For many families, financial fit is a key part of the college list building process. These families realize that being able to afford the cost of attending a college is at least as important as being admitted. They arm themselves with information about their family budget, financial aid practices, and where their student is likely to receive substantial financial aid. Read on and you can join the ranks of informed and prepared families.
Total Cost of Attendance = Direct Costs + Indirect Costs
When weighing the cost of attending a college, it’s important to consider both the direct costs, what you pay directly to the college, and indirect costs, other expenses that come from being a college student. Tuition, fees, housing, food, and books are examples of direct costs. Transportation, bedding and other dorm supplies, entertainment, clothing, toiletries, computers, laundry, club & activity costs, and fraternity/sorority expenses are examples of indirect costs. Some colleges make a reasonable effort to estimate the overall cost of attendance, but it pays to look at the assumptions. James Madison University, for example, includes transportation, personal costs, and even loan fees in their cost of attendance estimate. But students who live far from Virginia might find the estimated travel costs too low, and students with more expensive entertainment and recreation interests may find they have to boost their personal expenses costs at most of their colleges.
In State vs Out of State Tuition
You might have noticed a difference in the tuition costs depending on if the student is “In State” or “Out of State.” This a practice that recognizes the fact that public colleges receive some financial support from state governments. In essence, residents of the state are already supporting the college through their tax dollars. Sometimes this is listed as two separate tuition rates. Sometimes, non-residents are charged a non-resident supplement or surcharge in addition to the regular tuition rate.
States set their own policies about what qualifies a student as a resident for the purpose of tuition. Requirements vary, but typical considerations include where the student lives and graduated from high school, what state of residence the parents claim, and administrative evidence of residency such as paying income tax or registering to vote. Military families, expat families, and students who split their time between divorced parents may need to provide additional information in support of state residency claims. It may be difficult to establish residency after starting as a student at the college (in other words, most states don’t count time living in the state as a student as a compelling reason to adjust residency for the purpose of tuition). I highly recommend finding the college or state guidelines for demonstrating residency and reading them carefully. What worked for your neighbor a decade ago or your cousin in another state might not prove insightful in your family’s situation. Don’t be afraid of asking questions of the college (the registrar often handles this type of question) or of asking for an appeal based on additional information. As an example, these are the In State Residency guidelines for Virginia.
Types of Financial Aid
There are two main categories of financial aid and several ways that aid can be provided. How a college determines eligibility for financial aid and how they package it depends on a combination of the college’s resources and priorities and the student’s family resources and perceived value to the college.
Assistance can be in the form of grants (money that does not have to be paid back), work study (money earned through specific campus jobs), and loans (money that will have to be paid back). This aid might come from the Federal government (ex, Pell Grants, Federal Work Study, or Federal Student Loans) or from the college itself.
Need-Based Aid is financial aid that is offered because the college has determined the student and their family have fewer financial resources that could be used to pay for college costs. This determination is made through a review of financial aid applications, specifically the FAFSA (Free Application for Federal Student Aid) and/or the CSS Profile (a separate financial aid application used by about 300 colleges).
The FAFSA is required if students wish to use Federal Subsidized or Unsubsidized Loans, Federal Work Study, or Pell Grants. There is no cost to submit the FAFSA, which opens the October before the school year in which financial aid would be used and considers income from the “prior-prior” tax year. In other words, students who are seeking federal aid for the 2022-23 school year would submit the FAFSA that is available starting October 2021 and would use income data from 2020.
The CSS Profile is used by a smaller number of colleges, that are usually private or highly selective, and that often give large amounts of need based aid to help pay for heftier costs of attendance. The CSS Profile is administered by College Board, and there is a charge to submit each application (fee waivers are available to low-income families). The CSS Profile asks far more questions in order to create a picture of family financial resources that goes beyond income and savings. The colleges that are most generous with need-based aid, tend to require the CSS Profile in addition to the FAFSA. [List of CSS Profile colleges and programs.]
Non-Need Based Aid, sometimes called Merit Aid is financial aid that is not awarded because of the student’s family financial status. This aid might be labeled as scholarships and might be automatic, based on grades and test scores, or be competitive, with additional application requirements. Sometimes colleges will discount tuition for students in order to encourage them to enroll. Their experience is that a family may lean more favorably towards a college that offers a $20,000 discount labeled a “scholarship” than towards another college that simply prices its tuition $20,000 lower. The process of deciding how much discount each family might need to encourage their commitment is part of Enrollment Management, a growing industry used by colleges around the country.
Both the FAFSA and the CSS Profile produce a number that represents how much those formulas think a family should contribute EACH YEAR towards the cost of attendance. This is labeled the Expected Family Contribution (EFC), a figure that may feel out of reach to many families, especially those who live in high cost of living areas. [The EFC is being renamed the Student Aid Index (SAI) starting in 2023. There are also some changes to the FAFSA coming at the same time, that will increase aid eligibility for low-income students. More about these changes will be coming out in 2022, but for now, Jeff Levy has a good overview of the changes.] Unfortunately, very few colleges meet 100% of demonstrated need. Instead, students find that after federal and institutional aid is subtracted from the cost of attendance, there remains both the EFC and additional unmet need. This is often called gapping.
So how do you come up with an estimate of how much your family would have to pay?
Net Price Calculators (NPC) are available on most college websites*. They ask for some of the same information required by the FAFSA or CSS Profile and will usually produce an estimate that includes Federal aid (including Federal Student Loans!), applicable state grants, and typical grants offered by the college. The more detail an NPC asks, the more accurate its results are likely to be. However, they are only an estimate and are not binding on future offers from the financial aid office. For example, here is a Net Price Calculator for University of Virginia. NPCs are usually updated shortly before the new application cycle begins in August. The easiest way to find them is to do an internet search for the name of the college and Net Price Calculator. *Federal law requires colleges that accept Federal aid to have a Net Price Calculator. Some colleges that do not accept Federal aid will not have this tool on their website. If that is the case with a school you are considering, contact the college financial aid office for more information about expected costs and institutional aid.
The Common Data Set (CDS) is a set of questions and responses that use a common format across all participating colleges. This provides information about admissions, costs, class size, number of degrees in each major, and financial aid. Section H is the section that includes Financial Aid results. You will be able to see how many students requested need-based aid; how many were determined to have need; how many received need-based grants, self-help (work study), or other grants; and what percentage of need was met. You can continue to the next set of responses to see how much non-need based aid was awarded the same year. Pay attention to both the percentage of students awarded aid and the size of the award. Question H5 addresses how many students took out loans and the average size of the loans. Be aware that this may not include all loans taken out by parents, such as home equity loans used to pay for college costs. This is the 2020-21 Common Data Set for University of Virginia. These are most easily found by searching for the college name and Common Data Set, then selecting the most recent year.
Another valuable resource is an annual Need Based and Merit Aid spreadsheet compiled by Jeff Levy and Jenny Kent of Big J Consulting. They pull data on need-based aid and non-need based aid from several hundred colleges and put it into a spreadsheet that can be sorted by field. If your family has high need, look for colleges that has a high number in “Average Percent of Need Met.” If your family has a high EFC but wants to control college costs, look for colleges that have a high number in “Percentage of Non-Need Undergraduates Receiving Merit Aid.” But keep a close eye on the amount of “Average Merit Aid Award” and remember that it may be subtracted from a higher cost of attendance figure, leaving a higher overall cost of attendance.
I know this may feel both confusing and overwhelming. It may seem like a lot of alphabet soup and really high numbers. Awareness is an important first step. Too often, families neglect these steps and apply to colleges without considering how much they will be expected to pay – each year of attendance. Spring of senior year rolls around and a student with hard-earned admissions decisions finds that few if any of her choices are actually affordable. It’s better to have this awareness of cost and affordability earlier in the process. When I am supporting client families through this process, I always ask them to make an honest assessment of their college budget and estimated need, so that when we create their student’s college list, at least some of the schools are affordable and likely to admit their student.