Written by Jack Wang, Financial Expert
Jack Wang is a noted expert in helping US-based families with middle to high school age students lower the cost of and pay for college by navigating the complex, stress-inducing financial aid system while still being able to retire.
The cycle starts again. Just as birds fly south for the winter, college-bound students and their parents start the annual rite of searching for the right college, filling out the Common Application, and writing those college essays. At the same time, they see articles about the massive amount of student debt and how to handle spiraling tuition costs.
The process usually starts with the student working with the guidance counselor, developing a list of schools - reach, target and safety. This list is predicated on the question:
Where can my student get in?
This question is so ingrained in the minds of students and parents alike. Students will ask what their GPA is required at particular schools, what SAT or ACT are required. And how extracurricular activities are evaluated in the application process.
If lowering the cost of college is important, families should be asking a different question:
What school will offer my student the most aid?
The answer to the right question is based on how each school views a given student relative to the other applicants. The higher a student ranks in the applicant pool, the more likely the student will receive merit aid, or a greater amount of merit aid. Merit aid, aka scholarships, is based on academic, artistic or athletic ability and does not consider financial information.
While we may think our student is the greatest thing since sliced bread, the reality is that our students may not rank that high at a particular school. As an example, last year’s freshman class at a prestigious, nationally recognized private university had test scores in the range of 1340 (25th percentile) through 1510 (75th percentile) out of a max SAT of 1600. In the minds of most students and parents, a test score of 1450 would be more than enough to get in, all other things being equal.
However, this particular university only gave merit scholarships to the top 15% of it’s accepted students. Think about what that means - a near-perfect SAT score of 1500 was “only” in the top 25% and was still not good enough to qualify for merit aid!
Also note that 54% of the freshman class paid FULL STICKER PRICE of almost $78,000 to attend. These students were good enough to get in, but not “good enough” to get aid. This really highlights the difference in the question that is asked versus the question that should be asked in the college planning process.
What can be done to lower the cost of college?
Check your ego
In working with families, I have seen many times where the choice of schools applied to is more dependent on the prestige of the school. Parents and students alike associate the “name” with “quality”. Though often unspoken, a bigger factor is the ability to brag to relatives at family dinners that the student attends a prestigious school. I’ve seen this many times working with clients.
These effects are reflected in data in the annual State of College Admissions report from the National Association of College Admissions Counselors (NACAC). In their 2019 report, colleges with admissions rates of 50% or less (meaning highly selective) average 1,026 applications per admissions officer. Those schools with 85% admissions rate or high averaged 335 per officer.
"Just think about the 54% of students who paid full price last year - they will be the student loan stories of tomorrow."
Similarly, the highly selective schools represent 19% of the total number of schools nationwide received 36.5% of all transfer and freshman applications nationally, while schools with 85% or higher admit rates represented 18.6% of schools while receiving only 7.9% of applications.
Note that very few Ivy or near-Ivy League schools even offer merit scholarships. Stories of people with huge student debt burdens typically don’t come from those who attended a community college or a state school; the most common tale is someone who attended a name school and now can’t afford the payments. Just think about the 54% of students who paid full price last year - they will be the student loan stories of tomorrow.
Expand your search
Every school has a different applicant pool and looks for different things in their students. Your mission is to find the school where they really want your student as much as your student wants them. This may mean that you have to expand your search beyond what the guidance counselor suggests, potentially including schools outside your area or ones that are unfamiliar. There are quality schools that don’t require near-perfect GPA or SAT scores, and give out merit scholarships to a far greater percentage of students. Find them!
Even before the pandemic, most non-Ivy or similar schools struggled with getting enough applicants and having those students enroll. The pandemic has made the admission landscape more challenging for these schools, while the Ivy and near-Ivy schools should have no problem given their name recognition.
Know the 3 numbers
Since the typical college search process typically starts with the student and guidance counselor without regard to finances, it is quite common for parents and students to be shocked at college's ultimate cost.
Understanding your finances and setting expectations during the college search process can help you and your student avoid being the next student debt statistic. The 3 numbers you should know:
Expected family contribution (EFC) - what the college expects you to afford per year
How much you can actually afford?
How much you are willing to pay?
These are independent of each other and are based far more on your values and philosophy - and how much you love your student versus balancing other priorities, such as retirement savings.
One thing is true about this entire process - you can either spend the time now (researching, planning, etc.) or spend the money later. You can be one of the smart families that lowers the cost of college while still being to achieve other financial goals.
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Jack Wang is a noted expert in helping US-based families with middle to high school age students lower the cost of and pay for college by navigating the complex, stress-inducing financial aid system while still being able to retire. He's helped hundreds of families and students (including his own 2 children) understand financial aid, student loan options, and payment strategies in the context of overall family finances and retirement plans. Jack studied finance at the University of Texas at Austin and started in the banking industry, where he spent 12 years as a commercial banker helping small to medium-sized businesses. Then he transitioned to be a corporate trainer for 10 years before starting his own firm.
