College Funding Models

In August, we dropped my daughter off at college for her freshman year.? While I knew it based on my work, the weekend only convinced me more that colleges are marketing/sales machines.? If you’ve had a high school student you know how much mail and email these institutions send trying to attract students.? It’s amplified during the visits and special on campus days colleges host.? The goal is to hook the student before you understand if you can afford it.? The problem is that’s backwards from how you should shop for college.?

One of the first steps in figuring out if a college is affordable is to understand the business models that colleges use.? The challenge is it’s not obvious based on their sticker prices so unless you do a significant amount of homework, you might not understand this.??

The first rule:? For most families, sticker price is not relevant.?

Let’s dig into the price models and you’ll see why.?

Ivy League & Other Top Schools that “Meet 100% of Need” ??

Many top schools have huge endowments in the billions of dollars.? They will assess your need using the FAFSA & CSS Profile and you’ll pay whatever that formula says you can afford.? There are no merit scholarships for GPA, ACT/SAT, or class rank.? All of these students are highly qualified.????

Who should consider these schools?? Those outstanding students with a large financial need could pay less at one of these schools (assuming the can get in) than they would even at a state school.? Families that have money available to pay whatever they are assessed.? ?

Smaller Private Schools

Smaller private schools that have to compete for students often discount their list price based on either financial need or through merit aid and scholarships.? On the financial need side, they usually have smaller endowments so they might not meet 100% of need, but will often meet part of it.? In order to attract top students, many of these schools often offer merit scholarships based on the student’s GPA, test scores, and class rank.???

Who should consider these schools?? Top students that may not have much financial need.? Many schools publish a scholarship matrix that you can use to figure out how much your student will qualify.? Students with financial need can also consider these schools, but they may not get 100% of their need met.?

State Schools

State schools typically offer a lower list price for those qualifying for in-state tuition but may not offer merit scholarships or meet 100% of need.? Additionally, if you’re an out-of-state discounts are even more unlikely.? There are some exceptions.? Schools like the University of Alabama have a published merit scholarship matrix and offer generous merit aid to both in and out of state students.????

Who should consider these schools?? In general, state schools can be the most economical for students who won’t qualify for either need-based aid or merit-based scholarships.? This is because they have a lower starting cost than most private schools.???

?The GI Bill Factor

These considerations can be important even if you’re planning to use the GI Bill for your children…especially for families who will split it.? Make sure you understand what the costs will be for the years you don’t plan to use the GI Bill.? Starting at an expensive private school that offers yellow ribbon for two years of the GI Bill could leave you with a big bill for the other 2 years if your child doesn’t qualify for other need-based or merit aid.?

Finding the best school that fits your family budget is something I help families with on a regular basis.? If you’d like to chat about how I might be able to help you navigate the college funding maze, don’t hesitate to set up a call.? https://nextmissionfinancialplanning.com/contact/?

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About Mike Hunsberger, ChFC?, CFP?, CCFC, MQFP

Mike Hunsberger is the owner and lead planner at Next Mission Financial Planning. Next Mission Financial Planning provides comprehensive financial planning and investment management for military and veteran clients. Mike started the firm after spending 25 years in the Air Force.

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