Families are understandably overwhelmed by the cost of college. With college inflation outpacing increases in the Consumer Price Index year after year, many students fall into the trap of unnecessarily ruling out a college for being too expensive before they have all the facts.
What many don’t realize is that the advertised sticker price found on a college’s website is often nowhere near the actual cost a student will have to pay — the net price.
{mosads}Moody’s Investors Service just released its annual tuition survey. This year’s results are eye popping: Nearly 20 percent of private colleges reduced the cost for first-year students on average by 60 percent or more; with some up to 70 percent.
So, a college that advertises a $60,000 sticker price may be offering to admit students at a net price of $24,000 or less. A year ago, only 13 percent of colleges reported first-year tuition discounts of 60 percent or more.
This bad news for colleges, which are obviously under huge pressure to fill seats with quality students, should be music to the ears of college-bound students and their families.
Families should plan to take advantage of this fire sale by understanding how colleges allocate their financial aid awards to create those 60-percent tuition discounts. Colleges value well-rounded individuals to assemble a diverse and interesting student body.
They accomplish this by allocating merit-based financial aid to students for all kinds of reasons: academic excellence, prowess on the sports field or to fill a special need at the school. Perhaps they need an oboe player or strong leaders to run the student government.
I’m pretty sure my daughter received scholarship offers from colleges far from our home because they wanted a female with her profile from our area. She lived in the right place at the right time. You may never really know the reason for the generous aid because institutional priorities change based on the class profile they seek.
To position themselves for maximum merit-based financial aid, freshman and sophomores need to establish a strong academic record and get involved in a few (not a lot) of activities that interest them.
They should also understand how their grades, and eventually test scores on the SAT and/or ACT, stack up against the average scores reported by the colleges. The odds of being admitted increase and more merit aid flows to those who are above the averages.
Juniors and seniors should continue to focus on academic performance, take courses that appropriately challenge them and begin assuming leadership roles in their activities. This combination positions them favorably for merit-based aid and bigger tuition discounts.
The final piece of the puzzle is creating a college list filled with institutions that are great academic and social fits, but that also offer the largest tuition discounts. The best way to accomplish this? A combination of some old-fashioned research and taking advantage of today’s technology.
Seek out information such as the Moody’s report that identifies colleges that have generous financial aid programs. Another way of finding these schools is to use the net price calculators that are required to be on every college’s website. These calculators are excellent indicators of the net price you will likely pay for that college based on a few simple inputs.
The news from Moody’s is encouraging but only a small step in solving the college affordability crisis and over-reliance of student loans. In addition to students positioning themselves to be beneficiaries of strong financial aid packages, parents can help by recognizing that it’s never too early or too late to start saving for college. Saving a dollar today is better than borrowing one tomorrow.
John Hupalo is the founder and CEO of Invite Education, co-author of “Plan and Finance Your Family’s College Dream” (Peterson’s 2016), and host of the podcast “My College Corner” (iTunes, SoundCloud).