Will the True Cost of Attendance Please Stand Up?
As families work to understand how to pay for college, one of the greatest challenges they face is to understand the jargon used to describe the price of attending a particular institution. The most commonly used term to describe the cost of college is tuition, but it’s really only a piece of the puzzle.
In order to understand the true pricetag of your education, you have to look at what’s called “Cost of Attendance.” This is the total annual cost to attend college, taking into account tuition, room and board, books and supplies and other fees.
Once you add up all of the items included in your Cost of Attendance, the number can appear overwhelming. But luckily, it’s rare that students in need of financial assistance will be required to pay the full Cost of Attendance. Those who apply for financial aid will often qualify for at least some form of assistance from the school, typically in the form of scholarships, grants, or loans.
At the end of the day, most students often end up paying what is called the “Net Price” to attend the school of their choice, which is the Cost of Attendance minus all Financial Aid that the school awards them. For many students, there might also be “outside” scholarships and grants available from their state or from a third party foundation/charity.
So now that you know the basic terminology, how do you compare your school options while keeping Net Price in mind? Below is a handy field guide for how you and your family should approach this challenge:
1) Identify your target schools. Don’t let Net Price be a factor at this point. Explore your options based on the non-financial factors that are most important to you, whether it’s academic programs, size, reputation, location, social/extracurricular life, sports programs or something else. Create the first cut list of desired schools that fit your interests as a student. If you need help finding some schools that match your preferences, try using the College Board’s College MatchMaker.
2) Research the estimated Net Price to attend your chosen schools. Luckily for students, this process will soon become much simpler. As of October 29, 2011, all schools will be required by the Department of Education to provide students with an online calculator that estimates their Net Price. Some schools have chosen to get a jump-start on the requirement by already publishing their calculators. A great example can be found at Stanford University’s financial aid website.
Overture (that’s us) recently announced a partnership with the College Board to provide a robust calculator that will be offered to schools to assist them with this task. In the meantime, there are still many decent resources such as the College Board’s website or FinAid.org to assist students with getting a rough sense of the average aid available to students.
3) Use your estimated Net Price research to narrow down your list. If it’s clear that a particular school is going to be too expensive and isn’t one of your favorites, it may make sense to eliminate them from the list at this point.
4) Apply for admission and financial aid at the remaining schools on your list. Each school has its own process for applying for financial aid and every school has a financial aid portion of their website dedicated to explaining this process along with tasks and deadlines – here’s a nice example from Duke University. If a school’s website is unclear, call the financial aid office and speak with a counselor.
5) Compare your financial aid awards. When you finally receive those thick letters (or emails) from schools informing you of your acceptance, take your time and carefully review the financial aid you’ve received from each school. Be sure to normalize the components in each award letter for a truly apples-to-apples comparison.
To assist you with this comparison, we’ve created a utility in Microsoft Excel, the Total Cost of Attendance Comparison Calculator. This spreadsheet is designed to help walk you through how to rack and stack the various components of your financial aid award letters so you can have a consistent comparison across schools.
Don’t forget to incorporate the interest costs of loans into your comparison. Adding up the interest makes a big difference in understanding the true, total cost to attend a school annually and over the full time you will spend in college.
6) Make your college selection. Once your comparison is complete and you get to each school’s bottom line – the true, total cost of attendance – you will have a much better idea of your college options. You and your family can then carefully consider the trade-offs between the cost and quality of the schools that you’re pursuing. For more insight, read this fabulous article by Lynn O’Shaughnessy, a prominent blogger on college costs, who goes into this topic in even greater and enlightening depth.
So that’s our take on the best practices for shopping for your education. If you found this article to be helpful, forward it to your friends or leave a comment below and let us know how everything went for you. Or you can even reach us on Twitter (@collegemoneyblg or @overture_peter) or on Facebook (www.facebook.com/privatestudentloans) to share your experience or any tips you might have for others looking for help. Just make sure not to share any personal information publicly!
