How do you make college more affordable? I guarantee that your clients with college-bound teenagers are agonizing over this one.
The good news is that there are simple ways for parents to shrink their college costs. Here are eight excellent strategies to get them started:
By Oct. 29, colleges and universities must have net price calculators installed on their websites. This might not sound like a big deal, but it will be revolutionary because it will make true college prices transparent for the first time.
A family that uses a school's calculator will receive a personalized estimate of what a school will cost them after projected scholarships and grants are subtracted. They can receive this information long before their children decide whether to apply.
Using one of these calculators, some families will discover that a $55,000 school may only cost them $10,000 or $20,000 while for other parents they will pay full price. That's the sort of information that is critical before a child finalizes a college list.
What's even more exciting are the price comparison tools that these calculators will surely trigger. It's inevitable that companies will begin offering college-price comparison software comparable to LendingTree, Zillow, Expedia, Kayak and Carfax.
Plenty of parents who earn six-figure incomes assume that they have no chance for financial aid. This assumption is a shame because it can leave serious money on the table when a child is applying to expensive universities. Families that make $150,000 to $200,000 can sometimes qualify for significant need-based aid at pricey colleges.
To illustrate this, I used Stanford University's net price calculator. Here are the main stats that I plugged into the university's calculator:
Family's adjusted gross income: $160,000
Student income: $2,000
Home equity: $150,000
Cash: $15,000
Taxable accounts: $60,000
Number of children in college: 1
Younger children: 1
According to the Stanford calculator, this family would qualify for $26,600 in need-based financial aid for the teen's freshman year.
It's worth mentioning here that neither Stanford nor any other schools will ask about a family's retirement assets when calculating financial need. So families could have millions stashed away in retirement accounts and it wouldn't hurt their financial aid chances.
As the Stanford example illustrates, price tags are meaningless. Most college students do not pay full price. Your child's chances of getting a price break will increase at schools where everyone or nearly everyone receives scholarship or grants. These schools are more common than you think. At private college and universities, for instance, 88 percent of students pocket grant or scholarship money.
At private schools, the average tuition discount rate is 49 percent. State schools also dispense price breaks for students of all income levels. In fact, 50 percent of grants from state flagship universities go to students who have no demonstrated financial need.
It's been my experience that parents and teenagers are usually stunned when they discover how difficult it is to graduate in four years. Only about 35 percent of students graduate from college in the traditional eight semesters. Obviously, families save considerable amounts of money when their children can graduate on time. You can find the four-, five- and six-year grad rates of any school by visiting College Results Online (www.collegeresults.org).
When a student's parents are divorced, the financial aid question can get a lot more complicated. In fact, net price calculators often won't work for these families and this is particularly true at prestigious private schools.
Divorced families, however, can enjoy a financial benefit that intact couples can't. Most schools only require the Free Application for Federal Student Aid (FAFSA) and this application only asks for the financial information of the custodial parent.
Keep in mind that there is a different definition of custodial in the higher-ed world. The custodial parent is the one whom the student has lived with the majority of the year. So if the mom is a financial advisor who makes a hefty salary and the ex-husband is a high school teacher, it would make sense that the teen live with the dad for a few more days a year.
In this hypothetical, it would be much more difficult to shield the mom's income if the teen applied to the mostly private colleges that use another financial aid application, CSS/Financial Aid PROFILE.
Thirty-five percent of students attend colleges that are no more than 50 miles from their homes and more than half end up at colleges within 100 miles. Colleges, however, crave students from other regions because they want to be able to brag about their geographic diversity. Here's the best part: college are eager to offer scholarships to distant students to lure them to their campus. These price cuts can make going to a distant school cost less than an in-state public university.
Clients who need to borrow can reduce their college costs by relying on the best college loans. The Direct Stafford Loan is going to be the superior loan for students. This federal student loan offers protections and features that private loans can't match.
Okay, there's not much parents can do about this when their children are on the verge of heading off to college, but being rich helps. A new survey of hundreds of senior college admission officers indicates that state and private institutions are more motivated than ever to accept rich kids to help ease their own revenue issues. Admission directors strongly favor giving merit scholarships to wealthy applicants.
Lynn O'Shaughnessy is a college consultant, author and speaker. She writes three college blogs for CBSMoneyWatch, U.S. News & World Report and TheCollegeSolutionBlog.com.