March Madness

While some may be glued to their sports feeds, watching as the brackets winnow down to the “Final Four,” for many families with college bound/aged kids, March takes on a different type of madness as financial aid letters come out and the clock for decision making starts to tick ever louder.

Making “cents” of these letters can be confusing at best and, in worst case scenarios, a lesson in fiscal catastrophe. To help with the situation, the federal government has encouraged all public and private universities to use a model financial aid award letter but encouragement is a long way from standardization and there are still a great many letters out there that leave the reader with more questions than answers. If your family (direct or extended) is facing college costs this year and you received a financial aid award letter, get out your pencil and pad and make some notes for when you pick up the phone to call the financial aid department of the school(s) you are considering.

A prominent section of the suggested form discloses the “Total Cost of Attendance”, and this section might be why many schools have not adopted the form. Some schools feel that a potential student (and their family) might be discouraged from attending if they knew what the total cost might be for the year. The same way you shouldn’t be afraid to ask your financial advisor “what is my relationship with you and this portfolio costing me,” you shouldn’t hesitate to ask the school being considered “what is the total cost of attending your school?” This should include tuition and fees, housing & meals (both on-campus and off-campus options), books and other costs associated with attending that year.

The next section on the suggested form is going to cover the Expected Family Contribution (now called the Student Aid Index) which is formulated from your FAFSA data and/or by the Institutional Methodology (for most private schools). On the surface, yes, this might be your out of pocket (at least for the actual school costs) but then we have Scholarships and Grants to offset some of that “Total Cost.” In theory, your financial aid letter should then have a nice bold section that says “NET PRICE.” On the government suggested form, it’s there in bold but the General Accountability Office (GAO) found that 91% of colleges and universities surveyed didn’t include what the family’s net price would be in their letters so you are going to have to do a little math to make sure you are comparing apples to apples. My suggestion would be to make your own College Financing Plan form for each of the institutions being considered and fill out the forms yourself.

Unfortunately, that’s only part of the battle since now you have to figure out how much this is really going to cost. These formulas don’t include things like getting your child to and from college – is that going to happen just when the dorm is closed or more frequently? What sort of health insurance plan covers your child? Some parents are surprised to learn that their offspring isn’t covered when they are away at college since this is “out of network.” Potential study abroad? Better check with the school and see what isn’t covered while little Emma or Aiden (the most popular child names for 2005) is in Madrid.

Whew – now that your head is spinning like that basketball on a player’s finger, let’s talk about some ideas for making that “Net Price” figure a little more manageable. 1) Right fit the school choice to the student. Some schools are visually stunning, some do an amazing job of marketing their campuses, and some trade on the cache of reputations built on a different time & generation but that’s not what makes a school right for your family. Colleges will often provide more merit money for students who are strong students for that college. Does your child want to be a little fish in a big pond or a big fish in a more selective program? If your student is passionate about becoming (insert profession here) then look at schools who graduate that profession. 2) Money is important but not the only thing to consider. The learning experience can be just as important. Are the classes going to be taught by teachers or by graduate assistants? Being able to work with professors and develop mentoring relationships helps not just with the college experience but landing those coveted internships and first jobs after graduation. Right-fitting a school to the student can go a long way in avoiding the dreaded “school transfer” which has stretched the college experience from four years to over six years.

And here’s the big one – after your first job, employers rarely care where you went to school so, for the love of all things education related, take those expensive institutions off the list unless there is a VERY specific curriculum reason to keep it on there. Research has shown that kids from high-income families will do well regardless of where they go to school and golden ticket families aren’t really looking at their financial aid letters (because therapy for being a mal-adjusted trust fund baby isn’t going to be on the College Financing Plan letter anyway). Our job here is to get four years of education under our belt with a manageable level of debt and graduate into the field that we are passionate about because long-term financial stability (and by way of that, higher pay) is more related to the choice of a college major than it is attending a selective undergraduate school.

With that, go print off your bracket chart and get ready to tune in for the NCAA Women’s Selection on ESPN this Sunday at 8.