The Hard Talk: How to Discuss Paying for College
Families often wait too long to discuss the cost of college with their teens, making tough choices even tougher once admissions decisions come in.
It should be a simple question: “How much will college cost?” Unfortunately, the factors involved — where a student lives, how much money their parents make, what kinds of colleges they are applying to, and what kind of student they are — can all impact the cost of any given college for any given student.
Who would ever choose a car or a house before knowing the cost? This is the difficult reality of college admissions: families won’t often know the financial bottom line for a given college until after their child applies and is accepted. This backwards process leaves students building up dreams that their parents have to crush with the fact that they simply can’t pay the bill.
Families can better prepare their teens by making finances part of the college conversation from the start. Two basic data points — a college’s COA and the EFC — can open the door for such discussions and potentially shape the application process in order to maximize a student’s college options in a way that their families can afford.
Cost of Attendance (COA)
Colleges are mandated to make public their full “Cost of Attendance,” which includes tuition, fees, housing, books, health insurance, and any other possible costs to attend their school. It is usually broken down into a chart which shows the difference between the COA for living at home, living on or off campus, and the cost of addition needs such as health insurance or transportation. To find a college’s full cost, the easiest method is to search for the name of the college with the letters COA. If that doesn’t work, go to the college’s main page and find their financial aid office website or a page called “Tuition and Fees.” (While legally mandated to post the information, not all colleges like to make it easy to find.)
Many people assume that they won’t pay full price for a college because their child will get some kind of aid. This might be true, but it will depend a lot on the type of school for which they are applying. Our public universities in California, for example, don’t have a lot of aid to give out except for government aid based on need. Very selective, “brand name” colleges are also unlikely to offer much to reduce the COA: plenty of highly-qualified students are willing to pay full fare to popular schools, so there is little incentive for these universities to offer money to anyone to attend except those with high financial need or high value to the school, such as a prized athlete or other stand-out student.
Less selective, less well-known colleges are more likely to provide tuition discounts in the form of “merit aid” and scholarships in order to create an incentive for desirable students to attend. (In fact, in order to look like a big name school, some colleges inflate their tuition to match higher-ranking schools, but provide tuition discounts to almost every student they admit in order to bring that cost more in line with what families are willing to pay, much like the “dealer discount” off of an MSRP at a car dealership.)
How can you tell which kind of school you are looking at? Use a tool like College Navigator to find out the percentage of students receiving institutional aid and the average aid amount. You can also use College Scorecard, which even breaks down the average cost of a school by family income.
Even with this data, it can be hard to determine whether any given college will offer additional aid. While federal and state aid follow public formulas, “institutional aid” is a murky business. Some public universities give tuition breaks to encourage out-of-state students to come; others use their out-of-state students to subsidize low in-state tuition costs. Some private colleges are “need blind,” meaning they don’t consider a student’s ability to pay; others are “need aware,” meaning that they factor in the student’s ability to pay when they consider whether to admit the student in the first place — forcing some families to commit to paying the full cost up front in order to increase their child’s chance of acceptance.
In this environment, it’s easy to feel like a line item on a college’s financial ledger, but savvy students can do more to determine their fate by searching a college’s website to learn about how they determine merit aid and if they give incentives for high GPAs or test scores, and getting to know their regional admissions officers from each college and asking questions about what the college is looking for in a student and who they give aid to.
Don’t wait to have this conversation. When deciding where to apply, comparing colleges’ COAs can open up conversations about the widely varying cost of a college education. This can help teens understand that the choice between one school and another will need to consider more than just how much they want to attend and whether they get in.
Estimated Family Contribution (EFC)
In addition to the student’s academic application, most families will need to complete the Free Application for Federal Student Aid (FAFSA) as part of the college admission process. The FAFSA, run by the federal government, shares family income and tax data so that colleges can determine how much a family can pay for their child’s higher education. (While only some families will qualify for federal aid, the same application is used for state aid, institutional aid, and loans, and so it is important for most families to complete it even if they don’t think they will quality for the most basic level of aid.)
Completing this form will result in what’s called the Expected Family Contribution (EFC). This is the amount that the federal government “expects” the family to contribute to their child’s higher education before any government aid is considered. The EFC is often a much higher number than families “expect,” however, and federal grants and loans are for much smaller sums than the media would have you believe. (Think of it this way: the federal government is willing to provide a free bus pass, or maybe provide an incentive to upgrade your gas-guzzler, but not pay for your Tesla.) Whether realistic or not, colleges will also start with the EFC when creating their financial aid packages.
Here’s a very rough example — a married couple making $150,000/year in California with typical assets will have an EFC of around $35,000. This is about the cost of a UC tuition for their child. If the student attends a UC/CSU, they could also be eligible for a Middle Class Scholarship, which could bring that price down 10–40% (most likely closer to 10%, as the cap on scholarships is $191,000) depending on the school and available state funds.
If that same student applied to a private college with a $50,000 price tag, that college will assume that the family will pay at least that base amount of $35,000, and then will determine if they want to give incentives to make up the $15,000 difference (or not), or even sweeten the deal with greater incentives to encourage the student to attend.
In your conversations at home, play a game of “Would you rather” with these scenarios. What if the student got into a UC and College X, but College X offered no money? What if College Y offered enough money to bring the price down below the cost of the UC, but was the student’s second choice between the two schools? Just like balancing our needs and wants when buying a car or a home, teens need to learn how to balance their needs and wants with their family’s needs and wants when choosing a college to attend.
How to calculate the EFC
While the official FAFSA website does not open each year until October 1, you can calculate your family’s EFC any time by using your tax information and a few online tools. The FAFSA itself has its own FAFSA4caster. I also find the College Board’s BigFuture EFC calculator easy to use. In addition, every college is required to have what is called a Net Price Calculator, which combine the EFC with the school’s tuition costs. Using two different calculators can help you feel more confident in the EFC you are given.
Use the EFC to start a conversation with your teen. If this is the amount that will have to be paid for college each year, can your family do it? How would you do it? If you cannot, start talking about which colleges cost less than this amount, or might cost less because the student would be a more desirable candidate for the school. If the student is serious about a school whose tuition is out of reach, starting taking a close look now at what kind of aid that school usually provides and where the student falls academically in the school’s usual student profile. If the school is a reach academically and financially, consider the possibility that the student, if accepted, may get no aid at all. What the family would do in that case? Whether this scenario comes to pass matters less than the exercise of including the financial package in the decision making process right from the start.
While there are things that a student can do to increase their chances of getting aid — keeping up their grades, for example, and taking challenging classes that interest them — much of what determines whether a student gets aid is largely out of their control and will only be known after admissions decisions are released. When applying, then, always include some colleges which a student is likely to be admitted to and have a reliable cost that the family can cover without any aid. Then include some that might be likely to provide aid, and, if desired, those brand name schools that the student dreams of attending, with the understanding that the financial piece has to fit, too.
Having the COA and EFC conversation up front can help a student put their admissions expectations, which takes center-stage in their lives, into the context of their family’s ability to pay the bill.
Resource
College Affordability and Transparency Center — This website compiles links to all of these resources — College Scorecard, College Navigator, and college’s Net Price Calculators — in one place.
I believe firmly in empowering families with information to make better choices in the college admissions process, but I am not a financial advisor. ~KM
