College Decision Time
It’s almost April 1st and in addition to April Fools Day, it is also the final day that most colleges and universities will notify their applicants whether they have been accepted, denied, or wait-listed. Prospective students now have approximately one month to make their decision. Colleges usually expect to have students commit to them by a May 1st deadline.
Students and Parents have a big decision ahead of them. The decision is a personal one: The school may be large, small, or tiny. It may be urban or rural. It may be a serious school or a party school (or sometimes both). It may be far away or close to home. The decision is also an academic one: Is this the best place for the student to achieve in their major? Or maybe the question is whether the school is the best place for the student to figure out what their major or career choice will be. And of course, the decision will be financial. Can both the student and his/her parents afford the best choice academically and personally? Maybe a trade-off on the academic or personal side will make a big difference financially. Is it worth it?
Evaluating the Offer Financially
With the acceptance, the college will send a financial aid determination. There are two types of aid: merit aid and needs-based aid.
Schools give merit aid based on how much they want the student to attend. Merit aid may be given for academic reasons or for sports, and music. Merit aid is typically in the form of a scholarship. It is usually renewable, in that it will be given to the student every year and is the student’s to lose. Wait, did I say lose? Yes, merit aid is usually contingent on keeping your grades above a certain level and you should pay attention to that level. It might be a 3.0 or 3.2, but in some cases it could actually be higher. And often students who had good grades in high school are in for a rude awakening in college and run the risk of losing merit aid. If merit aid is part of the financial aid package, then you should find out what the grade point cutoff is for renewal, whether there is a probation period or a sudden cessation, and if the aid can be resumed if the student improves their grades.
The other unfortunate thing about merit-aid is that its often given most by the school that the student is least likely to want to attend. If, as a student, you did what you were advised to, you applied to at least six colleges: Two “reach” schools, two “target” schools, and two “safety” schools. Your guidance counselor should have told you that all these schools should be ones that you actually WANT to attend. Even the safety schools. The truth is that as soon as the student categorizes a school as a safety school, it suddenly becomes a pariah and the student stops wanting to attend. Yet, the reach schools will often give no merit aid, the target schools will give some merit aid, and the safety schools will give the most merit aid or be the cheapest. Yet these are the schools that the student doesn’t want to attend because it’s a safety school. After all, you got into Harvard, so who wants to go to Quinnipiac University? Even though Quinnipiac might be giving you a free ride or close to it.
The other part of the aid package will be needs-based aid. This will be a combination of grants, subsidized loans, unsubsidized loans, and work-study. Even given the same FAFSA and CSS information, each college will have a different package for the needs-based aid. You need to evaluate this carefully. Grants are the best kind of aid. They may be Federal Pell grants, other federal grants, state grants, or private needs-based scholarship grants. Grants are basically a discount from the list price based on your financial need. Loans and work-study are basically money that you have to come up with. If not now, then later. In the case of loans, you are actually going to pay more for your education than the list price, for the pleasure of not paying it up-front. You need to be very careful about loans.
Making the Decision
So you’ve got that package, how do you make your decision? From a financial point of view, the less you have to borrow or pay yourself, the better. You should look at the bottom-line price after any merit-aid and grants. Ignore the loans and work-study for this evaluation. Because that’s the price YOU will have to pay, now or later. You have to evaluate how much that expensive school is worth to you versus the cheaper one. Are you certain you want to be an Electrical Engineer and are you confident of getting a $60,000/yr starting salary after you graduate? Congratulations, you can probably take out more loans confidently and afford to pay more out of pocket. Are you not sure what you want to do and are still finding yourself? That’s OK, but maybe you shouldn’t pay or borrow $80,000 out of pocket to do it.
Community College for 2 years, then Transfer
This is touted as a frugal choice. The Community College has lower tuition than most four year schools, public or private, but be careful. In my experience, the Community College credits often don’t transfer to the four year college that you want to finish up at. So you end up having to go to college at least one year and sometimes two years longer than expected. You should check out your complete plan by finding out if the second school will take your Community College credits BEFORE you start at the first school. Don’t get surprised that after two years, you are still looking at four more years of school.
Public versus Private College
Public schools are cheap, right? Wrong! Public colleges and universities used to be bargains, but this has changed in the past few years. Public schools have lost funding, particularly in New Jersey, but in many other states as well. This means they have raised tuition at a high rate and are continuing to do so. They are typically still lower cost than private schools, but public schools do not give merit or needs-based aid as readily as private schools. You need to ignore the list price and look at the actual price you will pay. Private school might wind up being less expensive after all.
Tips for Parents
Mom, Dad, you want the best for your son or daughter. I’ve had parents tell me that if their child gets into Harvard or Yale, they will find a way to pay for it, but be very careful about how much you put your own financial situation into jeopardy paying for your child’s secondary education. How about retirement? What happens if you lose your job? What I typically tell my clients is to figure out a budgetary amount that you can afford to give each child for their college education. The rest is up to the child. Let the child make the decision of what school to go to, but anything above the budget is up to them. Of course, you should make sure your child understands the ramifications of $80,000 in student loans upon graduation.
What can happen
High School graduates are full of confidence. They are absolutely sure of where the want to go and what they want to do, right? WRONG! 80 percent of students in the United States end up changing their major at least once, according to the National Center for Education Statistics. This often means going to school longer than originally planned. This is how students can graduate with $200,000 in student loans. You think they planned that? Things change and you should keep that in mind when you make the financial part of you decision. Be conservative just in case things don’t work out the way you planned.
I have lots of information about financial aid, college costs, and ways to save for college in the Learning Center of my website: Education Planning.