“I realized that I was rooting for rejection. If NYU said no to my daughter, I didn’t have to …”
I wish I could say I haven’t heard parents admit this, but college is expensive. The one your child has fallen head over heels for might be too expensive. Where does this leave you as a parent? Are you the villain in their love story?
The first thing to do is to get an estimate of how much the dream school costs. The first tool you have at your fingertips is a net price calculator.
Net price calculators take your financial information and give you an estimated cost of attendance after need-based aid.
All colleges must have net price calculators, and their estimates are usually pretty accurate. Regardless of your income, the simpler your tax return, the better, on aggregate, the estimate. Remember, Net Price Calculators don’t include any scholarships, even automatic awards.
Run the calculators, even if your family finances resemble a multinational holding company. They will be a solid starting point.
Don’ts with Net Price Calculators
- Don’t generalize a net price estimate from one college to all similar colleges. Cornell and Carnegie Mellon have different financial aid formulas, and the net prices may differ.
- Don’t go to a college’s website and try to find the net price calculator. It’s easier to find on Google. College websites are a lateral mess of departments, programs, etc., and it’s hard to find anything.
- Don’t use 3rd party calculators. If the college routes you to College Board for their NPC, fine. That’s their preferred method, and it should be as good as any self-hosted calculator. College Raptor and other options tend to be less accurate.
- Don’t take the NPC result as a firm offer. The real number can be higher or lower.
- Don’t forget that colleges seldom reduce price. Assume that you’ll experience between 5-10% growth in net cost every year of college.
Net Price Calculators are not tools to say “No” for you. In most cases, even if it looks like the price is beyond your wildest imaginings, it’s best to let your child apply. Nothing is set in stone, and there are always other options for funding.
OK, I ran them. Now what?
- Don’t freak out.
- Remember, net price estimates are estimates.
- Remember, there are other funding sources than your checkbook and debt. Your child can use our Small Ball Scholarship Strategy to find additional scholarships/grants. We can also help with that process, especially with essay-driven scholarships.
- If you’ve had a financial change not yet reflected in your taxes, rerun the calculator with your new (or estimated) numbers.
- Remember that financial aid can be negotiated if you have a valid reason. Last year, we knocked off $23k per year for a single student at Brown. Right now, we’re in the process of doing so with six students at colleges ranging from Dartmouth to Williams. In one case, we’ve dropped the cost of attendance by $11k per year already, and I suspect we’ll get at least another $10k off. Reasons that often work: money sent to extended family (especially internationally), uncaptured medical expenses, changes in income or expenditures, and better financial aid offered by a college’s true competitor.
- But keep in mind that the price could be higher. That’s rarely the case, but it happens.
Your job is to make your child understand the difference between “Can’t” and “Won’t.”
How much can you spend, and at what cost? How does spending an extra $10,000 flow through the family financial system? Where does it come from?
What about your own dreams? There’s no concrete answer to how many dreams you should defer.
Financially speaking, parents often make the same mistake as kids–short time horizon. Think 10 and 20 years from now.
How will it impact you if you become disabled or battle cancer? We’re seeing signs of tragic cases: Mom/Dad sacrifice too much for a child’s college education, delay retirement, retire with inadequate means, or become quasi-dependent on young-adult children.
Student debt is a shackle that colleges are happy to forge for families. But no one should go into terrible debt for a bachelor’s degree.
Think through the sources of money and price them out. Get an estimate on a home equity line and private student loans APR. Here’s how I rank possible college payment sources:
Of these, I see the Parent PLUS loans as the most dangerous. They can be massive (up to the cost of attendance), regardless of the ability to pay. Interest rates are high. There is an origination fee, and finding refinancing options can be challenging. You can’t escape them with bankruptcy, and the government will even garnish your social security retirement funds.
Using these funding sources and any others you can count on, you can build your own spending packages with dollar amounts from known sources. I recommend people establish three numbers:
- Want to spend
- Midrange spend
- Max spend
Eventually, you’re going to show your child this work. I’d recommend using a spreadsheet or online calculator to show longer-term ramifications.
Even if the numbers are dispiriting, most people feel better. We always suffer more in our imagination. Now you’re armed with financial reality.
You have two big uncertainties left: what value means to you and how your kid will react. We’ll tackle that next time.