One feature of this blog will be book reviews. There are so many great books on college admission and paying for college that families can’t read them all. So I’ll be reading some of these books and giving you the highlights on the blog.
In this post, I’m taking a look at the first five chapters of The Price You Pay for College by Ron Lieber. These first five chapters comprise the section on The Price and Cost of College and the Systems Behind It.
- Cost: the expense to the college or university to educate a student.
- Price: What the family pays for college.
- Need-based financial aid: Families pay a lower price depending on what the federal government or the school thinks the family can afford.
- Merit aid: Merit aid or merit scholarships are not the traditional financial aid that many of us know about. Instead, merit aid is a discount applied to the total college bill on a case-by-case basis in order to entice students to attend the college. This is not about the financial need of the student, it is about recruiting students. The school lowers the price for one or two reasons – 1) the school believes the student will add something of value to the campus and wants you to turn down offers from other schools and/or 2) the school realizes that many or most people are not willing to pay the list price (this functions like a coupon).
Why does college cost so much?
- On average, 75% of the money families pay for college goes to teaching students and paying teachers. The rest funds additional services beyond classroom teaching and construction costs.
- In the first 20 years of this century, the price of four-year public universities has risen by 70%. State legislatures, beginning in the recession of 2008, were forced to withdraw some of their funding for public universities, and that cost has been passed along to families.
- Empty seats in a college classroom are a waste of money for the college. Therefore they try to fill those seats with the kinds of students they want at their university. Often, colleges use consultants who manage merit aid. Merit aid consultants form a $1 billion annual industry. That adds to the cost of college.
How does Merit Aid work?
- The process of determining how much merit aid to offer a student begins when the student first takes a college entrance exam and continues through the summer after high school graduation. Here are the basic steps:
- Students take a PSAT, SAT, or ACT and the testing company sells student information to colleges for marketing purposes.
- The merit aid consultants hired by the college determine what to say to students as they court them to their university. This can include determining what incentives students need early on, such as application fee waivers.
- Once a student applies, computer algorithms determine what discount the college should offer to get a student to say yes to the school.
- The process continues over the summer to keep students from changing their minds as well as to track students throughout their college years.
What will I really pay for college?
- When you complete the Free Application for Federal Student Aid (FAFSA) in October, you will receive your Expected Family Contribution (EFC). This number tells you what the government thinks you can pay for your student’s college each year. It uses the EFC to determine eligibility for grants, work-study jobs, and subsidized loans. And just because the government says that you can contribute that amount annually doesn’t mean you really can. That’s why there are supports to paying for college like scholarships and merit aid.
- Most colleges and universities have a Net Price Calculator somewhere on their website. This calculator will ask you for quite a bit of financial information and it will return an estimate of what you might pay at that college. It isn’t always exact, but it is usually in the ballpark. Many Texas colleges and universities have their Net Price Calculator linked here.
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