Just As Important as Academic & Social Fit
Everyone talks about colleges’ academics and the social environment, but what about the financial piece of the puzzle. To us, college financial fit weighs just as heavily as the academic and social fit.
For most students and their families, they can’t pay for the
sticker price for just any college out there. Determining college affordability is a key aspect about assessing the college financial fit. But how do you do that? Here is our 3-step process to assess college affordability.
Step 1: Understand Your Net Price
Paying for college like other major purchases (think car or house) have a sticker price, but most people tend to pay the
net price. For college, the sticker price is fully loaded price or cost of attendance - tuition, fees, room and board, books and supplies, and other miscellaneous expenses. The college net price subtracts all the gift aid - that is free money from
merit scholarships and
need-based grants.
For students and families that are kicking the tires for a college, the federal government created a requirement that every college has a
net price calculator (NPC) available. The problem is that some NPCs vary in their level of sophistication and accuracy because there is not a common standard of requirements. The more sophisticated NPCs will almost take you through the entire admissions and financial questions to assess your qualifications to receive their merit and need-based aid. This means be prepared to take 30-60 minutes to complete the NPC. Other NPCs ask less questions to get you quick answers. These NPCs give you more directional information on how much the average net price is for broader categories of students.
For students who already have aid offers from colleges and universities, calculating your net price is specific and personal. Every college is required to disclose the cost of attendance. Then, it’s just a matter of subtracting all the
gift aid.
Whether you are exploring specific colleges to narrow down your application list or you are assessing aid offers, Quatromoney makes it easy to understand college net price. We only ask a few questions like the name of the college and start year to display the average net price or income-based net price. If you have an aid offer, you can input your cost of attendance details as well as all your gift aid, to calculate your personal net price.
Step 2: See How Far Your Financial Resources will Stretch
Many students and families plan to use savings and cash from income to help pay for college. When it comes to college savings, some parents have started saving for college at their kid’s birth by setting aside money regularly in a college savings account like a
529 plan. For others, students have their own savings account with its primary goal of saving for college.
When it comes to income, some parents plan to re-allocate some of their money costs of raising their kid to college costs once their kid is enrolled. The
USDA estimates the average teenager costs $1,093 a monthly to raise at home. Although 26-33% of this monthly amount is calculated for housing, it should mean that some of that $732-809 cash could be used to pay college costs.
Students also plan to use their cash from wages to pay for college costs.
Georgetown University Center on Education and the Workforce reported that 70 percent of full-time college students are working. Many students work part-time jobs or work-study. Typically, students use wages to pay for needs like indirect costs like books, transportation, and miscellaneous expenses.
Quatromoney asks students and their families about their cash and savings so we can show how far it will stretch over 4 years of college costs. This helps them see the power of paying now and
reduce borrowing needs.
Step 3: Assess Your Financing Options and Their Costs
Taking out loans to pay for college is the reality for 70% of students who receive a bachelor's degree have education debt by the time they graduate according to
Urban Institute. According to a study by
Fidelity, 81% of parents don’t want their kids to be heavily burdened with student loans. So if loans are a part of the paying for college equation, it’s best to know the options and the financing costs and make certain you borrow only what you need.
Both the federal government and private sector offer loans to help pay for college. Federal student loans tend to use the one-size-fits-all approach and private loans offer customized pricing based on creditworthiness.
Federal Direct Loan Program offers fixed rate loans for students and their parents. Plus, they offer amazing features like
deferment, forbearance,
forgiveness, and
cancellation options.
Private Student Loans and
Private Parent Loans offer the lowest financing options for borrowers with strong to excellent credit. Ensure you know the
difference between federal and private student loan options.
Some parents want to use a portion of their home asset to affordably pay for college by taking out a home equity line of credit (HELOC). HELOCs let home owners borrow against their home with a credit line over the course of several years called the draw period. Many families who use this option schedule the release of HELOC funds just in time each semester’s payment. Most often HELOCs only require interest-only payments during this draw period.
Quatromoney wants to helps students and their families evaluate their best financing options. That is why we’ve made it easy with detailed financing options side-by-side in one place to make the best financial decision. In just a few minutes, families can compare the costs on their eligible federal and private finance options (including home equity soon) and understand their aggregated monthly payments to ensure it fits in the family’s monthly budget both during school and after graduation.
Putting It All Together
Once you know your net price, see how far your financial resources will stretch, and determine your financing needs and costs, then you can know the college financial fit. Since most students consider more than one college, make certain to compare the financial fit of each school. Quatromoney makes that easy with our dashboard in our personalized college finance planner.
College financial fit is just as important as academic and social for. We encourage students and their families to be comfortable with how much you are paying while in college and after graduation.
Colleen Krumwiede
Co-Founder & Chief Marketing Officer
Colleen MacDonald Krumwiede is a financial aid and paying for college expert with over a decade of financial aid experience at Stanford GSB, Caltech, and Pomona College and another decade at educational finance and technology companies servicing higher education. She guides go-to-market strategy and product development at Quatromoney to transform the way families afford college.
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