Over the next few weeks, financial aid awards will be determined and families will receive notifications. Most schools attempt to provide a helpful breakdown of the annual costs of attendance, including the impact of financial aid on the bottom line.
College is not a consumer good with an associated cost - education is an investment!
Higher education remains the smartest investment you can make, even when considering the increasing cost of college. Americans with four-year college degrees earn nearly double the income of those without a degree.
How do you calculate the cost of college?
Sticker Price (tuition, fees, room, board, travel..)
− Scholarships/Grants from all sources (do NOT need to be repaid)
− Loans, federal and private (DO need to be repaid)
_________________________________________________
= Actual Cost
How does the Financial Aid process work?
The financial aid staff starts by deciding upon your cost of attendance (COA) at that school. They then consider your Expected Family Contribution (EFC). The FAFSA (Free Application for Federal Student Aid) calculates your EFC, based on taxed and untaxed income, assets, benefits (such as unemployment or Social Security), family size, and the number of family members in college. The FAFSA can be filed for free at fafsa.gov.
Cost of Attendance (COA) − Expected Family Contribution (EFC) = Financial Need
Your family’s Financial Need calculation will be used to award Need Based Financial Aid, including:
• Federal Grants (including the Pell Grant program) and some institutional grants
• Federal Loans (including Subsidized, Unsubsidized, and Parent PLUS Loan programs)
Most colleges also offer scholarships (grant aid, does not need to be repaid) based on:
• Academic Achievement – not only for the top of the class!
• Artistic/Music Performance
• Athletics (NCAA Divisions I and II)
• Alumni/Legacy Relationships
• Religious Affiliations
For families wanting to compare costs, I suggest a spreadsheet where you can make comparisons side-by-side. The key is to ensure that all of the same costs AND comprehensive aid awards are included for each school, so you can truly compare apples to apples.
For total costs, I recommend including the coming year's tuition, fees, room, board, books, and travel expenses. You should find these amounts on the award letters, and/or on the school's website.
For the deduction of financial aid, certainly include all grant aid from the school (both any merit-based and need-based grants), and any federal or state grant programs for which you qualify.
If loans were offered as part of the aid package, you may want to calculate a net cost with AND without loans included. Most Americans are comfortable taking out a loan to buy a car, but a car only depreciates over time. A college degree, on the other hand, is worth more and more over your lifetime. I can't say it enough: don’t think of college as a cost, think of your education as an investment! Student loans are the only form of debt that will pay dividends in the future!
The New York Times recently published an article titled “The Reality of Student Debt ,” highlighting that among four-year college graduates who took out loans, their average debt is about $25,000, a sum that is a tiny fraction of the economic benefits of college.
The share of income that young adults are devoting to loan repayment has remained fairly steady over the last two decades. Most four-year colleges you’ll consider will have stellar loan repayment.
Once you've calculated net price, I recommend a couple of additional considerations:
- Average time to graduation. At many large state universities, finding the classes needed to fulfill graduation requirements can be difficult and make it nearly impossible for some students to graduate in four years. That additional year or two doesn't just cost more in tuition, but also adds another year of rent, food, living expenses, and deducts a year's worth of salary! That's what economists call opportunity cost - and it can make attending a college like Millsaps a less expensive option in the total cost to graduation, even if the cost per year is slightly higher than a large state school.
- The value of personal attention. With an average of 14 students per class, students at Millsaps College will be challenged to think and interact with their professors, not just listen and take notes (or fall asleep during a lecture). We could deliver education less expensively - we could add more students in every class, or substitute graduate students or adjunct faculty instead of top-notch professors with the highest degrees in their fields - but that would substantively change the educational outcomes our students expect. Millsaps College graduates credit their experiences with our faculty as the basis for their success in their careers and their lives.
