Don't let a college's "sticker price" stop you from applying.
Before you automatically rule out certain colleges on the basis of "It costs HOW much?", you should realize that a school's "sticker price" is often far higher than what you may be asked to pay. Today, less than 1-in-5 college students pay the full published tuition price of private and public colleges. How can that be?
Each college or university that accepts your application uses a similar formula when determining both your financial need and your "expected family contribution" (EFC)—the amount a school expects you to kick in. That means your EFC is basically the same whether a school's annual cost is $4,500 or $45,000 or whether it's a public, private, or elite institution.
Each financial aid package that you receive represents the difference between that institution's cost of attendance (COA) and your EFC. That aid package may be a mix of federal grants and loans, need-based scholarships, federal work-study jobs, and, increasingly, "institutional aid" from the school.
But whether the terminology is institutional aid, an entrance award, a specific college-based grant, or a waiver, the school is offering you a tuition discount to be subtracted from your college bill.
Tuition discounting is sometimes compared to the marketing of airline tickets. By charging full price to affluent students who can afford to pay, colleges can offer discounted 'fares' to lower- to middle-income students who cannot. In this way, the school maintains the full value of its published price, and gets a student it wants—hopefully, you.
Colleges don't advertise tuition discounts. Students must complete the application process, be accepted, and receive an award letter detailing that financial aid package.
Keep in mind that the true differences between aid packages aren't always obvious. Before deciding which college is the best for you, evaluate each aid package carefully, check the fine print, then crunch the numbers for a true comparison. You can compare up to three award letters at a time at www.nelliemae.com/calculators.
Are your perceptions limiting your aspirations? With constant media reports about sky-high college costs, students and their families—particularly low- and middle-income families—tend to overestimate the price of colleges in general, and underestimate the existence and availability of financial aid for their student, according to a 2004 report by The Education Resources Institute (TERI).
Fact: You can get a fine education at all price points. A mere 5% of students attend colleges with annual tuition and fees of $33,000 or higher—and most receive aid including tuition discounts. According to the College Board, 65% of students in all 4-year schools are charged less than $9,000 per year in tuition and fees, and 56% of 4-year public institutions were charged between $3,000 and $6,000. Two-year public schools–which educate 41% of all undergraduates—average $2,272 and the average full-time junior/community college student gets about $2,200 in financial aid. Many 2-year colleges have formal "feeder school" arrangements with both public and private 4-year colleges.
Are there special programs that your state offers to reduce college costs? Visit your home state's education department web site to discover what's available. Also, New England residents attending out-of-state regional public colleges and universities may qualify for a significant tuition discount if enrolled in a major that the student's home state's public system doesn't offer. Called Tuition Break, all 79 New England public colleges and universities participate in this regional reciprocal program. To learn more, visit www.nebhe.org.
For more information about financial aid or to review your best borrowing options for covering your "expected family contribution", visit www.nelliemae.com today.
