"Picture yourself house-hunting. You are shown 20 different homes, all of which fit your basic criteria -- four sturdy walls, a roof, and modern amenities. Undoubtedly there will be one you fall in love with for any number of reasons, tangible or intangible. You've found your dream home. But here's the catch: at no point were you shown the prices of these homes, and the prices vary wildly. With the cost revealed, your dream home is one you cannot afford. Would you buy it anyway? Not if your mortgage lender had any sense. But if you replay this scenario and replace "home" with "college," Americans have proven -- to the tune of $1 trillion in outstanding debt according to the Consumer Financial Protection Bureau -- that they'll buy the college they can't afford anyway." (source: Frank Palmasani for www.huffingtonpost.com)
This is confusing because, as I've written about before, there is often a wide difference between the "sticker-price" for a college, meaning the published full-cost of a school if the student receives no aid whatsoever, and the "net-price" of a college, meaning what a student pays after scholarships, grants, work-study, and, debatably, student loans. Most students, especially at private colleges and universities, do not pay the full sticker-price. It reminds me of airline tickets, in that very rarely do most people on a plane pay the same price for their ticket. College can often be very similar, with no two students often paying exactly the same price to attend.
Further, one of the latest briefs from College Board discusses the relationship between college cost, selectivity, and one of the hot-new focal points in post-secondary education, graduation rates. In the report, it states:
- College "sticker-prices" for tuition and fees may play a prohibitive role in the college choice for families whose net-price may, in fact, be manageable.
- Even if there are only modest differences in the probability of degree completion between different categories of institutions, time-to-degree can still vary dramatically, which is an important consideration in a student’s college choice.
- Recommendation: Refine institutional reporting requirements so that students have better access to institution-specific completion rate data for students like themselves.
- Recommendation: Additional quantitative and qualitative research on the impact of net price calculators on student decision making.
- Recommendation: Convey clear message that, particularly for lower-income students, the additional cost of attending more selective colleges may be much smaller than the benefits of attending such colleges. (source: www.collegeboard.org)
Thus, here it says that students need to be wary of sticker-prices as they are shopping for colleges, as the net-price is so often different in the end. Further, at schools that are more selective (defined in the full report as schools with higher average SAT's scores in their admitted classes) there also tend to be higher rates of graduation within 4-6 years. Therefore, the report argues that students may be better off in the long-run if they pay a bit more for their education at a school where they are statistically more likely to finish their degree within a standard amount of time. Throw into the mix the continued rising costs of public-universities and the lack of standardization and faith in net-price calculators and it can be difficult for school counselors to determine how best to advise students and families to approach the financial aspects of the college search, application, and decision process.
- Students need two lists. For admissions, we often discuss the need for reach schools, mid-range schools, and "safety" schools, based on a student's academic criteria (classes, grades, standardized test scores.) Additionally, families should take that same list of schools and chart it with cost as the main factor versus admissions criteria. If none of the schools on their "financial" list fall into the "safety" category, then it may be time to go back and search for an additional school or two that might fit the bill. Again, this is just a starting off point to insure that a student will have a variety of options by the time they are making decisions in the spring.
- Use net-price calculators...with caution. If students have done the step above and have diverse lists of schools, then head to the net-price calculators, but realize that the word on the street is that there are still kinks to work out. However, this will give students an idea of what general ball-park "net-price" they might be looking at with some of the schools on their list. They should also look at additional financial-aid statistics, such as can be found at Big Future from College Board.
- Consider private schools. The sticker-price can be scary, yes. I realize this. However, if you get into the statistics of private schools, most of the students pay less than this, and many pay a lot less. When I was applying to colleges, there were two private schools at the top of my list. There was no way my family could afford the sticker-price of those schools. As such, my parents made me a deal. I could apply to those schools, but I also had to apply to at least one state-school that still met most of my admissions needs with regards to size, program reputation, etc. We would see what financial-aid offers came, and then decide. Thus, I had options come the spring. Again, by making a "financial" list with reach, mid-range, and safety categories, you should be giving yourself choices before making that final decision.
- Look at graduation rates. This is key. I believe what the College Board brief is telling us is that it may be worth going to a slightly more expensive school if that school has a higher rate of graduating students in four to six years. Why is this important? First, with a degree, your earnings potential is higher. You need to actually finish said degree, though. Secondly, the less time you are in school, the less money you are paying or going into debt over. If a four-year private school costs $4,000 more a year but has a four-year graduation rate of 80%, it may be worth it in the long run versus going to the less expensive school with a four-year graduation rate of 50%. If nothing else, it is worth considering. Click here for graduation rates by state and then by school.
- Don't just go K-16, but K-17 and beyond. As I alluded to before, if you have a student who is convinced they are going to be going to law school someday, or that they are going to go into a field where a graduate degree is a must, it is important to include this possible post-college education as a part of the conversation. Medical school is expensive. So is law school. Students and families should consider this when deciding on an undergraduate institution. It may not be worth going into $75,000 worth of debt for college when you are going to then go into $150,000 of debt for law school.