Overview
The good news is that most families do not pay the full sticker price for college.
The bad news is that many colleges do not make it easy for you figure out – in advance – the discounted price (Net Price) you will pay upon admission.
Colleges award their grants and scholarships in many different ways so there is no single approach – no magic shortcut – to estimating the net price of all your target schools.
But, if you roll up your sleeves and follow the steps in this section, then you will learn how to the identify schools that will be a financial fit for your family.
Here are some key facts and important trends to keep in mind as you get started.
The EFC Myth
Although the FAFSA EFC is commonly referred to as the estimated family contribution, it is NOT the amount a family is expected to pay for college.
In most cases, the EFC is not even a reasonable approximation of the amount a family will be expected to pay for college. It is simply one of the factors that determine eligibility for certain types of financial aid awards. It is an important variable for sure, but it is not a measure of how much you will pay for college.
The amount you will pay for college is the Net Price, which will vary from school to school. Sometimes your FAFSA EFC will be higher than the Net Price of a particular target school and sometimes it will be lower.
Net Price
The net price is the discounted price you will pay after subtracting grant and scholarship awards. It is very important to focus on net price instead of sticker price when deciding where to apply.
Grants and scholarships are the best kind of financial aid because they reduce the price. They are discounts. Other types of financial aid such as student loans and work-study are very useful resources that help you pay your share; but they do not reduce the price.
NET COST vs NET PRICE
NET COST has no generally accepted definition for financial aid purposes. The term appears on many school net price calculators and financial aid award letters, where it may represent your annual OUT-OF-POCKET COSTS or it may represent the actual NET PRICE. You should research the meaning of NET COST to determine whether it represents OUT-OF-POCKET COSTS or NET PRICE.
NET PRICE is the sum of your college costs less your grants and scholarships. It is the amount you will pay for an academic year of education at a particular school.
NET PRICE is the critical number to use when deciding if a target school is a financial fit for your family.
Don’t Assume
1. Don’t assume that you won’t be eligible for school awarded need-based grants.
Now that the sticker price of some private colleges is more than $70,000, even higher-income families qualify for significant need-based discounts.
For example, a family of four with an income of $150,000 and a net worth of $150,000, will qualify for school awarded need-based discounts of approximately $40,000 at some private colleges and universities.
At the beginning of your college search process, select a couple of schools from the list of colleges that meet full need and estimate the net price for your family using the school net price calculators. You may be surprised by the results.
2. Don’t assume you won’t qualify for school-awarded merit-based discounts.
Even if you don’t qualify for need-based grants, you may qualify for school awarded merit discounts at many colleges, which is why it is especially important to apply to the right colleges, if you are concerned about affordability.
Most four year colleges award merit scholarships – and this form of discounting is on the rise. According to the 2016 Tuition Discounting Study published by the National Association of College and University Business Officers, 60% of school awarded grants and scholarships were awarded without regard to family financial need.
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