Affording College
What Families Need to Consider

In the best of times college is an expensive proposition.  In a bad economy, it can be especially daunting to contemplate spending tens of thousands of dollars or taking on a burden of loans, or both.  So, it’s important for students and their families to do their homework and learn how to compare different options and weigh the value associated with different schools.

Understanding the comparative costs of different institutions can be complicated and confusing for families who haven’t been through the process.  First, they should recognize that the “sticker price” of a college or university is not what counts.  An expensive private institution that has generous financial aid can end up costing less than a public university with less generous financial aid.  The comparison has to be made after students receive financial aid packages from all of the schools in their consideration set.

The financial aid package will provide a detailed breakdown of what the sources and amounts of aid include.  The most desirable aid is gift aid, which does not need to be paid back.  Gift aid includes scholarships, which are based on academic or other accomplishments and are not based on need.   Need based grants awarded by the institution are also considered gift aid, but depend upon the family’s ability to contribute, as measured by the Free Application for Federal Student Aid (FAFSA).  Federal aid, including PELL grants and SEOG (Supplementary Educational Opportunity Grant), ACG, and Smart grants also do not have to be repaid.  The sum of gift aid should be compared as a subset of the Financial Aid award. 

Self help aid includes the components of the package that will need to be repaid, e.g. Federal Stafford loans (both subsidized and unsubsidized), PLUS loans for parents, and private loans, in order of desirability.  The opportunity to participate in federal work study is also a self-help category, although repayment is not required.

The student compares the packages and finds that school A had provided more gift aid than school B, or that school B has offered a larger package overall.  Is that the end of the story?  Not quite.  The student should also consider the likelihood that he or she will be able to complete the desired program of study in four years. National studies show that only 37% of students attending a four-year college or university actually graduate in four years.  Private institutions do somewhat better than publics.  ACT has reported the five year graduation rate for private institutions at 56.6% v. public institutions at 44.2%. 

This difference is important for families to consider.  State budgets are stretched and less money is available to support public colleges.  Meanwhile, increased enrollment at public colleges is expected as a result of the recession.  This will mean larger classes, fewer resources, and a students likelihood of being able to take all the classes they need within four years declines.  In contrast, some private institutions like Doane College, Green Mountain College, and others, offer students a four-year graduation guarantee.  Under such a guarantee, students who meet certain basic requirements like selecting a major on time and meeting with an advisor each semester are guaranteed to graduate in four years or the college will pay for any additional tuition that is required.

When students and families do their cost analysis, it’s not only critical to evaluate the contents of each financial aid award letter, but also to consider the type of institution and the potential additional costs that will be incurred if the student cannot graduate in four years.  An additional semester or two at a public institution may add up to a total cost that is actually more than four years at a higher priced private institution.

And remember, cost is not the only factor (or even the most important factor) in choosing a college.  If a student finds a great place that feels like a good fit and will be engaging and exciting academically. . .well, it’s hard to put a price tag on that.

Editorial content provided by Dr. Sandra Bartholomew, Green Mountain College.