and CSS Profile reflect a family's financial strength. The lower the Federal Student Aid Index (SAI) or Institutional Expected Family Contribution (EFC), the greater the chance of potentially receiving need-based aid. The higher the SAI/EFC, the more a family is expected to pay.

• A family’s SAI/EFC is considered the minimum amount a family may be expected to pay for college based on their family’s financial strength.

• While the FAFSA does not factor multiple siblings in calculating need, the CSS Profile typically does. Sometimes, a FAFSA-only college will adjust financial aid in an appeal if it wants to yield the student.

• FAFSA-only schools tend to provide little need-based aid and fail to close the "gap" in students' needs. Sometimes they will displace institutional aid if a student brings in an outside scholarship.

• Few students attend college on a full scholarship. Most of these are athletes, recipients of very selective scholarships, under-resourced students at well-resourced schools, or students who meet key institutional priorities. 

• Most grants or tuition discounts are provided by the institution a student attends. Less than 7% of free college financial aid, “AKA free money,” comes from scholarships outside the college.

• Colleges (especially non-brand colleges) vary widely in net price. Sometimes, a college with a high sticker price can be the most affordable option for a student after discounts. 

• There are options for every kind of student. A few lower-cost options include:

o   Employee college benefit programs (Arizona State Online/Starbucks, Walmart) 

o   State and Regional Scholarship Programs (WEU/Common Market)

o   Community College 

o   Choosing a “buyer” (author Jeff Selingo's term) where the student is at the top of the class or an institutional priority.

Step 3: Share your family scholarship amount (AKA family budget) with your student early! 

Do not let your student fall in love with a Lamborghini school if you have a Chevy budget, and help manage their expectations for that magic scholarship piñata many students believe exists.

My son told me that since our budget was a Chevy budget, he would cover the additional fee for a Mercedes college with student loans. He was surprised to learn that he needed a co-signer for any loan above the student federal loan of $5,500 (freshman year). He has since graduated from a Chevy NC public school and is grateful to be loan-free.

Pro Tip: As with a house renovation, expect costs to exceed initial planning estimates by 5-10%.

College is a consumer purchase influenced by deep emotions. Early planning and open, honest conversations about the family budget can save time and heartache.

Check out additional blogs on my website at Agather College Consulting.