Weighing your Options - Net Price and Financial Considerations

In California, where I live and work, there are 3 college systems: the California Community Colleges (with approximately 113 colleges), the California State University system with 23 campuses, and the 10-campus University of California system.  Tuition prices vary widely between these systems, with the community colleges providing a bargain at $1104 per year, the CSU system offering a moderate price of $7022, and the UC system topping out at approximately $13,896 per year in tuition and fees.  Conventional wisdom in California is that the UC system is much more expensive than CSU, and the numbers above would seem to support this idea.

However, the prices quoted above are just for tuition and fees.  Including estimates for room and board, books, travel, etc. the total cost of attendance for a student paying full price is as follows:

Community College                    $14,604
California State University          $23,478
University of California               $31,816

Once again, it would seem that UC is by far the most expensive, community colleges the least expensive, with the CSU system comfortably nestled in the middle.  A major caveat here is that the prices above are for a student paying the full price; that is, a student with no financial aid whatsoever.

However, most low and middle income students do not pay the full price of attendance.  Both the state of California and the federal government have grants available for low income students, and the state of California and the public universities offer grant assistance middle income students as well.  The net price is the amount the family will have to pay either from savings or student loans; this is the actual price paid after all grants and scholarships are applied towards the cost of attendance.  When you factor in grants and other forms of gift aid (financial aid that does not need to be paid back), the ranking of the systems by net price changes considerably.  Consider the following net costs for a student in a family of 3, only one student in college, for the following family income levels:

                                                  < $30,000             $50,000            $100,000

Community College                    $8,411                $11,524            $13,689
California State University        $10,620                $16,726            $23,478
University of California               $8,500                $11,130            $25,544

The above net cost values are for a California resident living on campus, dependent for financial aid purposes (under 24, not married or active duty military, student has no dependents).

Take a few minutes to carefully study the above table.  Does this surprise you?  When I calculated out the net cost, I was certainly surprised.  This turns conventional wisdom upside down.  For a student with a family income less than $30,000, the "expensive" UC system is within $100 of the cost of a community college.  And for a middle income student with a family income of $50,000, the net price for UC is actually less than for a community college!  I experimented with several types of family composition and income, and in every case, up to a family income of $90,000, the UC system came out with a lower net price than CSU.  This is presumably because the UC system has more grant aid available for students who qualify.

Of course, one benefit to attending the local community college is the ability to live at home, and this will certainly result in cost savings.  There are also other factors that are important in choosing a college; most community colleges and many of the CSU campuses are smaller and may feel more personal than a large UC school.  Certain schools may have a particular major or program of interest, such as the Oceanography program at Humboldt State, or the fantastic culinary arts program at American River College in Sacramento.  Admissions at UC campuses can also be fiercely competitive, and some students may not be able to go directly from high school into the UC system.  The point here is not that everyone should go into the University of California.  Many people, however, assume that the UC system is out of reach financially, and this is a huge misconception.  After all, it is the net price, not the sticker price, that matters in the end.

Net price calculators can be found on each school's website. This is true for both public and private colleges and universities.  Although I did not include the data above, my calculations for several out of state and private schools showed a net price in between the UC and CSU values.  Before ruling out schools based on how much you think they will cost, spend some time playing with the net price calculators - you may be surprised at how the different schools stack up financially.

Community Colleges

There are about 1,123 community colleges in the United States, with a total enrollment of approximately 12.4 million students. Community colleges generally have lower costs, and there is currently a movement to make community colleges free for 2 years if students meet certain requirements.  In California, community colleges are essentially free for low - income students, who qualify for a waiver of the registration fees (the Board of Governors, of BOG waiver).  Community colleges in Oregon offer in-state tuition to California residents, and many community colleges participate in regional networks that offer tuition breaks to students from neighboring states.

Community colleges can be a great access point for students who are worried about college costs.  If you decide to go this route, however, there are a few things to keep in mind.

Good planning is essential for success

Graduation rates for community colleges tend to be much lower than those for 4-year colleges.  There are many factors that play into this, but two major factors are planning/counseling and the commitment of students going into a community college.  Before you start, know what your goal is.  Do you want to transfer?  Look into guarantee transfer programs that will keep you on the right track, get you through to transfer more quickly, and guarantee admission into a university.  Are you looking for an AA or certificate?  Meet with a counselor early and often to make sure you are taking the right classes.

Different schools have different policies on student advising; while mandatory counseling is built into the program at many universities, at a community college you will most likely have to take the initiative.

Not all community colleges are the same

Different community colleges have different strengths and weaknesses.  It's an obvious point, but one often overlooked by students.  If you're interested in culinary arts, American River College in Sacramento may be your best choice.  If you're interested in welding, Butte College has a great program.  Recording Arts Technology?  Try Los Medanos college.

Part of the lower completion rates at community college may have to do with the fact that students don't pay attention to finding a good fit to the same extent they do with universities.  Of course, one of the financial advantages of community colleges is that they are ubiquitous, and if you go to the local community college you can live at home and save money.  But if the local community college doesn't have the program you want, you may be wasting your time.  This can lead to discouragement and cause students to quit.  So to increase your chances of success, make sure the college has the program you want.  College Board has a great search tool to help you find the college that best meets your needs and interests.

Understand Transfer Requirements

In California, if you take any college classes (at a community college or elsewhere) after graduating high school, you will generally have to complete the full 2-year lower division requirements before transferring to a UC or CSU school.  Some students think they'll just go to the local community college for a year, then transfer.  If you're planning to transfer to a California Public University, understand the commitment before you enroll in a community college.

For more information

To find out more about community colleges, visit the American Association of Community Colleges website, or your state community college network website.  For California, this is http://www.cccco.edu/.

Financial Aid, Scholarships, and College Cost

Recently, I sat with a senior poised on the verge of going off to college.  She has been accepted to her top choice college, has completed the Free Application for Federal Student Aid (FAFSA), and is from a family with very low income.  She was reviewing the financial aid she had received so far and lamenting the fact that there was no way she could cover the difference between the federal and state aid she had received and the total cost of attendance at this university. Luckily, what she can see now in terms of federal and state grants is not the whole picture, and we were able to create a strategy to meet her college costs.

The problem with financial aid, and what makes the process so complicated and stressful, is that you can't see the full picture right away.  After submitting the FAFSA, you should get an estimate on the federal Pell Grant you may qualify for, as well as any state grant money, but you can't see what the specific college will offer you until you get the award letter in the spring.

In addition, most undergraduate students with financial need will qualify for up to $5500 in student loans - $2500 subsidized (which means they don't accrue any interest while you're in school) and $3000 unsubsidized (you don't have to start paying them back until after you graduate, but they will accrue interest during this time).  These loans, as well as the approximately $2000 in work study funds, may also not show up in your offer until you get the financial aid award letters from specific colleges in the spring.

The other problem, and unfortunate reality, is that college costs have risen faster than federal and state grants for education, and even for the most academically qualified students with the highest financial need, there is likely to be a gap of some sort between the aid offered and the cost of attendance.

So the bad news is, this process is confusing and stressful. The good news is, when the offer letters come, there will probably be additional aid available that will help you pay your college costs.  The other good news is that there is a lot you can do to improve your ability to pay for college.

So what's a student to do?  Below are some tips to help put yourself in the best possible position:

• Complete the FAFSA (www.fafsa.ed.gov) as soon as possible after January 1 your senior year.  Be sure to complete it before the deadline for state aid (March 2 for California). You don't need to wait until your taxes are done; you can use estimated values for income and go back and revise the numbers after you've completed your taxes.
• Check out the financial aid website for the colleges you are applying to and make sure you know the deadlines for scholarship applications, and APPLY before those deadlines.  Be careful, these deadlines may be earlier than the actual college application deadline.
• Spend some time on scholarship searches.  I'm amazed at how many students don't follow through on this.  I'll hear "that's too much work", and I'm thinking "It's $2000!!  It's worth a little work!" Yes, it takes time and effort, but if you spend 10 hours on scholarship applications and receive a scholarship for $2000, you've essentially just made $200 per hour. One of my favorite scholarship search sites is www.petersons.com.
• Apply to at least 4 colleges or universities.  Each school will offer a different financial aid package, and some will be better than others.  Applying to a variety of schools will increase the likelihood you'll get a financial aid offer that will work for you.
• Don't be afraid of loans if you need them to pay for school.  Obviously, you want to be prudent and minimize your student debt, but the average college graduate (with a bachelor's degree) will earn, on average about $1 million more than the average high school graduate.  Think of it as an investment in your future.  You can also look into income based repayment plans to ease the pain of repayment. (Disclaimer: I am not a financial advisor and am not qualified to give financial advice.  Please see your CPA or other financial advisor for financial advice related to your specific situation).

Finally, I'd like to end with this great infographic on myths about financial aid: 8 Myths About Financial Aid.

What is a Liberal Arts College Anyway?

People in the college counseling world tend to throw around terms like "research university" and "liberal arts college", but what do these terms really mean?  And more importantly, how do you choose which type of school is best for you?

In brief, a research university is one where a significant portion of the money to run the school comes in the form of research grants.  This generally means that there is exciting, cutting-edge research going on, often with professors who are well-respected in their fields.  While this can be exciting to be a part of, and the professors are, by necessity, staying current in their respective fields through the research they are conducting, it comes with a price.  The professors' time is split between research and teaching - and this may impact the time and effort they are able to devote to their classes.  Typically, but not always, research universities tend to be large, with intro level classes often having enrollments of hundreds of students.  These classes are then split into discussion sessions run by graduate teaching assistants.  So even though the university may boast professors who are Nobel Laureates, the average undergraduate student may never actually interact significantly with those instructors.

Liberal arts colleges and universities, on the other hand, tend to be smaller and focused almost exclusively on teaching undergraduates.  Professors may or may not be involved in research in their respective fields, but if they are, the focus is still firmly on teaching.  Class sizes tend to be smaller (often under 20 students per class) and students are able to develop a closer relationship with their instructors.  The benefits of a liberal arts education include more interaction with professors, smaller class sizes, and a greater focus on teaching.  Liberal arts colleges focus on developing excellent oral and written communication skills, as well as critical thinking skills, which can be applied to nearly any career.  These types of colleges also tend to have excellent success rates in terms of students moving on to graduate or professional study.  A 2010 article from CBS news laid out 5 reasons to attend a liberal arts college. Again, however, this comes with a price.  The drawbacks: the university is less likely to be involved in cutting-edge research, there is often a smaller selection of majors, and students are unlikely to find specialized majors such as industrial design or dietetics.

There are some common misconceptions of liberal arts colleges.  To dispel these myths and set the record straight, keep in mind the following:

• Liberal arts colleges are not necessarily connected with liberal politics or thinking.  The culture at a liberal arts college could be predominantly conservative or predominantly liberal - it depends on the college.
• Most liberal arts colleges have strong programs in math and science as well as humanities, social science, and art.
• Liberal arts colleges have some of the highest success rates in students going on to graduate and professional schools.
• Liberal arts colleges are not inherently any more or less expensive than other types of schools - again, it depends on the school and the amount of financial aid you qualify for.
• You don't have to be interested in art to attend and succeed at a liberal arts college.

So which type of school is best for you? There are many factors that affect how well a college or university fits your needs, and the distinction between research university and liberal arts school is only one of these many factors.  But in general, consider the following:

A liberal arts school might better fit your needs if:

• You want a personal connection and significant interaction with your professors
• You want small class sizes where interaction is a key part of the class
• You are planning to major in a general area of science, art, humanities, or social science

On the other hand, a larger research institution may be better if:

• Being around cutting-edge research is important to you
• You thrive in a larger, more diverse environment (socially and academically)
• Class size, particularly in intro classes, is not important to you
• You are interested in a more specialized field of study

More information can be found in this excellent article from Education.com  Whatever you decide, be sure to thoroughly explore the offerings at schools you are interested in, and, if possible, try to visit the school in person to see how you would fit in (see post on Campus Visits from July 2012).

FAFSA Season again

If you are a senior, or the parent of a senior, the single most important thing you can do right now to support your college journey is to complete the FAFSA.  That's the free application for federal student aid, and it's the gateway to almost any type of financial aid you're likely to receive.  To complete the FAFSA, go to www.fafsa.ed.gov and follow the instructions to start a new FAFSA.

The FAFSA will ask about the student's and parent's income and assets, and will calculate an Expected Family Contribution (or EFC) based on the information you provide.  It's important to understand that the EFC is not necessarily what you will pay for college, but it is an important factor in determining your financial need.  Your financial need will be the difference between the cost of attendance (COA) at the school you attend and your EFC.

The information on the FAFSA determines your eligibility for federal grants such as the Pell Grant and state grants, including the Cal Grant and California Middle Class Scholarship in California.  State grants are available in many other states as well. Furthermore, most scholarships will require that you have filed a FAFSA, and will use that information to determine income-based eligibility.

Some important things to note about the FAFSA:

• Although the FAFSA will ask for information from your tax return, you do not have to wait until you have filed taxes before submitting the FAFSA.  You can use estimated income, then go back and make changes after you file your taxes.
• If you are a California resident, be sure to file the FAFSA before March 2.  This is the deadline for the state grants, including the Cal Grant and the California Middle Class Scholarship.
• If you are eligible for the Cal Grant, be sure to submit your GPA verification by March 2.  See your high school counselor for information on how to do this.
• If your parents are separated or divorced, you will only provide income information for the parent you live with most of the time, and their spouse, if they are remarried.  If you live with each parent 50% of the time, you should provide income information for the parent who provides most of your financial support.
• Make sure you are on the correct website - you want .gov NOT .com  There is a fafsa.com website that may charge you up to $100 to file this free application.  
• You need to complete the FAFSA each year.  You should file as soon as possible after January 1st of each year.

Once you have completed the FAFSA, you will receive a Student Aid Report (SAR) which will include your EFC, along with a summary of information you entered in the FAFSA.  Check your SAR for accuracy, and follow the directions you'll receive with the SAR if you need to make corrections. 

Undocumented students in California who meet the requirements of AB540 should complete the Dream Act application.  It is similar to the FAFSA, but does not require a social security number.  The Dream Act assesses eligibility for the Cal Grant and California Middle Class Scholarship, and provides important information regarding eligibility for institution - based aid. 

Once you have finished your college applications, make sure your student aid report is sent to all colleges you have applied to.  You can list up to 10 colleges on the FAFSA, if you apply to a college after completing the FAFSA and did not have the information sent, contact the financial aid office at the college to make sure they receive the information from your FAFSA.  They will use this information to determine your eligibility for financial aid.

Eventually, you should receive a financial aid offer letter from each college you are accepted to.  Be sure to check your online portal for each college to make sure they are not missing any important information.  If you have questions about the offer, you should contact the school's financial aid office.  College Options, a community-based advising service in Northern California, has a tool for comparing offer letters, along with a wealth of general information on financial aid: http://www.collegeoptions.org/#!financial-aid/c8k2

If you play your cards correctly, you'll have a variety of options to choose from.  Now you just need to sit back and decide.

SUMMER AGAIN!!!

            It’s that time of year again when students take a deep breath and look forward to the freedom of summer.  While some students are stocking up on novels to keep them company through those long, open days, and others are flexing their fingers in anticipation of hours of gaming, or perhaps dreaming of long, lazy, days at the lake, summer also offers an opportunity to complete some preparation for college and career that can be hard to fit into the busy weeks during the school year.  The following summer activities can help you get ready for the day you graduate – which tends to come sooner than you might think!

1. Get a job.  Work experience is great for your resume, and for college and scholarship applications.  The extra money in your pocket isn’t bad either.
2. Find an internship in a career field you’re interested in.  While you might not get paid right now, this valuable experience can help you get a job later on, and can also help you figure out if this is really what you want to do.
3. Volunteer. There are plenty of community organizations that could use your help.  Find something you’re interested in, like helping people, improving the environment, or working with animals.  It’s also a great way to meet people with similar interests.  And it’ll give you something to put on your resume and/or college and scholarship applications later.
4. Explore your interests.  Learn something new.  Learn a new sport or skill.  It may be that this is the summer you discover your love of herpetology, and launch yourself into a long and satisfying career.
5. Dream about your future.  And when you’re done dreaming, do a little planning. Think about where you might want to live, and do some online searching for colleges that offer majors you’re interested in.  For that matter, do some online searching on different majors and careers and find out what they’re all about.  
6. If you just finished your junior year, research deadlines for applications for colleges you’re interested in as well as scholarships you might qualify for.  Fall of senior year is likely to be extremely busy, and the more organized you can be now, the better off you’ll be come fall.
7. If you have the chance, visit some college campuses.  See what it’s like to walk around campus, and if there are students there for summer session, ask them what it’s like to go to school there.

            Yes, it’s true (probably) that you’ve worked hard all year and have earned yourself a little rest and relaxation.  And by all means, relax and have some fun.  But while you’re doing that, spend a few of your free hours looking to the future.   

Talking about College Costs

It seems that work and other life commitments have completely overrun my schedule for the last little bit here, and it's been quite a while since my last post.  These days I'm spending a lot of time thinking about financial aid, however, and I felt I needed to share a few thoughts on thinking (and talking) about college costs.

If you are a senior (or the parent of a senior) reading this, I'm sorry, it might be too late.  But read on, maybe you can pass this advice on to your friends who are (or who have children who are) freshmen, juniors, sophomores, or even middle school students.  Seriously, it is never too early to start talking about college costs. There are several reasons for this:

First, it takes awhile to research grants and scholarships. If you start this process your senior year, you might only have a few months to complete your research before the scholarship deadlines have passed you by.  Some of the larger scholarships require a lot from you in terms of information on your community involvement, extra-curricular activities, academic achievements, and essays or personal statements.  If you are rushing the process of compiling this information and writing your essays, you may not be presenting your best work - and you are competing with many other students who want that money just as much as you do.  Start now collecting the information and thinking about how you want to present yourself in those personal statements.. and begin compiling a list of scholarships you might be eligible for so you can hit the ground running senior year.

Second, and perhaps more importantly, it takes awhile for the family as a whole to think about how college costs fit into the family budget.  Sticker shock is a pretty common response when students and parents first start to think about college costs.  If you've been following the news, you may have heard that college costs have been rising rapidly over the past decade or so.  Gift aid has not necessarily kept up with this trend.  That leaves more and more students and families borrowing to make up the difference, with the resulting student loan crisis that has also been frequently discussed in the news lately.  Thinking about and discussing college costs early and often can help your family create a plan to minimize the amount you will need to borrow to complete your education.  As with grants and scholarships, an earlier start on the research phase may also help you find better terms for any loans you do take out.

Finally, the paralysis caused by this sticker shock may cause you to waver in your quest for higher education, or miss the opportunity to apply to some of the schools that might be the best fit.  At the very least, it can cause excessive stress during an already stressful time.  If you've dealt with the cost issue early, and come up with a viable plan to address those costs, you can focus on the college and scholarship applications.

So what's a family to do?

• Starting as early as possible, look at the cost of attendance for a variety of schools you may be interested in.  This information can be easily found on the most college websites.  
• Next, estimate your expected family contribution (EFC) using the FAFSA forecaster.  This is the amount the federal government thinks you should be able to afford to contribute towards your child's education
• Does this amount seem reasonable?  Unfortunately, short of earning less money (which will not really help the problem) or having another child (not a decision you want to make based on how it affects your EFC) there is not much you can do to change your EFC, so begin thinking about how you might change your family's budget to make this amount reasonable.
• The EFC gives the total amount per year you are expected to contribute to your student's education.  It might help psychologically to break this down into a monthly amount.  Where a $6,000 EFC might seem overwhelming, the idea that's $600 per month over the course of the academic year might not seem quite so outrageous.  And if your student is living away from home, remember you'll have some savings for not having to feed him/her during those 10 months.
• Check out payment plans at the colleges you are interested in.  Sometimes breaking up the total cost into smaller payments can help it fit into your budget better, and help avoid taking out loans.
• Once you've got your EFC, you can begin to think about how much additional aid you will need.  For middle class families, aid given based on the FAFSA often comes in the forms of loans.  Doing some scouting for scholarship options now can help reduce the need for loans later.
• I wish I could tell you you're going to be able to finance your entire education with loans and grants, but I would probably be lying to you.  Student loans are a ubiquitous part of the package in paying for college.  By thinking ahead, however, you can reduce the amount you need to borrow, and look for the best possible terms on the money you do borrow.

Also, keep this in mind: According to the US Bureau of labor statistics (2012), a person with a bachelor's degree, on average, earns about $20,000 more per year than someone with only a high school diploma.  Furthermore, the person with the bachelor's degree is half as likely to be unemployed. So it's likely that taking out a few loans to make it through school could give you a very good return on your investment over the course of your career.  More on loans - what to look for, which have the best terms, etc. in my next post.