How To Uncover Your True Cost At Any College

Forbes

At most private schools, few students pay the list price. A new Forbes tool gives you a quick idea of what your real price might be. Plus, we’ve got advice on the longer process of getting a final financial offer, beginning with filling out the new FAFSA form.  Emma Whitford, an education reporter for Forbes, joins Rosemarie Miller on ‘Forbes Talks’ to discuss calculating the true cost of college tuition beyond the listed price.

Transcript

00:00 Hi everyone, I'm Rosemary Miller here with Emma Whitford, an education reporter here

00:07 at Forbes, here to tell us about determining the actual cost of college.

00:13 Thank you so much for joining me today, Emma.

00:15 Thanks for having me.

00:16 Absolutely.

00:17 So Emma, how do you see the role of financial aid in making college education accessible,

00:23 especially those from underrepresented backgrounds?

00:27 I think for most families, going to college these days is not really possible without

00:33 financial aid.

00:34 I mean, you see so many media reports of the rising cost of college, of rising sticker

00:39 prices climbing into the 70, 80, 90K range, and for most people, they cannot afford an

00:48 investment like that without some kind of financial aid.

00:50 So it's definitely a huge part of the college application process for almost every student

00:56 these days.

00:57 Can you explain some of the challenges students and families face in trying to understand

01:01 the true cost of college?

01:03 Yeah, it's actually really hard to figure out exactly what you might pay to go to college.

01:09 We can look up tuition prices at a given institution, and what you'll find typically is just the

01:15 sticker price, which is how much they're charging for tuition that year.

01:21 But almost no students actually pay that price at most private institutions, and a lot of

01:27 public institutions as well.

01:30 They will pay what's called the net price, which is the out-of-pocket price that comes

01:35 after financial aid and loans are taken into account typically.

01:40 So it's really hard to determine without going through the financial aid process what that

01:47 cost actually will be.

01:48 Wow, that's interesting.

01:51 You never really know how much you're paying to go to college.

01:54 It's very frustrating.

01:56 So how do private colleges utilize tuition discounting as a strategy, and what impact

02:01 does it have on the perceived cost of education?

02:04 Yeah, a lot of private colleges practice tuition discounting, which is setting a high net price

02:11 and then in turn dealing out these really significant financial aid packages for students.

02:18 So the actual cost that you would pay to attend is more like 50, 40, 30 percent of what the

02:24 listed price is.

02:26 And for many colleges, it's a marketing strategy.

02:29 They want to signal that they're a great institution that offers an amazing education, and that's

02:34 why it's really expensive.

02:36 And at the same time, they really want these students to come, so they'll entice them with

02:40 these really hefty financial aid packages.

02:43 And that's a really common practice for almost all private colleges in the U.S.

02:48 So what determines the pricing strategies of the highly selective and well-endowed private

02:54 colleges versus those that don't have billion-dollar endowments?

02:58 Yeah, it's a little bit different.

03:00 So there is a class of colleges at the top, think the Ivy League, some smaller, well-recognized

03:07 colleges like Amherst, Stanford, MIT.

03:11 Those colleges have a lot of money that they can put towards financial aid.

03:15 So if you're making, I think at Harvard, it's $85,000 or less a year, you're going to pay

03:21 nothing to attend.

03:24 It's still a really small amount if your family's making even six figures to attend.

03:30 And they can do that because there are still a lot of students that want to go to that

03:34 school that will pay full price, and that they can support their financial aid budgets

03:40 with those large endowments.

03:42 But there's obviously a lot of private colleges in the U.S. that don't have that name recognition

03:46 and don't have those endowments, and those are the ones that implement that tuition discounting

03:51 strategy like I mentioned.

03:53 So they're shooting for maybe $30,000 to $40,000 per student, but they're going to set their

03:59 price closer to $60,000 or $70,000 so that they can offer that financial aid and sort

04:05 of woo the student to enroll.

04:07 Wouldn't that kind of repel students from applying, then bring more students?

04:13 It does.

04:14 Yeah, okay.

04:15 It does.

04:16 If you don't understand that you're likely going to be offered a significant financial

04:20 aid package, you're probably not going to apply at all if you're thinking, "Okay, well,

04:24 I'm going to have to pay $60,000 or $70,000 a year to go here."

04:29 Right.

04:30 So how do high school students, particularly those surveyed by Nishan Art and Science Group,

04:36 perceive and react to the college sticker prices?

04:39 Yeah, those surveys were really interesting because it showed that around half of the

04:44 students surveyed aren't even going to consider a college that has a sticker price of over

04:50 $40,000, which is a little shocking because we found in the latest College Trends and

04:56 Pricing Report that the College Board puts out every year that the average sticker price

05:01 at a four-year private college is $41,000.

05:04 So that's a lot of students that are not even going to look at your website, they're not

05:09 going to put in an application, they're not going to look at financial aid because they've

05:12 already decided they don't think that they can afford to go there.

05:16 They're not even willing to take out loans.

05:19 It's a lot of loans to take out.

05:21 But isn't part of the reason you choose certain schools because you think, "Okay, maybe one

05:27 day I'll be able to pay this back."

05:30 That's definitely true, but it's not true for every graduate.

05:36 Obviously, if you're going to get that return on investment that you want for going to college,

05:40 you have to graduate, first of all.

05:43 You also have to be going into a field where you have high earning potential, and for a

05:48 lot of students, they aren't going to have the earning potential to make an investment

05:53 that's that significant worth it.

05:56 But I think it's primarily an issue of just advertising, because even though the return

06:05 on investment might be great at some of these schools because the student will only end

06:10 up paying, say, $15,000 to $20,000 a year to go there, they just don't even know that

06:17 because they haven't looked past the sticker price that's advertised on Google or the website.

06:24 How effective do you find the net price calculators in helping students estimate their out-of-pocket

06:30 expenses?

06:31 They're really useful.

06:33 They can get you really close to knowing exactly what you're going to have to pay to attend

06:39 a specific institution.

06:41 It'll break down things like what merit aid you might receive, what need-based aid you

06:46 might receive, federal grants like a Pell Grant that you could earn, and also if there

06:52 are loans available, what options you might have there.

06:56 That said, they're very cumbersome and require inputting a lot of information that most 17,

07:04 18-year-olds just don't know, things like your parents' mortgage balance, their retirement

07:10 account balance, even their checking and savings accounts.

07:14 So it's not something that they can typically do without their parents involved, and I think

07:19 that makes it a bit of a hurdle for a lot of students that are early on in the college

07:23 search process.

07:24 So could you compare the price calculators like MyIntuition versus other calculators?

07:31 Yeah, so every college is required by the Department of Education to have a net price

07:36 calculator on its website, and those are the really big, cumbersome calculators that account

07:43 for every single type of student.

07:46 They're really helpful if you can get all the way through them.

07:50 And then there are calculators like MyIntuition, which is designed to account for most students,

07:55 but it's very pared down, it's a lot simpler, so a lot of colleges will offer you both.

08:01 They'll say, "Why don't you start with MyIntuition, see if you can get a good price on this.

08:06 If you can't get a perfect estimate, then go on to this larger, more cumbersome calculator,

08:12 and that will definitely be able to give you an estimate."

08:15 That said, MyIntuition still does ask for information like mortgage, 401(k), checking

08:21 and savings account balances, that you'll definitely want a parent with you if you're

08:26 filling that out.

08:28 So let's switch gears a little bit to FAFSA form.

08:31 There have been some changes made recently to FAFSA.

08:34 How will that affect students and families?

08:36 Yeah, there will be changes this year.

08:38 The FAFSA is expected to come out now on December 31st.

08:44 Hopefully they will stick to that timeline.

08:47 It's supposed to be simplified this year, so there will be a number of fields that you'll

08:53 be able to skip.

08:54 I think they said that some students will have to fill out only 18 fields, and it'll

09:01 take about 10 minutes, which is pretty great compared to how complicated the form used

09:07 to be.

09:09 The idea is to make it a lot simpler, to encourage more students to fill it out.

09:13 Whether that works, we will see in the spring.

09:18 So how can school counselors help students, regardless of income, compare FAFSA and consider

09:24 the broader financial aid process?

09:28 I think having opportunities to help students and families walk through the FAFSA with a

09:35 counselor can be really helpful.

09:38 There was a counselor I spoke with at the Mung College Prep Academy, which is a charter

09:44 school in Minnesota.

09:46 They hold FAFSA nights, where they bring in 10 to 15 college counselors and a bunch of

09:52 students and parents.

09:54 Everyone sits around and fills out the FAFSA together, and they can obviously call on counselors

09:59 right away to help walk them through it if they have any questions.

10:02 I think that can be really, really helpful, working through this form, which asks about

10:08 a lot of things, especially if you're maybe the first kid in your family to go to college,

10:13 and it's the first time you and your parents are seeing these terms.

10:17 It can be helpful to have someone right there with you.

10:20 And in the article you recently published for Forbes, you talked about a CSS profile,

10:26 college board CSS profile.

10:28 What exactly is that, and how can it be made more accessible to students?

10:33 The CSS profile is something that's required by a few hundred additional private colleges.

10:41 So they'll ask for the FAFSA as well as the CSS.

10:44 And it's essentially just a more detailed financial aid form.

10:48 They're going to ask you for more information.

10:50 They might have more questions on there that will relate to merit aid awards that you could

10:55 receive.

10:56 It's not required by all colleges, so definitely most students won't need to fill it out.

11:04 It's also a little bit different because it does have a fee associated with it.

11:09 I believe it's $25 for the first submission, and then $16 for every additional college

11:14 that you want to send it to.

11:16 So I think having waivers for that fee, which the college board does for some students,

11:21 and if colleges implement that as well, that helps make it a little bit more accessible.

11:27 But it's definitely not a form that most students need to fill out unless they're applying to

11:31 one of these specific schools.

11:33 So speaking of merit aid, why are colleges kind of hesitant to promote it more widely?

11:40 Yeah, a lot of colleges will advertise that 90 to 100% of their students receive some

11:47 kind of aid.

11:48 But I think there is still a sense around merit aid that it's something that the student

11:55 wants to feel really good about having earned.

11:57 So you're unlikely to see a school that's going to say, you know, 100% of our students

12:02 receive $20,000 in merit aid because they want those scholarships to feel special and

12:07 important and sort of encourage the student to enroll.

12:11 But at a lot of private colleges, you do see them giving out merit aid to a lot of students

12:18 as long as they meet a certain academic threshold.

12:22 So how do students and families typically react when they discover the availability

12:27 of merit aid scholarships?

12:29 It's pretty exciting.

12:31 I think it makes the biggest difference for families that are maybe thinking, you know,

12:37 private colleges are off the table because we can't afford $50,000 to $60,000 a year.

12:43 But then learning that merit aid scholarships are available and it's not just, you know,

12:48 $1,000 to $2,000, it can be up to $20,000, $25,000, even more.

12:54 And now they're looking at a sticker price of, you know, $20,000 to $30,000.

12:59 It brings a lot more colleges back into the pool of options for them.

13:04 So finally, Emma, what advice would you give to students, families, educational institutions

13:11 about navigating the financial aid process?

13:16 I will sound like a broken record, but I definitely think it's important to reach out to financial

13:21 aid officers, reach out to your high school counselors, ask as many questions as you need.

13:27 This is complicated stuff.

13:28 I know when I was applying to college, I was super overwhelmed by all of these forms.

13:33 So talking to somebody that has done it before and knows what they're doing is really important.

13:39 And then just remembering that the sticker price is likely not what you're going to pay.

13:44 I think if everyone can keep that in mind going into the college search process, that

13:49 will give them a lot more options while they're looking at schools.

13:53 That is major.

13:54 The sticker price is likely not what you're going to pay.

13:57 Yes.

13:58 Well, thank you so much for joining me today, Emma.

14:00 Thanks for having me.

14:01 Absolutely.

14:01 [BLANK_AUDIO]

14:11 [BLANK_AUDIO]

Category

Transcript

Be the first to comment

Recommended