With skyrocketing tuition costs, many look at published tuition rates and assume they can’t afford to take the leap. However, tuition is actually a fluid number that depends largely on your own personal financial situation. Published sticker price essentially doesn’t mean anything outside the context of your Free Application for Federal Student Aid (FAFSA) and Expected Family Contribution (EFC).
Our college financial planning experts will explain the terms you need to know regarding tuition and provide insight and tips for helping you navigate how tuition could impact your college experience.
Meet the Experts
State Bank of Cross Plains has enlisted two internal experts to share insight and guidance as your family makes plans to save for and pay for college:
Jayne Deutmeyer is a Certified Trust and Financial Planner and a mother who has helped two of her own children navigate education and career decisions beyond high school.
Brent Landrum is a Personal Banker who recently graduated after returning to school as a non-traditional student paying his own way as an adult.
First, Certified Trust and Financial Planner Jayne Deutmeyer will explain how tuition works. Then Personal Banker Brent Landrum will share some insights based on his own recent experience.
Solving the Mystery of Tuition
By Jayne Deutmeyer, CTFA
Each school determines its own tuition. Generally speaking, public universities have a lower tuition than private universities, in part because public universities are subsidized by the government. However, that doesn’t tell the whole story about what your student will pay for tuition.
The formula for out-of-pocket expenses includes the following pieces:
- Your FAFSA (find a great tool for estimating your FAFSA here)
- Your Expected Family Contribution (EFC) determined by your FAFSA
- Total Cost of Attendance for that school, which is the total cost of tuition, housing, food, books, and other miscellaneous expenses, such as busses or parking, etc.
- The school’s policy on meeting the need that exists between your EFC and Total Cost of Attendance
- The school’s available resources, such as affiliated endowments or foundations
In explanation, the Free Application for Federal Student Aid (FAFSA) is a form filled out and submitted annually by prospective and continuing college students/families. Your FAFSA determines your eligibility for financial aid by examining your family’s financial picture and providing an estimate of what the government thinks your family can afford to spend on college. This estimate is known as your Expected Family Contribution, or EFC.
Your EFC is based on a variety of factors, including:
- Parent income and savings
- Student income and savings (weighted more heavily)
- College-specific accounts, such as a 529 plan or Coverdell Education Savings Account (CESA)
- Investment accounts not related to retirement
- Real estate other than the home you live in
- Value of family-owned businesses, such as a duplex, farm, and more
- Benefits you receive, such as Unemployment or Social Security
- Family size
- Number of family members who will attend college during the given year
The school’s Total Cost of Attendance (TCA) minus your EFC equals your “need.” (TCA – EFC = NEED)
This is where your chosen school’s policy on meeting need comes in. Some schools make sure 100 percent of your need is met with grants, scholarships, work study, and loans. Other schools don’t have the resources to make that happen and, therefore, don’t guarantee to cover that difference.
For example, many people scoff at the high price tag for Ivy League schools, but most of these schools have made it their mission to establish merit as the only barrier for entry. One student I know got recruiting letters from both Harvard and Yale that shared the average out-of-pocket cost for their student bodies was approximately $6,500. That’s less than most state schools. These universities have significant endowments supported by alumni to enable hefty scholarships and grants for most or all incoming freshmen.
In fact, Forbes magazine recently published a list of schools who prioritize a “no loan” environment.
With that in mind, the real formula for out-of-pocket expenses is your family’s demonstrated need (TCA – EFC = NEED) minus the funds provided by the individual school of choice to meet that need. (NEED – NEED MET BY SCHOOL = OUT-OF-POCKET COST)
The lesson here is that you don’t really know what college will cost until you submit your FAFSA to a specific school and get your financial aid package back. Each school will be different. If there is a university that you or your student have an interest in, you can usually find their policy on meeting need on the financial aid page on their website. And, you can estimate your current EFC using the FAFSA 4Caster tool.
To determine the best way to prepare for college expenses, you will need to make some assumptions and base your saving goals on those assumptions in order to get started.
How I Handled Tuition
By Brent Landrum, recent graduate
When it came to funding my secondary education, I learned a lot between the time I entered school right out of high school and when I returned after taking time off.
As a young 18-year-old, the concept of money had not sunk in. My parents handled my finances, so understanding that college was expensive was a foreign world. Making mistakes and understanding where I went wrong helped me have a better grasp on the financial aspect of college when I returned to complete my degree. Here are some lessons I learned along the way:
1. Did tuition play into my choice of school? Yes and no.
As a high school junior and senior, it was all about getting into the best schools and attending the “coolest” one. I am sure many individuals facing this very scenario right now can relate to that mentality. There wasn’t a lot of pressure on me to make the best decision based on academics and finances. While my parents worried about the finances, I was concerned with picking the school that would fit into what I wanted to become. While those factors are important, so are finances. I picked the school I wanted to attend regardless of cost and continued to accept financial aid that was necessary in the short term, but didn’t make sense for me long term. Jump ahead a few years, and I was preparing to return to school. This time, tuition costs played a much bigger role in my decision. I chose a school that made sense with the life I had and my current financial state. Working full-time and attending an in-state school was an absolute must, so it was important to take advantage of the financial aid to pay for school while utilizing other funds to cover living expenses. I took the time to understand the financial aid award letter and calculate what my needs were. Already having a significant amount of student loan debt, it was imperative that I not accrue any more than I absolutely had to.
2. Expected Family Contribution was another aspect of my financial planning that was different each time I attended.
Out of high school, my EFC was much greater because my parents’ income adversely affected the amount and type of aid I could receive. When returning to school, the only income that mattered was my own. Looking back, I wish I would have understood this earlier so that I could understand how aid could help me and not add up to a pile of student debt. Not having my parents’ income factored into EFC did help in receiving aid that was not required to be paid back. This factor in financial aid is hard to get around for traditional students going directly from high school to college, but it is important to fully understand what it all means.
To sum this all up, here are some tips based on my experience:
- Understand the aid being offered.
- To the best of your ability, know your expenses at the start of each semester.
- Know how much you can contribute each semester.
- Think long term. Live like a student when you’re a student so you don’t have to live like a student for so long after graduation.
Watch for more information on planning for college expenses each month in this newsletter. If you would like help in planning appropriately for college tuition, contact Jayne.Deutmeyer@CrossPlainsBank.com or call 608-798-5233.