Archive for ‘college search and selection’

April 16, 2014

How to talk to your kids about paying for college

by Grace

When should parents have the “talk” with their children?

Of course, I mean the talk about how their college education will be financed.  According to comments in a recent College Confidential thread, fourteen is too early and 12th grade is too late.  And just like sex education, kids should not be hit with everything all at once.

It’s like the sex talk … Tell them a little at a time in chunks they can understand.

“Parents of High School Juniors: Talk Finances NOW” is the title of the thread, and the original poster wants families to avoid the disappointment that sometimes occurs this time of year for high school seniors.

If you are the parent of a high school junior who will be applying to colleges next year, now is the time to take a close look at what you will be willing and able to pay toward your kid’s college education–and to make sure your kid understands it. You may never have told your kid about your family’s finances–now, you must do so, even if you’d rather not. Don’t be the subject of a thread next year when your kid says, “My parents told me I could apply to any college I wanted and they’d make it work, but now they’re saying I have to go to the relatively undesirable college that’s giving me a scholarship.”

So, look at some price calculators on college websites, get financial advice, think about whether your kid will have to have scholarships, what you feel comfortable borrowing (if anything), what you will expect your kid to contribute, whether you will expect your kid to pay back any of the money you spend on education, etc. And share the result with your kid. There should be no unpleasant surprises when acceptances come in next year–at least, there should be no surprising changes in your position.

In US News, Ryan Lane outlines a series of steps in planning for the talk.  It’s important to set clear expectations, and he even suggests putting it in writing to instill a better understanding.  Whatever else they do, parents should avoid the mistake of making a vague and uninformed promise that “we’ll find a way to pay” for college.

One way to begin the process is to run a few Net Price Calculators for some prospective colleges, including both private and public institutions.  It can serve as a reality check in laying the groundwork for the big talk.

April 9, 2014

Want to appeal your college financial aid?  Go for it

by Grace

Ron Lieber in the New York Times has some tips for students hoping to appeal their college financial aid packages before making the final decision on where to enroll in the fall.

A change in a your financial situation holds the best chances for a successful appeal.

Your best shot with an appeal will come from a change in your family’s financial circumstances since you applied for aid. Possibilities include job loss or other reduction in income, new health expenses, death of a parent, disability of a family member, nursing home costs, natural disasters or parental credit woes that make borrowing impossible.

Adjusting need-based aid may be a more straightforward proposition, but that’s not always true since need-based awards are often based on a ‘student’s academic merit’.

Some tips:

Some schools automatically match offers from similar schools.

Cornell instantly corrects itself if you’ve got higher need-based aid offers from other Ivy League schools or M.I.T., Duke and Stanford; it will match that offer, no questions asked.

Carnegie Mellon appears to be acting similarly, noting on its site that the university has “been open about our willingness to review financial aid awards to compete with certain private institutions for students admitted under the regular decision plan.” …

Go for it.
Based on some feedback from colleges, Lieber seems to suggest that the odds are not bad that an appeal will result in increased aid.

The worst that can happen is that the financial aid office says no …

Related:  Will colleges negotiate financial aid packages? (Cost of College)

April 7, 2014

Be careful — your college financial ‘award’ may include loans

by Grace

College financial award letters can sometimes be difficult to decipher.  With the May 1 deadline for fall enrollment decisions fast approaching, families must be careful as they review details about the types of aid listed in these letters.

That number next to the word “financial aid award”? It’s not all a gift This is the single biggest point of confusion, financial aid experts say. There may be a line at the bottom of your letter that reads, “this is your award amount,” and the number next to that phrase could look like a lot of dollars. However, you have to look at the lines above the “total aid award” number to figure out what went into calculating that total – and chances are, there are some loans mixed in. Since loans need to be paid back with interest, these are hardly a “gift.”

This sample award letter shows a $39,000 “award” that “includes “$2,000 you’re expected to earn and another $6,500 you’ll have to pay back”.

20140403.COCFinAwardLetter1

 

What’s worse, Mark Kantrowitz says, you may not be able to quickly tell which items are grants and which are loans. “There’s no interest rate, no monthly payment listed, and they may not use the word loan. They set up a character limit for the name of the award and they use lots of abbreviations. Sometimes they’ll say L or LN instead of using the full word for loan,” he says. So, for instance, you may see “Fed Staff L,” and there may be a “sub” or “unsub” afterwards. This stands for “federal Stafford loan,” a loan that comes from the government and whose current interest rate is 3.9%. “Sub” stands for subsidized, which means the interest does not accrue while you’re in school; “unsub” stands for unsubsidized, which means the interest does accrue while you’re in school so the amount you owe upon graduation will be larger than the amount you borrowed (unless you pay down the interest while you’re in school).

Sometimes loans to parents are included in the award amount.

Stafford loans are loans that go in the student’s name, but parents need to be careful to scan the award letter for the addition of loans that will be in their names, too. Troy Onink, CEO of college planning service Stratagee.com (and a FORBES contributor), says that some schools will even include a Parent Plus loan into the “award” mix. Though this item is just a suggestion — you’re not required to take out a Parent Plus loan, whose interest rate was 6.41% this past academic year and whose 2014-2015 interest rate has not been set yet –some schools include a parental loan to inflate the “award” and make it look better than it is.

Forbes has additional tips for “Decoding College Financial Aid Award Letters.

Related:

February 6, 2014

College 101 Infographic

by Grace

20140202.COCCollege101Infographic1


College 101 Infographic from the Federal Reserve Bank of St. Louis has basic information about choosing a college and paying for it. 

Be educated and informed. Forecast your financial aid with the FAFSA4caster calculator. Find out what percentage of students received federal financial aid in 2012 and see the results of an April 2013 salary survey. Use a calculator to estimate the size of your monthly loan payment and the annual salary required to manage that payment. Learn about the top 75 college destinations with a link to the College Destination Index. Identify some of the reasons students select particular colleges…and more.


Short videos cover three topics:

  • Choosing a college
  • FAFSA
  • Financial aid

Related:  Ten questions to ask about college financial aid (Cost of College)

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January 22, 2014

The risk of promising your child that “we’ll find a way to pay” for college

by Grace

Don’t make promises you cannot keep.

In the college search and selection process, parents should think very carefully before assuring their child that “we’ll find a way to pay for it.”  That promise could be the cause of deep disappointment or crushing student debt.

In answering the question, “Should Students Apply to Reach Schools?“, Do It Yourself College Rankings discusses the pitfalls of applying to colleges that are financial reaches.

The simple answer is not to apply to any college that you can’t afford to attend.

The more detailed answer would be that it’s fine to apply to a financial reach school if everyone clearly understands that only significant financial aid would make matriculation possible should the student be accepted.  But to avoid unnecessary disappointment and stress in making the final decision where to attend, one recommendation is to get a sense about the likelihood of receiving financial aid by running the Net Price Calculator tool very early in the process.  Also consider the realistic chances of merit aid, which is often not included in the NPC estimate.

For more insight on what makes sense for your family when deciding whether to apply to a financial reach, check out the complete DIY Rankings answer.

Related:

January 21, 2014

Net Price Calculator can help guide your college search

by Grace

Can we afford it?

That question has to be high on the list for a high school student creating a list of colleges she’d like to attend, and the Net Price Calculator can help in answering that question during the early stages of the college search.

What is a Net Price Calculator?
Net price calculators are available on a college’s or university’s website and allow prospective students to enter information about themselves to find out what students like them paid to attend the institution in the previous year, after taking grants and scholarship aid into account.

While it’s fine to stretch aspirations in considering a dream college that may be a financial reach, it’s important to be realistic in understanding practical budget limitations.

Let’s consider the hypothetical case of a New York high school senior, where an NPC calculation can show meaningful cost differences among various colleges.  Here are three possible college choices:

  1. Harvard University:  It’s a reach for almost everyone because chances for admission at this Ivy League school are small at only 6%.
  2. Syracuse University:  A private university with a 50% acceptance rate that is attainable for many students.
  3. Binghamton University:  One of the top New York state universities, it comes with a 43% acceptance rate.

Here are simplified NPC scenarios showing Net Cost of Attendance (COA) based on earned income levels of $50,000 (low income), $80,000 (medium income), and $150,00 (high income).

20140115.SEMNPCChart1

Useful information, right?  This chart illustrates the oft-repeated advice that in some instances a private college may be as affordable as a state school.

Important points about this hypothetical NPC illustration:

At what income level does a family’s chance of aid become zero?

At an income level of $250,000, the net price of attendance in all these scenarios equals the gross price.  In other words, somewhere between an income of $150,000 and $250,000 is the point where a family would not qualify for any need-based financial aid.

The advice?  Run a NPC early on in the process to get a general idea about a college’s affordability.

Related:

October 23, 2013

Ten questions to ask about college financial aid

by Grace

Questions to Ask College Financial Aid Administrators

From Fastweb’s Quick Reference Guide to Evaluating Financial Aid Award Letters:

The following questions can have a significant impact on college costs, especially the out-of-pocket cost, and on evaluating the financial aid award letter.

  1. Does the college meet the full demonstrated financial need for all four years, or is there unmet need (a gap)?
  2. How much on average do the college costs increase per year?
  3. Does the college practice front-loading of grants? Can students expect to receive a similar amount of grants in subsequent years, assuming their financial circumstances are similar? If the college practices front-loading of grants, how much will the grants change each year?
  4. What is the college’s outside scholarship policy? How does the college reduce the need-based financial aid package when a student wins a private scholarship? Does the scholarship reduce the loan and work burden (and unmet need, if any) or does it replace the college’s grants and scholarships?
  5. What are the residency requirements for in-state public college tuition?
  6. How many hours will I need to work to earn the full work-study award I’ve been offered? How much will I be paid per hour? Are work-study jobs readily available, or are they hard to get?
  7. What are the requirements for keeping my grants and scholarships in future years? Do I need to maintain a minimum grade point average? Do I need to take a particular number of units? Do I need to participate in any special activities such as community service?
  8. How does one appeal for more financial aid if the financial aid award is insufficient or the family’s financial circumstances have changed?
  9. What percentage of first-time, full-time students graduate within a normal timeframe? How many years, on average, does it take to earn the degree?
  10. What percentage of students graduate with debt and what is the average cumulative debt at graduation?

These questions highlight some of the most critical issues that should be considered in determining how the net cost of college will be affected by financial aid.

Here’s a suggestion on how a family can proceed with educating themselves about a particular college’s costs.

  1. Run a school’s Net Price Calculator using the family’s specific financial information.
  2. Review the school website to find answers to the ten questions listed above.
  3. Contact the school’s financial aid administrator to get answers not found on the website.

Going through this process will uncover key financial information, providing a good sense of that school’s affordability.

Related:

October 9, 2013

Second-tier status can mean second-tier salary for grad school

by Grace

The decision to go on to get a graduate degree should be made with specific career goals in mind.  Among other factors, a school’s reputation affects post-graduate job opportunities and salary.  From a MarketWatch story titled “10 things grad schools won’t tell you” comes this advice.

“Our second-tier status may hamper your career — and your pay.”

“The name of your school matters a lot,” says Katie Bardaro, lead economist for PayScale.com, a website that compiles compensation data. Indeed, salaries can be much higher for grads of top schools, especially for people getting M.B.A.S and law degrees, says Bardaro. Data from PayScale shows that the median pay for M.B.A. grads two years after graduating from the University of Pennsylvania Wharton School is $125,000 a year, growing to $167,000 by the time they were 10 years out of school. M.B.A. grads from the less highly regarded University of Massachusetts Boston Campus earn a median $62,300 annually two years out of school, and that pay grows to $75,400 when they’re 10 years out. The University of Massachusetts didn’t respond to requests for comment.

People considering graduate school who don’t want to attend or can’t get into or afford a brand-name school should look for schools with notable alumni in their industry, says Bardaro. Such alumni might bring cachet to a school that isn’t necessarily Ivy League, says Bardaro. And if the program has a strong track record of placing people in a certain industry, that could also boost the student’s chances of finding a well-paying job, she says.

When my husband was deciding where to go for his MBA, one of the most important factors was a school’s reputation for helping its graduates find employment in specific sectors and locations.  Given the recent devaluation of an MBA, today it’s even more important to determine carefully the return on the time and money for a business school education.

Here is some advice from Megan McArdle.

… When young people ask me whether they should get an MBA, I give them the same advice that I got in the late 1990s: unless you can get into a top 10* (or have a very specific job that you know you can get by attending a regional program), then don’t. You’re too likely to end up with massive debt and no very good prospects for paying it.

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September 25, 2013

Is your college ‘likely to be around for many years to come’?

by Grace

Besides sentimental reasons for wanting your alma mater to “be around for many years to come”, there are practical reasons for hoping your college is able to withstand the intense financial pressures bearing down on higher education today.

Do not ignore financial fitness when making a list of potential colleges to attend.

Lucie Lapovsky, former V.P. of finance at Baltimore’s Goucher College, a higher-ed financial consultant and a FORBES contributor, cautions against ignoring the financial health of the colleges you choose: “Visible signs of financial stress can include fewer classes offered less frequently, more classes taught by adjunct professors, less money for clubs and cutbacks in the upkeep of campus facilities.”

Financial woes are also the leading cause of accreditation suspensions. Indeed, more than a dozen schools among our C- and D-rated colleges are already facing some kind of accreditation inquiry. The last thing you want is for Junior’s college to lose its accreditation. When that happens the feds pull financial aid, enrollment plummets and the lights get turned out.

To help determine the financial health of a college on your list, you can use the FORBES College Financial Grades.  Over 900 private colleges are graded based on several components:

Balance Sheet Health (40%)
Operational Soundness (35%)
Admissions Yield (10%)
Freshmen Receiving Institutional Grants (7.5%)
Instructional Expenses per Full-Time Student (7.5%)

Higher education is facing a tough situation.

The prognosis is ominous in part because institutions of higher education operate in an extremely difficult business environment today. Imagine, if you will, running a company that sells a commodity product, where pricing is opaque and you have hundreds of competitors all clamoring after the same shrinking customer base–which, by the way, happens itself to be in financial distress.

Then consider that one of your other chief revenue drivers, subsidies and grants from federal and state governments, has either been cut back or eliminated. Add to this an evaporating competitive moat being stormed by newly minted for-profit businesses and cheap online alternatives.

Management may be the biggest problem.

… By far the biggest problem at most colleges is that they are governed in a way that flies in the face of sound business practices. The vast majority of colleges in the U.S. are bloated with personnel and programs that make little economic sense.

It’s no surprise that the highest scoring schools on the Forbes list include the Ivy League and other elite institutions.  I was a little surprised to see two local schools, Pace University and Concordia College, at the bottom of the list with D grades.  This financial information would certainly be a factor if I were considering these schools for my child.

September 20, 2013

A quick way to find if a college has many out-of-state students

by Grace

A handy tool from the Chronicle of Higher Education allows you to access out-of-state (OOS) freshman student data for nearly 1,600 universities and colleges.  It offers a quick way to compare several schools at once, as well as to see data compiled for entire states.

20130917.COCOOSStudents1


Some ways you can use this information:

  • You can quickly compare the percentage of OOS students for schools in which you are interested.  You can also check the states these students come from.
  • You can see trends.  The information goes back to 1994, so you can see how a school’s OOS population has changed over time.
  • You can get a sense how attractive you might be to a school.  A school with a low OOS percentage may be seeking to increase geographic diversity by reaching out to students outside their state.

Some quick observations about OOS freshman at selected locations:

  • Binghamton University’s OOS students have increased from 6% to 15% over ten years.
  • Colleges in the states with the least amounts of OOS students, including Montana, New Mexico, Nevada, and Wyoming, may be particularly interested in applications from OOS students.
  • Rice Universtiy is more geographically diverse than many people might expect, with 52% of its students coming from other states.
  • UNC Chapel Hill has consistently maintained its OOS student population at close to 18%, the upper limit as mandated by state regulation.  Florida and New York lead the way in being the source of their OOS students.
  • University of Alabama has bumped its percentage of OOS students from 24% to 43% over ten years, no doubt at least partly due to their generous merit scholarship programs that catch the attention of high-achieving students across the country.

Limitations
The latest year available is 2010, so the most recent trends are not captured.  International students are not included, skewing the profiles of some schools more than others.

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