Category Archives: Paying for College

The Price of College, or how one college sets its tuition

In a recent post, The Price of College, or how a $60,000 tuition can be dubbed a discount, I described college pricing as complicated, individualized, and opaque. Upon occasion college administrators shed light on the process. A couple of years ago, W. Kent Barnds, Vice President for Enrollment, Communication & Planning at Augustana College, wrote about the steps Augustana follows to determine a price.

Old Main, Augustana College, Rock Island, IL

Old Main, Augustana College, Rock Island, IL

Augustana is a very well-regarded small, private liberal arts college in Illinois. Barnds’ post opens the door to the enrollment management perspective of admissions, a perspective internal to a college. While prospective students and their families may look at admissions as the team selecting the few who will be invited to attend, the college administration may look at admissions as the team charged with filling classroom seats and dormitory beds. If you’re interested in understanding the college’s perspective, I recommend you read Barnds’ post, Establishing the price (and cost of a college); here’s the introduction:

This is in no way a complete description of the many considerations that go into the decision-making process, but it’s a start. My goal is to keep it simple and provide the perspective of an enrollment leader. Another goal is to reinforce the idea that establishing price (and by virtue of establishing price, determining net cost) is neither as haphazard as tossing darts at a dartboard or a scientific certainty. It’s complex and somewhat idiosyncratic.

Not surprisingly, the process begins in May, after deposits are received and the admissions yield is determined, with an evaluation of how well the college recruited its fall class. (See What happens when, the college admissions calendar.) Barnds also mentions that the past several years have caused an increased focus on:

…a family’s willingness and ability  to pay …the changes in demographics in the Midwest that brings more first-generation and multicultural applicants to our pool …our position within the broader marketplace (publics, community colleges and high-quality, more selective privates that we know many of our accepts will pay more to attend) …far more conscientious about what the market will tolerate, rather than what we “need” to run our operation

Those demographic changes also include a smaller pool of high school graduates, especially in the Midwest. See Dwindling Midwest High School Grads Spur College Hunt, via Bloomberg:

A waning number of high school graduates from the Midwest is sparking a college hunt for freshman applicants, with the decline being felt as far away as Harvard and Emory universities.

Back to the considerations Augustana (and most other colleges) faces; these questions [pulled from Barnds’ post] will directly affect offers of admission and financial aid to potential students:

  • How much did we spend in financial assistance in an effort to attract the class?
  • And, how much total revenue did the class generate?
  • What size class do we desire?
  • How many students from out of state?
  • What is the academic profile we seek?
  • How much aid can we afford to offer?
  • How little financial aid can we afford to offer and make the class?

And here’s another piece of Augustana’s process:

We typically discover that we can’t afford to do what we want to do. In this discussion we involve members of the admissions and financial aid staff and the chief financial officer (CFO), who provides guidance about “how much more revenue we need” to accomplish our financial goals for the coming year (think pay raises, new hires, programming, physical plant improvements, etc.). Hopefully, we get close enough to the targets during this process that we make the CFO and President happy and we think we can accomplish our goals. It is also during this stage that we begin to model a couple of different % tuition increases based on CFO recommendations.

Though Augustana is a nonprofit college, it still has to function as a well-managed business, balancing the needs of the college operations with the desire to attract a strong cohort of new students, leveraging financial aid and merit funds as efficiently as possible.

I appreciate the opportunity Barnds offers with this glimpse behind Augustana’s meeting room door.
Still more on the price of college to come.
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The Price of College, or how a $60,000 tuition can be dubbed a discount.

What’s your favorite analogy for college costs? The airline business, where every seat is sold at a different price? The automobile industry, where you’re a fool to pay the sticker price on the side window? Perhaps Alice-in-Wonderland, when a $60,000 tuition can be called a discount?

Illustration by John Tenniel for Alice's Adventures in Wonderland, by Lewis Carroll.

Illustration by John Tenniel for Alice’s Adventures in Wonderland, by Lewis Carroll.

Learning about college prices and college costs is just one of the many learning curves for parents new to the system. A few reasons why:

  1. Pricing and costs are complicated, individualized, and opaque.
  2. The pricing and financial aid system changes often, even within one school.
  3. Many families try to decipher costs at a number of schools, and each college determines and presents costs in a different manner.

First, though, back to that discounted tuition. NPR’s Planet Money ran the story on university accounting a week or so ago, in “Duke: $60,000 A Year For College Is Actually A Discount.”

In 1984, it cost $10,000 a year to go to Duke University. Today, it’s $60,000 a year. “It’s staggering,” says Duke freshman Max Duncan, “especially considering that’s for four years.”

But according to Jim Roberts, executive vice provost at Duke, that’s actually a discount. “We’re investing on average about $90,000 in the education of each student,” he says.

That accounting depends upon the charges the university chooses to apply toward each student, according to a retired U-Cal Berkeley professor, who questions whether the costs related to professors chiefly involved in lab research (and the cost of building their labs), should trickle down to undergrads.

Will the undergrad take full advantage of the resources afforded by a research university, seeking out research opportunities and working with the professors? If not, $90,000, even marked down to $60,000, could mean the student and his or her family are buying a lot more college then they need.

Yet colleges, other than community colleges to some extent, don’t offer an á la carte system. You make your choice and you buy into the college’s value system.

Each college administration, and its Board of Governors or Regents or Visitors, makes its own determination of how much of the college’s total operating costs to pass along to the students as tuition and fees, or its price. At the same time each college makes additional determinations that lead to an individual student’s net cost. Those include, but are not limited to:

  • Will the financial aid policy be loan-free?
  • Will the college commit to meeting all of the family’s financial aid?
  • Will the college offer merit aid?
  • Will the college encourage completion in four years?

The statement from Duke University’s Executive Vice Provost that $60,000 represents a discount exemplifies a choice Duke made about how to allocate costs. Duke also decided to allocate a third of the $60,000 tuition paid by full-freight students to financial aid for other students.

Just when you may have thought the list of considerations for college choices was long enough, families may want to add a look at what each college values–what choices the college administration and Board make–starting with those that affect your student’s net cost. Even a cursory glance at higher ed journals, such as the Chronicle of Higher Education, could add more considerations to that list, including how healthy the college”s finances and endowments are, whether the college pays a living wage, how much the size of administration has grown in the past two decades compared to the size of faculty, and how many professors are hired versus lower-cost adjunct professors.

More to come on the price of college…

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College Application Deadlines: It’s the parents’ turn.

Hello, second semester, senior year. After the last few months discussing college applications, the focus now shifts to financial aid applications. financial aid

Parents often ask whether these applications are worth the time and trouble. My short answer:  Yes. These applications offer the possibility of funding a college education — grants, loans, and scholarships. (A number of colleges use the FAFSA and CSS College Profile along with the student’s file to determine merit awards or scholarships.)

As Michelle Obama recently said to northern Virginia high school students and their parents, “Don’t leave money on the table.”

The applications
FAFSA—Every college, from a local community college to a very selective private college, requires the Free Application for Federal Student Aid. The FAFSA determines a student’s eligibility for any federal aid, whether grants, subsidized loans, or work-study funds. The application is free; the 2014-15 school year version became available January 1, 2014.

CSS Profile—Most private colleges, which award their own funds in addition to federal aid, also require a completed CSS Profile, from the College Board. (These schools often have the strongest needs-based financial aid,) The Profile is not free; it costs $25 to send to one college, and $16 for each additional submission. (According to the College Board, “Students who are from low-income families with limited assets will automatically receive fee waivers.”) The 2014-15 school year form became available in October 2013.

Others—Certain circumstances, such as business or farm ownership, may require additional forms. Some colleges have created their own forms to be completed in place of, or in addition to, the FAFSA and the CSS Profile.

The documents
Financial aid applications are not so different from recipes, when it saves time to gather all the ingredients before you begin to cook. Start with these documents:

  • Most recent signed, completed tax returns
  • Social Security number
  • Driver’s license
  • Current statements from banks, retirement accounts, investment accounts, and any other assets
  • Current income and expense information, such as W-2s, 1099s, 1098s, etc.
  • Any untaxed income records, such as child support, workers’ compensation, etc.
  • Any other documents related to assets or income

The frustrations
The timing—This all sounds straightforward enough, but the timing involved makes it complicated and, yes, a bit frustrating. The FAFSA, CSS Profile, and other financial aid applications request specific information from our tax returns—and often these applications must be submitted—before the returns can be completed.

Providing estimates—The FAFSA and the CSS Profile offer the opportunity to enter estimates for the previous year’s Adjusted Gross Income, itemized deductions, taxes to be paid, etc., then changes can be made after the tax return has been completed. Changes will have to be made because colleges also require the completed tax returns or an online link to verify the application.

Yet, providing estimates presents a bit of a nightmare for households with incomes that vary, such as small business owners, consultants, realtors, farmers, or salespeople. Also, some items may sound simple enough, like a tuition credit, but are not because of frequent changes in the rules.

Early returns—Estimates will only go so far. Some colleges require signed, completed tax returns by February 15.

The quantity—College application year is the most complicated since students are applying for financial aidwith a variety of due dates and submission procedures from the full list of high school senior’s colleges.

So I get frustrated. I complain. I procrastinate. I write blog posts instead of completing the forms. Frustrating though it may be, it is doable, and it’s important to do for a number of reasons.

The why
Many college advisors recommend that every family should complete the FAFSA, at least.

  1. While some families may assume they make too much money to qualify for aid, there is only one way to find out. You have to apply.
  2. Meanwhile, American colleges currently operate within a system of very high Costs of Attendance, which can be whittled down to lower net costs through aid, merit awards, and scholarships. Very expensive private colleges, especially those with healthy endowments, may offer a much lower net cost, indeed one that could be comparable to that of a public university. There’s only one way to discover a family’s net cost for each college.
  3. Many colleges, especially private colleges, use the FAFSA and CSS Profile as a part of their merit awards and scholarships qualifications. One form I just saw included this permission request: “I hereby grant permission for Student Financial Services to release my academic transcript and information about my financial aid to your prospective scholarship donors.”
  4. Even families with high income and asset levels may wish to access unsubsidized Stafford loans, with favorable interest rates and repayment beginning after the student leaves college.
  5. Finally, families who may not quality for aid with one child in college are likely to see a change with two or more in college at the same time.

Now it’s time for me to stop procrastinating and follow my own advice.

This post appeared in slightly different form on True Admissions, the blog of College Admission: From Application To Acceptance.

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After college applications are done: 5 things to do now.

After your student’s (or your) college applications are done–and even if they’re not–January brings a new set of deadlines with it. These tasks need to be done now, or as soon as possible.

1. Request a PIN for the FAFSA (the student and the parent each need one). The student will use the same PIN each year; the parent can use one PIN for more than one child’s FAFSA. The PIN acts as an electronic signature for on-line submission.Screen Shot 2014-01-06 at 9.22.52 PM

2.  Start the FAFSA. Financial aid starts here; every college requires the Free Application for Federal Student Aid. Information you will need on hand:

    • Student Social Security Number
    • Federal income tax returns, W-2s, and other records of income.
    • Bank statements and records of investments.
    • Records of untaxed income.
    • And that PIN to sign electronically.

Make sure you select the correct form (2014-2015) and submit as promptly as possible. (See more about deadlines below.)

3.  Start your tax return. If this process is new to you, now is the time to internalize the financial aid calendar. The FAFSA, the CSS Profile (used by most private colleges), and other college-specific applications require information now (or very soon) from the tax return you have not yet completed. Specifically, financial aid applications for the 2014-2015 college year require 2013 income tax return details in January 2014.

In many instances you are allowed to make estimations for 2013 using the previous year’s returns (and you will be asked to make projections for 2014); however, there’s at least one college on Mod Squad Julie’s list that requires signed, completed 2013 income tax returns by February 15, 2014.

4.  Know your deadlines. Create a spreadsheet with the name of each pending college application. Find and note each college’s financial aid requirements and deadlines. I started looking at one of these for our household on January 1st and learned my first deadline is January 15. Yikes.

Screen shot of our sign in and financial aid spreadsheet.

Screen shot of our sign in and financial aid spreadsheet.

For a fast search:  enter “” [use your college name] and “financial aid” into Google. For the next college, just change the college name. Most college financial aid sites have a page about how to apply; most of those “how to apply” pages provide specific needs and deadlines.

5.  Track each college’s Student Information System (SIS) instructions. Most colleges acknowledge receipt of applications with instructions on how to sign in to their Student Information System (SIS). Make sure your student follows the instructions, signs in now, and keeps track of the sign-in information. This seems simple enough, but it is even easier to overlook.

The college will post important notifications on the SIS, including:

  • missing application elements,
  • missing financial aid forms, and
  • application decisions.

The college will send an email when decisions are posted, but the college may or may not notify the student of missing information. It’s the student’s responsibility to check the SIS.

6.  Take a deep breath. Actually, I may need that advice more than any of this blog’s readers. Perhaps things were calm in your house in the run-up to the college application deadlines. Maybe it feels like there has been a nice, lazy break between the final submission and now. Or, was your experience anything like ours, with an application submitted early evening on December 31st, followed by perusing financial aid deadlines within twenty-four hours? If that’s the case:  take a deep breath.

Here we are, less than four months away from sending a deposit to a college. I expect this time to simultaneously drag (as Julie awaits decisions) and fly (as I face financial aid deadlines).

Fasten your seat-belts; we’re still in for a long ride.

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Head’s up: Free webinars on how to pay for college.

I don’t often give over this space to promote something. Since I cannot remember if I ever have in the two years I’ve been writing here, this may be a first. All that simply to say, here is a great opportunity for any parents wondering about how college pricing works and how to pay.

Via The Atlantic.

Via The Atlantic.

Two college admissions and finance specialists, Lynn O’Shaughnessy and Michelle Kretzschmar, have joined together to develop a series of free live webinars this summer.

The first, to be held next Sunday, June 2nd at 7 pm EDT, will cover:

  • Why College Sticker Prices are Meaningless. It’s a lot like airline prices or buying a car but not as transparent and no Priceline equivalent.
  • The Real Story Behind College Scholarships. There really aren’t millions of dollars of scholarship money out there that goes unclaimed. But there is money if you know where to look.

You can read more about it on Lynn’s College Solution website and on Michelle’s DIY College Rankings website here. No registration is required, simply go to The College Solution Webinar page.

I’ll be there.

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Got your FAFSA done yet? Here’s why you need to hurry.

There’s one very big reason guidance and financial aid counselors advise students and their families to file the Free Application for Federal Student Aid (FAFSA) as early as possible: The money runs out.

Tweeted 2/16/13 by UVa's Student Financial Services.

Tweeted 2/16/13 by UVa’s Student Financial Services.

Colleges use the FAFSA to determine a student’s eligibility for financial aid via “nine federal student-aid programs, 605 state aid programs, and most of the institutional aid available.”  [Via Wikipedia.] All of those programs have limited pools of funds; most allocate funding on a first-come, first-serve basis.

1.  The Deadline. The FAFSA becomes available online each January 1st for the following school year. FAFSA provides a deadline of June 1st, but some states set an earlier deadline, and most colleges will provide a recommended deadline of March 1st.

2.  The Tax Return. Completing the FAFSA requires at least a draft of the previous year’s tax return. So the Jan. 1, 2013 version of the FAFSA, required for the 2013-2014 academic year, needs data from your 2012 tax return. Some counselors will advise filing taxes first and linking the FAFSA to the IRS electronically for verification. Yet, most families will still be waiting for tax forms (1099s, W-2s, etc.) when they complete the FAFSA; hence, the draft return.

3.  The Paperwork. FAFSA’s Help link provides this list of the records you will need, in addition to the tax return. When dealing with the FAFSA, “you” always refers to the student.

Your Social Security card.
Your driver’s license (if any)
Your 2012 W-2 forms and other records of money earned
Your (and if married, your spouse’s) 2012 Federal Income Tax Return.
Your Parents’ 2012 Federal Income Tax Return (if you are a dependent student)
Your 2012 untaxed income records
Your current bank statements
Your current business and investment mortgage information, business and farm records, stock, bond and other investment records
Your alien registration or permanent resident card (if you are not a U.S. citizen)

1040/FAFSA Worksheet

1040/FAFSA Worksheet

4. Getting it right. I won’t start a list of all the things that are confusing about the FAFSA. This post would never end. I will try to provide some help.

When preparing our draft 2012 tax return, our accountant provided a worksheet which matched dollar amounts from our return with FAFSA question numbers. If you know the difference between American Opportunity education credits and tuition deductions and which benefits you the most, you may not need any help. If, like me, this sort of help comes in handy, download a pdf of the blank form.

Good luck!

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Three Quick Tips for College Financial Aid

It’s time for me to review financial aid files in preparation for filing our FAFSA next month. If you’re in the same position — or if you’ve fafsa.ed.govnever done this before — here are three quick tips to getting started with college financial aid.

1.  Be Strategic.

From the Wall Street Journal’s, How to Not Blow it with Financial Aid, understand the cost of assets being held in the wrong accounts. Money in the student’s account is allocated toward what your family can pay at a much higher rate than money in the parent’s account. This is logical, sure, as the parents have many more demands on their income and assets than the student. To follow on that logic, make strategic choices about where assets are held. The WSJ article quotes Mark Kantrowitz from, an excellent resource.

For one thing, a child’s income and assets count heavily against their potential aid. Every dollar a child has in assets—that includes bank accounts or trust funds—cuts their possible award by 20 cents. Every dollar a child makes in income above $6,130 (the limit for 2013-14 aid) cuts their possible award by 50 cents.

Before the base income year starts, parents should transfer the child’s assets—that includes any money in checking and savings accounts—into a 529 plan, a tax-advantaged savings account for college, says Mr. Kantrowitz.

2.  Be Honest.

Any information families provide as part of their FAFSA will be verified by tax filings with the IRS. This can be done via the FAFSA/IRS direct interface or it will be done by the college requesting copies of past and current tax forms.

Take a look at this recent case, Attorney Disbarred for Submitting Falsified Tax Returns for Financial Aid, shared by Kelly Phillips Erb who blogs about tax at Forbes. The lawyer filed false financial aid forms, then submitted falsified tax returns to the private secondary school in support of the forms. Note:  he did not file the false returns with the IRS, he altered existing returns and give them to the school to back up the financial aid forms. No matter, “He sacrificed his career and his reputation for between $6,000 and $8,000 per year.” This from an attorney who had been a partner in a firm that shared $1.5 million in profits per partner last year.

As the cost of education skyrockets, parents feel trapped to pay for school – and some of them consider lying in order to get financial aid. And yes, financial aid forms require that you submit supporting documentation, usually pay stubs or federal income tax returns. Here’s where folks get into trouble: they lie on their tax returns in order to skew the numbers for financial aid. Sometimes it’s overstating deductions (bad) or omitting income (really bad). Other times, it’s lying about dependents, exemptions and in some instances, marital status (really, really bad). In almost every instance, one lie leads to another because it’s hard to keep up. Just like with Golden.

3.  Be Careful.

This quick read, Ten Common FAFSA Errors Parents Make, can help all of us avoid simple mistakes that might cause disastrous consequences. [Hat tip to Susie Watts for the link.] See the article for a brief paragraph on each mistake, but here’s the list:

  1. Failing to Submit Because of Income (High or Low)
  2. Waiting Too Long to Submit
  3. Submitting Incorrect Info for Divorced Parents
  4. Understating Income
  5. Overstating Assets
  6. Misquoting Real Estate Assets
  7. Misplacing Information
  8. Choosing to File Paper Vs. Electronic
  9. Failing to Consider Each Question Carefully
  10. Forgetting to Save as You Go

Good luck to families working on their taxes and financial aid forms. Good luck to all the high school seniors still working on completing college applications. I can only wish this time next year you are as happy at your selected college as Mod Squad Pete has been at his.

Next up:  2013 brings Mod Squad Julie to the year of SATs, more college visits, and — finally — college applications. Happy New Year!

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