How Does 45% Off the List Price of a Private College Sound?
Families need to research available discounts and not pay retail
With more than $1.5 trillion in outstanding student loan debt, it’s hard to argue college education is cheap.
But the list prices for tuition published constantly are not what people actually pay. At least not well-informed people with a smart strategy. Want 10% to 50% off your kid’s college education so you can keep saving for retirement? Read on.
Nothing but net
First, take full advantage of public data called net price. The net price is the actual out-of-pocket cost families are on the hook for after deducting all grants and scholarships.
For more than a decade, any college – public and private – that participates in the federal college loan program has been required to publish its average net price data. And a college’s net price is typically way less than its published sticker price. According to the College Board, the average list price to attend an in-state public four-year school is $21,000. But the average net price after subtracting the typical aid a student receives is $15,400, or about 27% less.
At private nonprofit four-year schools the average sticker price is a jaw-dropping $50,000. The average net price is about $27,400. There’s your 45% discount. Yes, net costs vary by household income, but even high-income families typically get a sizable discount.
Net price varies from school to school, based on how a school chooses to crunch a family’s finances and how eager a school is to have your kid attend. Schools pay up, essentially, for top test scores and grades so they can rise in the rankings. So, if your kid barely qualified for a school, their chances of getting a big discount are less. If your child’s scores are better than the school typically can attract, a bigger discount is possible.
Don’t be shy. Families regularly negotiate, even playing one school’s offer against another. You wouldn’t leave money on the table buying a house or accepting a job offer, so don’t do it here.
There are likely to be necessary negotiations within your own household too. Start early. Parents often encourage kids to shoot for the moon by hatching a short list of dream schools and maybe one or two academic safety schools. Financial safety often is ignored. When acceptances roll in, there’s a scramble to pay for a kid’s top choice. Finances can go off the rails.
Running the net cost numbers during your teen’s sophomore year of high school allows everyone to understand whether the dream school might be a financial nightmare. Doesn’t mean you cut that school from the list, but that you should set expectations. (“If the net price comes in below $X, we’ll consider it. If not, let’s agree now it will be out of play.”) That should lead everyone to a conversation about finding schools with a net price that’s affordable.
Net price calculator tips
A web search for “net price calculator” and school name will lead you to a calculator on the school’s site. Or create a free account at the College Board website and use its portal to access net price calculators at hundreds of schools; with an account, your data is saved, which beats inputting data on multiple calculators.
Some schools use a calculator template from the federal government; others have their own custom calculators. Keep in mind that the more questions asked, the better the estimate will be. Some schools ask about GPA and SAT scores, others don’t, which can have a big impact on merit aid when you apply. Some private nonprofits ask about home equity, others don’t.
Be patient and answer carefully. Garbage-in, garbage-out is no way to approach this big-ticket expense. Before you start, pull out your most recent federal tax return . . . you’ll need it.
Be aware: Some schools front-load aid into freshman year to entice families, and then aid drops in subsequent years. Or aid stays the same, but the cost of attending rises. At the point your kid is applying to schools, you might want to contact the financial aid office for each school and ask for the average net price for freshman and the overall average for all students. If the freshman net price is much lower, that’s a risk to work into your choice.
Long before choosing a college, you should read my prior columns for a general guide to college loans and insight into 529 state college savings plans and Plus loans.