In an article reposted on MSN Money last week from Kiplinger, the authors did a good job discussing some of the various options available to pay for college. However, they mentioned student loans as one of their seven “smart” ways to pay for college. I respectfully disagree. There is nothing smart about student loans. Five reasons follow:Continue Reading...
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High school seniors across the country are receiving their scholarship offers right about now. In our last post we talked about making sense out of those offers by placing a per-year dollar amount on awards from each school. Once that process is complete, you and your senior might find that their preferred school has not made the best offer. In this post we will look at ways to maximize those offers through negotiation with each school.
You have probably found through your calculations that your child’s scholarship offers fall short of the full cost of attending college. Outside of athletic scholarships, a “full ride” where everything is paid is rare. If this is your situation, negotiating can close the out-of-pocket gap for your child’s college education. Or, if your child does have a full ride, then negotiating can actually put money in your child’s pocket. The way financial aid works, any funds remaining after all costs have been paid to the university is refunded to the student. So, whatever your child’s initial scholarship situation, it pays to negotiate.
I believe that there are four steps you can take in order to get the best deal possible from a school. I recommend taking these steps with each school under consideration because you might be surprised at each school’s willingness to bring your child in as a student. The four steps in the process are:
First, recognize that the first offer is just that – an offer. Schools, particularly public institutions, will tell you that they have little leeway but there is always room to negotiate. Ask for additional scholarship money. You might also ask for additional aid in the form of work study, grant money for particular programs, research assistantships, or other non-scholarship programs.
Second, play each school against one another. If there is a school that you really want to go to but you have a better offer from a similar school, use that information to negotiate with your ideal school. The worst they can do is say is no.
Third, ask for discounts. Private schools may be more willing to offer these than public schools, but it can’t hurt to ask. This may come in the form of a fee waiver, tuition or room discount, or other enticement. Your child might be considering an out-of-state school; perhaps the school will give your child the in-state tuition rate, which is generally half the cost. If you get this, be sure to lock it in for the full term of your undergraduate studies.
Fourth, for each of these strategies, be prepared to make your case as to why you are deserving of these considerations. It may take a couple of conversations with your school’s scholarship office, and it becomes easier for them to gain approval if you tell a compelling tale.
Once you’ve made your best deal, go back to the previous post on analyzing your scholarship offers and update your numbers. We will use the results from this process in the next post where we make the college decision.
Besides purchasing a home, college is generally the largest financial commitment that an individual will make during their lifetime. If your child is in the position where they have multiple scholarship offers to consider, this can remove that huge burden. Using these negotiation tactics wisely, you may be able to improve your offers significantly. The last thing you want to do is leave money on the table. Next time we’ll look at making the big decision and committing to the college of your choice.
What other tactics can you suggest? Where have you seen this work? Please share your thoughts and feedback on this topic.
Your child has worked hard for years, and now the fruits of their labor are ready for harvest. March is the time when the scholarship offers begin to roll in for high school seniors across the nation. Mom and Dad are perhaps at their proudest and schools begin to woo your senior in earnest. It is a time of joy and celebration but it can also be a confusing time for those with multiple offers. How do you make sense of these offers? Let’s spend a few minutes talking about it.
Start by getting organized. The scholarship offers should all come in letter form, so collect all of those letters and sort them by school. Create a spreadsheet or a simple handwritten table with each school’s name at the top of each column. Then review each letter to determine the details of the award. Put the awards that are renewable each year at the top of the column and put the one-time awards next in the column. For all awards that are dependent on choosing a particular major or program, place those at the bottom of the column.
Some of the renewable awards might say “full tuition, books, and fees” instead of a specific amount. You can handle this by checking on the school website for the projected costs for each of these categories for the upcoming school year and using those values instead. Make sure that you understand if tuition includes in-state or out-of-state amounts and plug in the proper amount.
Next, we’ll annualize each school’s offer. What this means is that the recurring awards should be converted into the annual amount if not readily available. Divide the one-time awards by four to determine the annual amount for each of these scholarships. Finally, for the department-specific awards, convert those to an annual amount by determining if they are renewable or one-time and treating those like described previously. Sum up the annualized offers from each school and to find the total year-one award that the school is offering.
Your child might also receive scholarship offers from independent sources that can be used at any school. Those offers should also be converted to an annualized amount if not already in that form and added to each school’s total amount. This is because that amount needs to be factored in at all schools, although you will only use it at the one you attend. The alternative is to leave off these awards because they are the same wherever you go, but I like to include them so that you can determine the total out-of-pocket or surplus for each school.
On each school’s website you should be able to find the total first-year cost for an incoming freshman. Transfer that information to the table or spreadsheet below the total award amount for each school. Be sure that the expenses include everything that your child may spend, and be sure that you’re looking at the total yearly cost and not just the first semester. Also make sure that you pull the right number from the in-state or out-of-state student category as applicable to your child. Many schools now require first-year students to live on campus and have a meal plan so be sure that room and board are included if applicable. Make sure that you include an amount for books and supplies if not factored in to the school’s total cost.
Here’s where the fun begins. Subtract the total first year cost from the total annual award amount. If the amount is zero or positive, congratulations – your child can go to that school free for the first year, and any positive amount will be refunded to your child. If the amount is negative, that is the out-of-pocket cost that your child will incur during the first year.
There might be other money or opportunity from grants depending on your family’s situation, but this gives you a way to normalize all of the offers so that you understand the real financial impact. In the next post we’ll try to figure out what it all means and help you with the decision-making process.
Kiplinger Personal Finance magazine publishes a list annually that is their assessment of the best values in public colleges in the United States. The article for 2012 can be found here. In this post, I’ll take a look at this list and give my observations on what readers of the Affluent Student can take from the article.
As with any list of this nature, I would take it with a grain of salt. It does appear that Kiplinger has done a good job of analyzing the public schools. I like the fact that graduation rates were taken into consideration. The longer you spend in school, the more it will cost you so having a high percentage of students graduating in four years is pretty important. The list does include the average cost before and after need-based aid is applied, so you can look at how your offer stacks up against the average student at your chosen university. Another nice figure to have is the average debt at graduation; every school on the top 100 list that provided this figure was over $10,000.
I believe one of the most important lessons from this list can be found in the columns on out-of-state costs. Even after aid has been applied to the equation, in almost every case the cost per year for out-of-state students is at least twice the in-state rate. Remember that the figure given is the cost for a year, not the cost for four years. As parents, you need to ask yourself and your student these tough questions. Do you really believe that you should pay twice the amount that other parents are paying just to send your child to that school? Don’t you think that your child could find a comparable degree somewhere in the state that you live in, especially at half the price? Is the “college experience” your child receives across the state line really that much more valuable than the one they could have in their own home state? Do you think that potential employers will pay more for a degree from the out-of-state institution?
So how can you use this list? For parents of all ages, especially younger children, you can use it as a planning tool. Begin to identify the schools that your child might attend, use the appropriate “cost after need-based aid” figure (in-state or out-of-state), multiply by four and that’s the amount out of pocket that you could expect to pay for four years of attendance if your child started today. Since college costs have historically grown at a 7% rate annually, multiply the number of years till your child starts school by 7% then apply that factor of growth to your total cost for a rough guess at how much it will cost for your child to go to school. Once you see this number, you can begin to understand why it is so important for your child to excel in school. Scholarships for high-performing students make this amount go away very quickly, whether attending an in-state or out-of-state school.
A final note on this table – even at the school with the highest average debt at graduation ($35,671 at UNH Durham), the amount is not insurmountable. If your child worked their way through college instead of partying their way through, then it is likely that they could earn enough money to cover this debt over a four-year timespan. That being said, debt is not a requirement for those who are really serious about their college education.
Along with the discussion about gifted and talented students comes the question of magnet schools. Magnet schools have been around for a while, and their general purpose is to establish an enhanced learning environment which draws students from across school boundaries (hence the name). Most of these schools have a competitive admission process through testing or audition, but some have a lottery system where students enter into a pool and only a select few are chosen each year. Some of the schools specialize in a certain field of study, while others offer a challenging general education curriculum; these are sometimes known as International Baccalaureate schools.
If magnet schools are an option, should you allow your child to attend? There are several considerations to think about. One is simply desire; your child will have to leave their friends at school. Do they want to do that? How will their friends in their neighborhood react? Another may be transportation. Some provide bus transportation while others do not, and the school could be quite a distance from your home. The magnet high school in our county will pick up children from several centralized locations throughout the county, but it isn’t as convenient as the bus stopping in front of your house.
Yet another consideration may be cost. The magnet school could be in another part of the state, which means paying for room and board, and some magnet schools charge tuition. Magnet schools often serve up unique learning experiences which might include foreign travel. Are you able to bear these newfound costs without significant impact to your budget? Do you have enough savings to pay for the current year’s expenses should a parent lose their job or their income? If your child has to be a resident student, are they mature enough to manage life without their parents being there every day? Can they handle it emotionally and are they organized enough to succeed without your day-to-day guidance? Are you as parents prepared for your child to live away from home?
When your child attends a magnet school, they will face a much more rigorous school experience and the academic competition around them is much tougher. Your child may be accustomed to being the standout academic star in their old school. Going to a magnet school places them alongside other star students who will challenge them for the top spot. Can your child handle that newfound pressure? How will they handle the first “B” or “C” grade? How will you as parents handle it?
I went to a magnet school for my middle school years. Personally, it was the best educational experience of my life. I made lifelong friends there and was stretched and challenged beyond what I thought I could possibly achieve. The school I attended was relatively close to my home so travel and logistics were not an issue. My oldest son was offered to attend a magnet high school, but he declined because he wanted to remain with his friends and graduate with the kids that he grew up with. Neither choice will make or break your child’s educational career; just be aware of the concerns and considerations mentioned above as you decide on the best path for your child.
Isn’t college a funny thing? Although a four-year degree will cost in the tens of thousands (if not hundreds), it seems to be the one thing in this category that we buy where we do very little negotiating. If you were buying a house, you’d certainly negotiate. Likewise for a car. Planning a wedding – you’ll shop around for the best deals from the caterer, facility, and so forth. But college, not so much. In general, folks have bought into the myth that getting into the best college, whatever the cost, is the most important thing and that the value of the degree isn’t even questioned; it’s just assumed.
This is why it’s so important to apply the principles of the Affluent Student early and often in order to maximize available college funds. Nobody wants to disappoint their children; we all want the best for them. With little to no funds for college, their reasonable choices will be limited.
So, when choosing the right college, all of the websites and books out there will give you all kinds of tools to help determine the right fit. Those are fine to use, but these few questions need to be applied first to narrow the list down to reasonable choices. Then, you can use any of the book and website criteria that you’d like to narrow the choices. Here’s how I see the process for undergrads:
- List the in-state public schools. I can think of no reason that you “need” to incur out-of-state tuition.
- For each, determine if you qualify for admission.
- Narrow your list to those which your primary course of study (and your secondary choice). For each of these, perform the remaining steps.
- Identify the annual costs of tuition, required fees, books, and supplies.
- For each school, identify whether you will live on or off campus and determine the costs of doing each for one year.
- Add up any amount from savings, 529 plans, prepaid tuition plans, and other money set aside for college that will be used each year.
- List the merit and non-competitive scholarships and aid that you qualify for at each school and the amount you’ll receive annually.
- Determine the amount of money that you, as parents, are willing to pay for college per year.
- With your child decide how much, if any, that they will work and how much they can expect to make in the school year.
- Add the numbers from items 6-9. This is how much money you have to attend each college.
- Add the numbers from items 4 and 5. Add 20% to make sure you’ve covered any underestimates. This is how much it costs to attend each college.
- Subtract the result in item 11 from the result in item 10. List the results by school in order of largest to smallest difference.
- This is your prioritized list ranked by out-of-pocket cost. If there are any results greater than zero, I would focus on those schools.
- Now you can apply all of the cultural, student-teacher ratio, facilities, extracurricular, sports, and feel-good criteria that you’d like.
In line 13, there may be no school that has a positive number, meaning it will cost more than you have available. In that case, you can either change the criteria earlier in the process, choose a two-year college for starters, or plan to work more. You and your child might also decide for them to join the military or work for a year to save up some money to start. There are always options.
Unless we as parents have the means to fund our child’s college of choice, we need to help steer our them away from their starry-eyed plans. With rare exception, your child is not equipped to understand the financial ramifications of their college choice. They don’t see loans as a big deal. In fact, because all they have to do is point and click to accept a federal student loan, and because they never see the money, they can’t conceptualize what it means to have borrowed thousands of dollars. Don’t let them walk into this trap.
As shocking as it may seem, the possibility still exists for students to work their way through college without student loan debt, even if there is no scholarship or grant money available. As I mentioned a few posts back, the average cost of tuition and fees at a two-year college and at a four-year in-state university is as follows:
Two-year institution – $2,713
Four-year public institution, in-state – $7,605
Add on books at roughly $1000 per year (that’s full retail, buying new, which is also not necessary) and you can do college for under $9,000 per year. If you’re going to college, you should be able to do the math and figure out that this equates to $750 per month. If you work just 25 hours per week at a job that pays $10 per hour, you make $1,000 per month before taxes. Live at home and eat Mom’s cooking and you can make this happen.
But you say “What about the college experience, fun, etc?” If you are paying for your college, then you can choose to fund as much or as little fun as you’d like – just work more and you’ll have more cash for fun. The example I gave above was just one way to do it – increase your hourly pay or number of hours and you have more cash to do more with.
But then you say “What about class and study time?” Really. The equation that’s often cited is that for every hour in-class you should spend two hours out of class to be successful in college. If your in-class time equates to 16 hours per week, then your total time spent on school should be no more than 48 hours per week. There are 168 hours total in a week – subtract 56 for sleep (like you actually sleep eight hours per night), subtract 40 hours for working, subtract 48 hours for school… you still have 24 hours per week or an entire day to do other things. I’m not naive – there are other things that make up your life and consume your time – but hopefully you see where I’m going with this. There is more than enough time available to do the things that are most important to you.
Finally you may say “But I need all of my tuition up front – I don’t have that kind of money!” So work a semester or a year before you start school and save up. Again, it’s always easy to find a reason why you can’t do something, but are you willing to explore options that allow you to reach your goals, even if it means some sacrifice?
Remember that you’re in college to get an education, not to have a party. The cost of an education at an in-state institution is not out of reach, and if you want it bad enough then you’ll make the sacrifices to get it.
I want to float a question to my readers – whose job is it to pay for college? Should that responsibility go to the parents, to the student, or to someone else? In answering this question, assume that there is no scholarship money available to the student. As a parent and a current student, I believe that the student bears responsibility for this. First of all, I think that putting the responsibility on the student makes them evaluate their college choice (and their activities while in school) with a definitive eye towards value. They’ll also take ownership of the entire educational experience and their in-school choices will also change – everything from meal plan to Greek affiliation to books and supplies and other extracurricular activities will become a question of “How much it costs?” and “Am I getting my money’s worth?”. They’re also more likely to go to class if they’re paying for it because they have 100% ownership and responsibility for the bill. On the other hand, for 99% of students this means taking out a student loan (or does it – see more in my next post). And if I’m anything, it’s anti-debt; I hate the thought of a student being saddled with debt fresh out of college or worse, shackled to debt that didn’t lead to a degree.
If the parents pay, then that’s certainly their right. Parents who pay for school retain the right to know what’s going on both in-class and outside. They also have the rights to dictate where a student goes to school, the right to see grades, the right to decide how much housing they are paying for, and so forth. The parent who funds their student’s college education is most generous and kind and the benefactor (the student) should be nothing but grateful and respectful of the gift. In no case, however, do I believe that it is a parent’s obligation to pay for college. College is not required; it is a luxury. Many wildly and mildly successful persons have gotten to their stage in life without ever completing, and in some cases never attending, college. Some make the argument that a student needs college to find their identity. I don’t believe that either; life, and just a little bit of self-examination, is what helps a young adult find their identity. Whether it’s true or not, a parent is no more responsible for college whatever the reason or rationale.
What if someone else pays? In this day and age, that looks more and more like the government. There are grant programs out there to give low-income students a chance, but these are tied to both the parental and student incomes and assets unless the student is classified as independent. For those truly needy students, grants can help fill the gap but I do not believe that the government should take on the full burden of college expenses as a normal course of action. The military and other organizations have educational benefit programs for their members, which is different from the scope of my argument. I’m of the opinion that no luxury item should be an obligation of the government to provide. Because the government does not generate any income, then any such benefit program becomes the burden of the taxpayers. And, because 46% of households will pay no income tax in 2011 according to the Tax Policy Center, that means that only 54% of all households are saddled with this burden.
However, a college benefit where someone else pays for your education can be from an employer. There are any number of benefit programs that employers offer to pay part or all of your education. In general, though, these are reimbursement programs, which is how I’m going to graduate school now. If played properly, the student pays for their first semester and tuition reimbursement takes care of each subsequent semester as you use the benefit from the previous semester. If your employer offers a tuition reimbursement plan and you are not taking advantage of it, then I believe it’s just like leaving free money on the table. I’m a huge fan of this type of plan as a means to pay for college.
In summary, as far as college goes, I believe that the student should be responsible. But how does a freshly-graduated 18 year-old afford that kind of expense? More in my next post.
I mentioned in a couple of posts back about the cost of college, and I made the argument that private schools simply were not worth the cost. I want to take that argument one step further today and make the case for junior college. Even for a four-year public in-state institution, tuition alone will still cost over $30,000 to get to graduation. Further, there are some students that aren’t ready for college academically, and may not be ready from a maturity standpoint to handle college and live away from home. Since only one third of students who start college actually graduate, junior or community college may be an answer to find out if you’re college material.
Most in-state public schools have an arrangement with the two-year schools to ensure that their programs and credits transfer into the four-year school without penalty. Since junior college tuition is often one-half to one-third the cost of the four-year school, your educational dollar goes a lot further by starting at the two-year school. Also, part of the benefit that the two-year schools sell is that they prepare students to finish their four-year degree, so they have a vested interest in the success of all their students and their ability to transfer to a university. Be sure that you’re working with the university to ensure that the curriculum you’re following will transfer as expected to meet your degree/major goal.
A student can also stay at home and go to a two-year college. These schools typically don’t have dorms, dining centers, or the distractions of university life, so the student can focus on their education without the worry of living away from home. It’s cheaper for the student and it gives them time to mature before moving out on their own. Also, some of the programs at a two-year school are sufficient to prepare the student for entry into the workplace without finishing that university degree. Remember that employers aren’t paying for the degree that the student has, they are paying for the skills that they can bring to the workplace.
Consider a two-year school for these and many other reasons. The experience and education that you take away from the program will definitely be worth it. Plus, all of the things you’re wanting to get from the college experience will still be there when you transfer to the university in a couple of years.
First of all, neither this post, nor any other post in this blog, is meant to question the quality of education received at any school. What I am questioning in this post is the value of that private college education. Here are some averages for tuition and fees per year at different types of institutions, from The College Board for 2010:
Two-year institution – $2,713
Four-year public institution, in-state – $7,605
Four-year public institution, in-state – $11,990
Four-year private institution – $27,293
If you attend a private school versus a four-year in-state school offering the same degree, do you really think that the value of your education is $80,000 better just because it came from a private school? More importantly, will your degree from that school be worth that much more, or worth any more, in the marketplace than one from the public school? While private schools are a lot more liberal with their financial assistance offerings, it is unlikely that you will be awarded a scholarship to cover full tuition; even if they cover $20,000 per year, you’re still just breaking even on what you’d pay at a public school.
Think hard about this when weighing college choices. The environment that surrounds you at the lovely little private school may not be worth the added expense.