Yesterday’s post, which explored the school options of a brilliant teenager from Wisconsin, generated many insightful comments from parents. Here is the post:
If you missed the post or the comments, I’d urge you to check both out.
To summarize, the teenager managed to get admitted to some elite schools including Stanford, Johns Hopkins and Northwestern, but his affluent parents were only willing or able to kick in $10,000 a year. The schools gave the family about $120,000 in need-based aid (even upper-middle class families can get need-based aid from expensive schools), but the boy would still have to borrow at least $80,000.
I argued that borrowing that kind of money would be financially reckless.
Getting a Break With 2 College Students
Today I wanted to make one more suggestion. In her note, the mom said she and her husband were concerned about spending more than $10,000 a year on their son because they have another child who will be heading to college in two years.
Understandably, parents tend to freak out about the prospects of having two children in college at once. The cost, however, might not be as bad as they assume. That’s because the financial aid formula gives a break to families with multiple children in college.
CSS/Financial Aid PROFILE
Elite private institutions like Stanford, Northwestern and others on the teenager’s list use a financial aid application called the CSS/Financial Aid PROFILE. The PROFILE uses an institutional methodology that takes into account the number of children in a household – whether or not they are all in college.
The PROFILE also gives a break when two or more children are in college simultaneously. When this occurs, the Expected Family Contribution for each child will drop by about a third.
So if the family’s EFC is $30,000 for the first-born, it will drop to about $20,000 when a sibling starts college. And the second child’s EFC would also be $20,000.
For schools that exclusively use Free Application for Federal Student Aid — and that’s the great majority — the EFC drops by about 50% for each child. Here is a post that I wrote about this:
Because the private schools that the Wisconsin teenager wants to attend routinely meet 100% of their students’ demonstrated financial need, he would actually receive more financial aid for the last two years in college when his sibling is also in college.
If the high school senior wants to shrink the cost further, he could request a gap year from the schools. If he gets the go-ahead, he could delay beginning college by a year. By doing this, he and his brother would be in college for three years instead of two years, which would lower the family’s EFC and shave considerably off the price tag.
That said, I would urge the family not to saddle their children with more than federal student loans, which are the only loans with built-in protections!
What Should This Family Have Done?
This Wisconsin family, like millions of others, treated the admission process like a crap shoot. The parents encouraged the son to aim high and they hoped that they would get enough money from the schools to afford college, but they had no idea what would be in the financial aid packages. That’s a lousy way to go about it, but families aren’t getting the advice they need to approach this process as educated consumers.
What should families do instead? Before assembling a final list, a student should have a good idea whether he/she can expect money from individual schools and know what these institutions will expect the family to pay.
The elite schools that the Wisconsin teen aimed for actually award excellent financial aid packages. These schools, however, rightly expected the Wisconsin parents to kick what the financial aid formulas said they could afford. The family is affluent, at least based on their EFC, but they don’t have the cash. It’s an all-too-common problem.
Long before a child applies anywhere, parents should obtain a preliminary Expected Family Contribution by using an EFC calculator. This will give them a ballpark figure of what a school will expect them to kick in. Families should also use the net price calculator that’s available on every school’s website.
Here are two posts for further information:
Would have, could have, should have isn’t going to help this Wisconin family, but it could help you in the future.
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