Your dream college looks expensive, but it might be affordable
Earlier this month, my sons experienced their first college football game as we traveled to Charlottesville, Virginia, to see Notre Dame play the University of Virginia.聽It was by far one of the most exciting sporting events we have ever attended, with multiple lead changes, trick plays and a dramatic finish that saw the Fighting Irish score a touchdown in the closing seconds to win the game.
My boys were hooked. They now want to go to Notre Dame.
The last time I checked, Notre Dame cost聽聽a year to attend, which is high enough to scare most parents away from even asking for an application.聽But maybe it鈥檚 not such an impossible goal to send your kids to the university they鈥檝e set their sights on. Let鈥檚 take a deeper look into how college selection affects聽聽and see why a school such as Notre Dame might be within your reach after all.
We first need to determine the 鈥渢rue鈥� cost of attending a school.聽And to get that figure, you need to calculate your聽, or EFC.聽This is the minimum amount that colleges will expect you to contribute toward the cost of your child鈥檚 education.
The EFC is calculated based on the information you provide on one of the two financial aid forms, the Free Application for Federal Financial Aid (FAFSA) and the CSS/Financial Aid Profile.聽All colleges that award federal aid require the聽.聽Some schools also require the CSS Profile to聽determine eligibility for their own institutional aid.
Information you provide on the forms is used in one of three aid calculations, or methodologies, to determine your EFC.聽The FAFSA uses the 鈥淔ederal鈥� methodology, while the CSS Profile uses the 鈥淚nstitutional鈥� methodology or the 鈥淐onsensus鈥� methodology, depending on the college.聽Each methodology聽has its own formula for聽assessing a family鈥檚 income and assets for aid purposes.
For example, depending on the methodology used, College X might take into account 100% of your home equity when looking at your assets, while College Y excludes home equity altogether. That is why it鈥檚 so important to understand what aid calculation each college uses.
Once your EFC is calculated, your eligibility for need-based aid is determined by taking the cost of attendance and subtracting聽your EFC.聽The result (assuming your EFC is smaller than the cost) is your financial need.
Let鈥檚 take an example of someone applying to two colleges 鈥� a state school that costs $25,000 and a private school at $60,000.聽If the family has calculated its EFC to be $25,000, then its out-of-pocket cost at both schools would be the same: $25,000. The student would not be eligible for need-based aid at the state school, but would have a financial need of $35,000 at the private school.聽If that private school met 100% of the student鈥檚 need with grants, then both schools would effectively be identical in price.
As you can see, your child鈥檚 eligibility for need-based aid is relative to the cost of attendance.聽The higher the price tag, the greater the likelihood you have of qualifying for need-based aid. In fact, most elite schools will meet the majority of a student鈥檚 demonstrated need 鈥� Notre Dame, for example, says on its聽website聽that it will meet 100% of a student鈥檚 financial need.
If you happen to be a good candidate from an admissions standpoint, the college would probably meet your need in the form of grants, tuition discounts and scholarships,聽minimizing or eliminating the need for聽聽that would have to be paid back. This is a prime example of how college selection and affordability are integrated.
College will most likely be one of the largest investments you ever make.聽You need to determine聽your best strategy聽to聽聽and protect your assets and income for retirement.聽That strategy should be based on your family鈥檚 unique circumstances, coordinated by your advisor, and it should cover college selection, financial aid, tax aid and the best use of your personal resources.
If your current financial advisor is not providing guidance in this area, find an advisor who can.聽The right college planning strategy can make all the difference for your child and your retirement.
Learn more about Brett on NerdWallet鈥檚聽.
