College is expensive!
Just take the cost of tuition, room and board at Harvard College in 2011: a whopping $52,652. Add books and other expenses, and four years can top a quarter of a million dollars. And guess what? Harvard doesn’t even make it onto the top ten of Forbes’ list of the most expensive colleges in the U.S.
Few will go to Harvard, but the cost of attending more modestly priced institutions can cripple the budget of many American families. Fortunately, you can take steps to mitigate the damage.
Focus on Academic Performance in High School
Which should you focus on? Your son's baseball performance, or his pre-calc homework?
Less than 2% of high school athletes will earn athletic scholarships. Yet, at many schools, more than 50% of students earn financial aid based, at least in part, on academic ability. Students and their parents hoping to defray college costs through scholarships should focus on academics, not athletics.
Most colleges consider academic ability when determining financial aid packages. They will look at things like high school GPA, class rank and SAT scores. Other factors include the academic rigor of the high school and the caliber of the courses attempted (an “A” in calculus means more than an “A” in interpretive dance). If there is a choice, attend the best high school possible. Take academically rigorous classes, like advanced placement or college-prep courses.
Pass on Your Stretch School
Often, students have “stretch” schools (where they are a marginal admit) and “safe” schools (where they are reasonably sure to get in). A stretch school is often a dream for the student. Unfortunately, if the school is truly a stretch, he or she will probably be at the bottom of the academic pecking order and will receive little or no merit-based aid. But the same student could be much more attractive to the safe school. This might mean significant merit-based aid. It’s always difficult to pass on your dream school, but doing so could be worth tens of thousands of dollars over four years.
Maximize Need-Based Aid
Think you won’t qualify for need-based aid? You may be pleasantly surprised. Think Ahead reports that, depending on the school’s sticker price and how many people in your household are in college, even families with incomes that exceed $300,000 annually may qualify for some need-based aid. It’s worth spending a couple of hours to complete the FAFSA (Free Application for Federal Student Aid). The Federal Government will calculate your EFC (Expected Family Contribution) based on this submission. The sticker price of your school less your EFC is your demonstrated need. While schools are not always able to meet 100% of demonstrated need, it’s worth a try.
Prior to completing the FAFSA, you can lower your EFC. For example, pay off credit card debt, prepay your mortgage, or accelerate necessary expenses such as buying a new car to reduce available cash. Maximize contributions to your retirement account. You can borrow for college, but you can’t borrow for retirement. If Mom plans to pursue an Executive MBA, doing so while the children are in college will increase demonstrated need. FinAid.org lists several tips to maximize your ability to qualify for need-based aid.
Start With Community College
Students are increasingly attending community colleges that are less expensive than four-year schools. Students can live at home while attending, which further reduces the cost. Many four-year schools are anxious to accept transfer students from community colleges because they have empty seats in upper-level courses. Some four-year schools will guarantee acceptance to students who complete specified coursework at a particular community college while meeting required academic standards.
Just keep in mind that the level of academic rigor at some community colleges is less challenging. You can get a good education that will prepare you to complete your baccalaureate, but you’ll need to push yourself to do more than meet minimum requirements.
Graduate in Four Years
Spending additional years in college can raise costs quickly, especially since years five and six will cost more than years one and two. That's because most schools raise tuition and fees every year, but financial aid typically doesn’t increase. Consider a school that raises tuition by 5% each year: A student who received aid equal to 50% of tuition and fees in his or her freshman year will pay 43% more in year five than in year one. Further, aid sometimes ends after a specified number of years. Add to this $30,000 or more of opportunity cost because the student isn’t working and it is obvious that not finishing in four years can be very expensive.
When selecting a school, consider four-year graduation rates. The percentage of students who graduate in four years varies widely by school. It’s not unusual for more than half of the students graduating from large, state schools to take more than four years. Conversely, small, private schools often see 90-95% of their students who graduate in four years or less. Some even guarantee that students will graduate in four years. The state supported school that seemed like a good deal on the front end can be much more expensive if it takes additional time to graduate.
Choose Your Employer Carefully
Economic necessity can require high school graduates to enter the workforce. However, there are many opportunities to earn a college degree while working full-time. Attending college part-time will lengthen the time to graduation, but many employers will pay all or part of an employee’s education expenses. It isn’t easy, but it can be very cost effective. If you plan to attend school while working, choose your employer carefully. A somewhat lower paying job may be more lucrative if your employer will support your education.
Doug and Polly White hold a combined six college degrees and have paid for the college educations of their three children. They are Principals at Whitestone Partners; and coauthors of the new book, Let Go to GROW; Why some businesses thrive and others fail to reach their potential (Palari Publishing 2011).