Spoiler alert: college cost is not transparent. In fact, I like to talk about college cost as akin to a used car lot. If you are on a college website at this very moment – looking at the sticker price – chances are good you will not pay this amount. Shocking, but true. This simple fact causes a lot of headache and heartache for families around the United States…not to mention missed opportunities for a better education. This is especially true for private colleges.
Should I Pay Sticker Price for College?
Private colleges have what’s called an internal discount rate. You don’t often hear this term floated around outside of academia, but the topic is no less compelling for families looking for an affordable option to educate their children. This is the amount, on average, that private colleges discount their tuition for students. Care to guess what that number is? It’s right around 50%, meaning the average family pays around half of sticker price. To add to the complexity, this percentage discount can be substantially higher (in other words, you pay less for college) if you:
- Have scholastic or athletic potential
- Demonstrate financial need through the Free Application for Federal Student Aid (low income and assets)
- Plan to attend a college or university that has a very large endowment or well-funded department
A Concrete Example of Tuition Discounting
Let’s walk-though a scenario on #2 to make this real. I recently calculated four-year projected costs for a household with an income of less than $30,000 for Rockhurst University, University of Arizona, and Stanford University. Want to guess the projected difference in price per year? Which one do you think is the cheapest? The results might surprise you:
- Rockhurst was $16,965 (average cost reported by the school is $21,973)
- University of Arizona was $10,234 (average cost reported by the school is $14,553)
- Stanford was $1,226 (average cost reported by the school is $12,265)
What is a Net Price Calculator?
Luckily, the government also partially solves the vexing cost-transparency problem. It’s now required that colleges and universities publish a net price calculator on their website. This will help you estimate a total cost of attendance for a school, not just tuition and fees. A net price includes tuition, fees, room and board, textbooks, transportation expenses, and personal expenses. For example, here is the Kansas State University’s Net Price Calculator. After all, the last thing you want is to unexpectedly discover the high price of on-campus living in the form of a bill from the school.
The U.S. Department of Education also publishes helpful material on their College Scorecard website. I LOVE this website. Simply punch in the name of the school and get tons of helpful information on cost, graduation rates, and financial aid. Of particular importance is the information on earnings after school and typical total debt after graduation.
If you’re interested in building a rock solid school list that will maximize your financial aid and lower your cost, reach out to me at email@example.com.