Long before you take your high schooler on college campus tours, consider this: Shopping for college shouldn’t be any different than shopping for a home. When you want to buy a home, you come up with a range of how much you can afford and get pre-qualified for a mortgage. Then you look in neighborhoods that offer homes that meet your family’s needs and fall within your price range.
“Adopt a mindset that we’re buying college like we’re buying a house,” said Beth Walker, author of “Buying College Better” and “Never Pay Retail for College.”
As a financial adviser and certified college planning specialist, Walker tries to help families avoid a situation that many find themselves in at the 11th hour: Their child applies — and gets into — schools they cannot afford because the schools won’t give them enough aid. And then they just … try to make it work, no matter how much debt is involved for the parents or the student.
Instead, she advises families to start as early as 9th or 10th grade in figuring out what is affordable for them as a family — so parents don’t sacrifice their own financial welfare and the future college student doesn’t drown in debt upon graduation. And second, she recommends assessing how a child’s talents and interests pare with majors and careers they might want to pursue. Doing both those things can help you target the right colleges to apply to.
Mike McKinnon, executive director of the National Institute of Certified College Planners, defines the perfect college as one “where a student can go be happy, safe and successful, graduate in four years or less with a marketable degree and little or no debt.”
In helping families align parents’ affordability constraints with their student’s academic and social needs, he cautions them not to automatically assume the Ivys or other high-prestige schools will be best simply because of their status. And he stresses what success in life looks like after college and notes that an Ivy League degree isn’t the only path to achieving it, especially if your child won’t get much aid to attend.
In fact, said Todd Fothergill, founder and CEO of Strategies for College, a lot of brand-name schools don’t even offer merit-based aid, only need-based. So if you’re not rich, but you make too much to qualify for need-based aid, you could find yourself having to cover the entire cost of tuition, room and board every year, which is pushing $90,000 at some US colleges.
Set up financial guardrails well before the college search
Fothergill created a free calculator called CostHero that lets parents assess what financial resources they will have available to pay for a child’s college education. It then provides a range of affordability: At the low end is the number representing what they can pay if they don’t take on debt. And at the high end is the number they can pay if they also take out an unsubsidized federal Parent Loan for Undergraduate Students (PLUS).
“If you’re not in a position to write a check for $90,000 a year, put up guardrails for yourself so you don’t blow up your retirement,” he said.
The calculator inputs let you set the amount of resources you’re willing to use to pay for college from your income and savings, your child’s earnings from summer jobs, any family gifts, and any federal Stafford loans your child may take. It also factors in if you qualify for the federal American Opportunity Tax Credit. That credit, for qualified educational expenses, will reduce your tax bill or increase any refund you have coming.
The calculator also gives you a debt-to-income score like the kind a mortgage lender might use to assess whether you’re a good credit risk. Ideally, he said, you don’t want your housing costs to exceed 36% of your gross income and your total debt — including debt from housing, cars, credit cards and any parental education loans — to exceed 43%.
If your DTI ratio is close to or higher than 43% that is a sign you could get yourself into trouble if you end up having any financial problems while your child is in college, Fothergill said.
“If folks have a way to determine the range of affordability prior to the onset of the college search, the outcomes are a lot better. For example, if one knows that the range of affordability is between $30,000 [a year] with no parent debt and $50,000 with parent debt, then any college that comes in with a net cost in that range is, by definition, affordable,” Fothergill said.
Net cost refers to the true cost of attendance after figuring out how much aid your child may get (e.g., grants and scholarships).
Figure out where your student may qualify for the most aid
Generally speaking, the biggest tuition discounts go to the most academically accomplished students in an incoming class. “The student needs to be in the top 25% of those admitted,” Walker said.
Getting into that top 25% cohort is based on SAT or ACT scores, and having a high, unweighted GPA based on a rigorous high school curriculum. The curriculum’s academic rigor can be further bolstered by taking AP courses.
Since your child is more likely to make the top quartile at some schools than others, Fothergill and Walker both recommend your child focus on applying only to those schools in which they stand the best chances of being in that top group to maximize their chances for merit-based aid. Otherwise, you‘ll spend money to apply to guidance-counselor-recommended “safety” schools or “reach” schools with no sense if those places are affordable to you should your child get in.
Using reported data from admissions officers about their key criteria in admitting an incoming class and based on what more than 1,000 schools report about the qualifications they used to grant aid, Fothergill created another tool called ListHero. It gives students a score that helps gauge how competitive their profile is at a given school, relative to others admitted, and by extension their eligibility for tuition discounts. Right now the tool is only available to college planning professionals for a fee. But Fothergill plans to create a free mini-version for consumers to use.
For parents doing their own research on test scores, GPA requirements, costs and aid, he recommends checking the Department of Education College Scorecard, the site CollegeData.com and the College Board.
Other ways to reduce college costs before applying
While your children are in high school they can take other steps to reduce the total cost of their education.
One way is by doing well on the PSAT to qualify to compete for a National Merit Scholarship.
Another is to take AP courses. If their high school doesn’t offer them, there is a program called Freshman Year for Free offered by the Modern States Education Alliance. It provides free AP placement courses and pays the fee for students to take the AP tests or college-level preparation (CLEP) tests administered through the College Board.
Getting the minimum AP scores a college requires to earn a college credit will lower how much you ultimately have to spend on tuition.
A third option is to see if your state has a program that offers a year of free in-state community college, the credits from which can be transferred to a state university from which your child could earn their degree. Or, if you plan to go to any other college, make sure the school will accept the credits from a community college course you plan to take.
No matter what steps you take, starting the research and budgeting process early can save everyone a lot of stress, debt and potential heartache in the end. Said Walker: “We have to be a lot more intentional about this purchase.”
