Run the Numbers
A few simple steps and some tough questions can help families tackle the cost of college
More than 2 million Americans have just three weeks to make what will probably be one of the biggest financial bets of their lives: where to go to college.
Unfortunately, the odds of making a mistake are high because many colleges and lenders fail-sometimes intentionally-to provide the basic information students need to keep college costs within their budgets. Many schools, for example, ignore at least the spirit of vague federal laws requiring them to give students plenty of warning about scholarship details and total costs. And the New York State attorney general has launched an investigation into whether colleges and lenders have been illegally steering students and parents away from the cheapest education loans. Such tactics can be especially effective on college applicants, most of whom are young adults whose biggest previous financial decision may have been which sneaker to buy.
The costs of making a mistake have never been higher. About 40 percent of all students drop out of college and so get little career or earnings boost-but are often left with big bills. And this year's freshmen will face the risk of the biggest bills in history, as colleges around the country are raising tuition to new records. The California State universities' fees will jump 10 percent this fall; the University of Kentucky's, 9 percent. Even accounting for increases in federal Pell grants and other financial aid, students at public universities will probably have to scrape together about $14,000 from their own families next year, up several hundred dollars from last year. Meanwhile, students who get no scholarships and choose to pay the sticker prices of the most expensive private universities will have to pony up more than $50,000.
But the payoff to making a good decision is still lavish. Those who choose the right college, and make the grades and payments to receive a degree, earn about 40 percent more than those who drop out of college. That kind of jackpot is what is inspiring Olga Nuñez, 23, to ask plenty of questions about the financial aid offer she expects from a community college in New Jersey. She's being careful this time around because of the blunder she made at 20, when she was thrilled to get a small scholarship from private Wheelock College in Massachusetts. She didn't notice then that much of the rest of her aid package was loans. And she didn't check out the school to see if she'd be comfortable there. After just one year of feeling isolated and becoming alarmed by her new college debts, she dropped out. "Now I have almost $15,000 in loans," she says.
"This time, I'm going to do it right."
Financial aid experts and students like Nuñez say that a few hours of research and some simple strategies are all it takes to tilt the odds in students' favor.
Step 1. When Joe Paul Case, director of financial aid at Amherst College, helps friends decide which college to choose, he says the first step is to figure out just how much each college is going to cost. So he sits down with all the student's financial aid award letters, a big pad of paper, and a pencil. He draws a grid, writes the name of each school at the top of a column, and then starts to tear his hair out. The very first and most important number-the total cost of a year at the school, including tuition, fees, room, board, books, travel, and other reasonable expenses-is often left off award letters and college websites. Many schools reveal their total costs only upon request, so that their high prices don't scare applicants away. "They don't want to have confrontations with families" about costs but instead want students to get excited and say, "Oh, look how much scholarship there was," Case says.
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