Choosing a College: 3 Key Affordability Questions to Ask

By Joe Messinger, CFP®

January 13, 2023

4 min READ

The United States is home to approximately 6,000 colleges and universities. Having that many schools to choose from can be both a blessing and a curse. Yes, every student can find just the right fit for them, but on the flip side, a student can become overwhelmed by the sheer number of choices. When it comes to choosing a college, how does a student know where to start in narrowing down their list?

We talk about finding a college that’s the best “fit” a lot. What makes a school the right fit for a student? Many school features can be considered:

• The desired major/courses
• Size (small, medium, large, massive)
• Setting (urban, suburban, rural)
• Distance from home
• Extracurriculars
• Special programs (study abroad, Greek, honors programs, ROTC, etc.)
• Housing
• Campus facilities (labs, recreation, classrooms, gyms)
• Student life/community/involvement

Students need to decide which of these characteristics are the most important and then find colleges that check those boxes.

How much weight should we put on cost when choosing a college?

The above list of considerations are important, and we have great partners that help guide students through the college selection criteria mentioned; however, we would strongly suggest you put cost near the top of this list. Cost needs to be a make it or break it factor when choosing a college.

While some debt may be unavoidable, the goal is to keep it manageable to minimize the impact on the future graduate.

Figuring out the cost is not a simple matter of looking up the tuition, room and board, and fees on a college’s website. Those figures are what we call the “sticker price.” And just like buying a car, you rarely pay the total sticker price when you make a purchase. If you are an informed college consumer, the sticker price is irrelevant. It is all about your “net cost” to attend.

Financial aid policies can be difficult to decipher by simply looking at a school’s website. Every family’s financial situation is unique, and you should never assume that the average financial aid package touted on the website and in brochures will apply.

Here are 3 key questions to ask when assessing your family’s affordability at a particular college:

1)  What type of aid does the college provide?

Aid can be divided into two broad categories:  need-based and merit aid. Families often mistakenly assume all universities offer merit aid for academic or other talents. They are surprised to find out that not all schools do. Many of the most elite private universities for example award very few if any merit scholarships. On the flip side, families that are eligible for need-based aid often assume a college will be able to meet a student’s entire need, and that isn’t true either.

So, as a basic first step, understand what types of aid a college may provide by exploring the financial aid/scholarship section of their website but sure to ask specific questions on college visits to see how this may apply to you.

2)  How can my student get the most financial aid?

Now that you understand the types of aid at a college you are researching, how does your student match up? Will your student’s credentials or characteristics trigger the award or gift aid? Match your student with those colleges providing the best financial position.

For need-based aid candidates, families need to know their Expected Family Contribution or EFC. Determined by completing the Free Application for Federal Student Aid or FAFSA, this number is the amount the government thinks a family can afford to put towards college each year. (This number will probably make you gasp because it is higher than you expected.) A calculator like this one from the College Board can help you figure out this number.

When the cost of attendance at a school is higher than the EFC, the difference is the student’s “need.” Just because you are “eligible” to receive need-based aid does not mean that the college has the money to give you. Some schools meet 100% of need and others may only have the resources to meet 50%. Seek out those colleges that will cover at or near 100% of need. A few things to keep in mind;

• Any “unmet need” is an additional out of pocket expense.
• Need-based aid is frequently awarded in the form of student loans and work-study.

If you don’t qualify for need-based aid, focus on schools that will award merit money–typically referred to as “non-need merit” scholarships. In general, colleges that provide competitive merit scholarships award them to students in the top 25% of their applicants. Visit a website like College Navigator, find the college you are interested in, and check out their middle 50% range for test scores. If your student’s test score is above the top number in that range, they have a better chance of receiving money.

Some schools provide merit money automatically for certain GPAs and test scores. We like to call them “grid scholarship” schools because they will present their awards in a grid on their website. They want you to know about the money available to you so they make it very clear. Miami University has a good example on their website.

Understand your student’s position–need vs. merit–and match it up with colleges that will offer your student the best education at the best price.

3)  How can we estimate our families’ “out-of-pocket” costs at each college?

Colleges are required to have “net price calculators” on their websites, and they can be helpful. Every college’s calculator can be slightly different. In general, you plug in lots of financial information, as well as some information about your student, and they give you an estimate of the cost. Remember, this number is just an estimate and only applies to a student’s freshmen year. Beware that some calculators will include federal student loans and work-study as financial aid. Others will only include “free money” in grants and merit scholarships.

With the net price in hand, does that college still fit? Is this cost something your family can meet?

The answers to these questions are key to narrowing down your college list and making an informed college choice. Never rule a school out based on the “sticker price.” Answer these three questions for the colleges you are considering and don’t keep colleges on your list that you know you cannot afford. That only leads to heartbreak for your student and we have seen that play out many times.

Of course, we would never recommend a student choose a college merely based on price! The simple fact is that many schools are well worth paying the premium to attend. However, if attending that school results in over-burdensome student loans and robbing retirement, we would encourage you to cast the net a little wider. With so many beautiful colleges, you can find an excellent fit at a comfortable price.

Originally Posted 6/17

Updated 1/23