Affording High-Priced Colleges in Crazy Economic Times

We visited Drew University today, which is a beautiful campus in New Jersey that’s located in a forest.

My son was impressed by the physics chairman, who was nice enough to meet with him and answer his questions for 45 minutes. Ben was also intrigued by the squirrels that are attracted by all the trees on the campus. (You can go months or even years without seeing any of these critters back in San Diego where we live. )

While we were sitting in the admission office, I read a reprint of an article in a New Jersey paper that Drew’s president Robert Weisbuch wrote.

Weisbuch suggested parents should not pay attention to costs initially, but instead teenagers should simply look for great academic fits. That was the only statement he made in the long article that I disagreed with.

I’d suggest that it’s important to find academic and financial fits from the start. Otherwise your child could get excited by a bunch of schools that parents could never afford. That certainly doesn’t mean, however, that someone with little money should ignore pricier schools like Drew.

I agree with the Drew president that the price tag is irrelevant. Bachelor degrees really are priced like airline tickets. Everybody pays a different price.

Especially in this scary time on Wall Street, however, I think it’s important to focus on schools that will financially reward your child with a more reasonable price.

Before you find these schools — and it isn’t as tough as it might seem — you need to get a preliminary idea of whether you will qualify for financial aid or not.

The best way to do that is to run preliminary numbers with an online calculator. Even families with sophomores or freshmen might want to do this. You’ll find the calculator for federal financial aid at FinAid.org and at FAFSA4Caster.

If you’re interested in more selective private schools, you’ll need to use a calculator that uses the institutional methodology.

Both types of calculators will generate a number that’s called the expected family contribution (EFC). This figure is what a family is expected to be able to afford for the child’s upcoming year of college.

Here’s an example: Let’s suppose a family’s EFC is $15,000. If the child attends a school where the cost is $15,000 or lower, you would typically be expected to pick up the entire tab. In contrast, if the school cost $40,000, you could end up with $25,000 in financial aid.

It’s the cost of the college and an EFC that drives the financial aid process.

If you have a high EFC and don’t qualify for need-based aid, you’ll want to search for colleges and universities that are eager to award affluent teenagers with price breaks. The average tuition break at private schools today is 33.5%.

If you do qualify for aid, you’ll want to search for schools that offer wonderful aid packages — heavy on grants and light on loans.

Learn more about financial aid by reading my new book, The College Solution.

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