Picking the Right College to Avoid Debt
by John Wasik
We had a two-layered financial strategy when my daughter sat down with us to come up with a list of colleges she should apply to in her junior year.
We asked two questions:
- Which schools in general would offer the most amount of debt-free merit or financial aid?
- Which schools had sufficient endowments to cover most college costs without loans?
These are not questions most advisors ask, but should, because it could add tremendous value to their practices.
These were tough questions since our primary goal was to find the right college for our daughter.
A "good fit" is hard to find since you need to find the right atmosphere, academic challenges, post-graduate opportunities, and a whole list of other intangibles.
By looking at a college's endowment, or the amount of money they have in their kitty, you can tell if they can afford to offer a full scholarship. That's why you shouldn't even look at college price tags early on. Universities with healthy endowments may not charge you full price for attending, but they won't tell you upfront.
But numbers mean little early on in your clients' college search. Like most families, we dedicated the end of her junior year to college visits. These are absolutely necessary to get a feel for campuses, although they can be highly deceptive, especially when you go in the summer and there are few students around. And large endowments don't guarantee that your child will receive non-loan aid.
Generally, nearly every campus tour will show you the newest buildings, most modern dorms, recreational complexes, and updated dining amenities. Many colleges have spent so much on facilities that they rival the finest resorts. Most adults see themselves happily ensconced there. I would've gladly attended most of the colleges we toured. Yet what you see is not what you need to know. You have to get beyond the window dressing, which is an art form in the college tours.
Parents: You have to listen to your children because they are not thinking about how much a college education costs—they can't fathom that amount of money—nor can they think beyond what they see in the present. They're just not hardwired for the world of careers, mortgages, credit cards, unemployment, or loans. What they do know is what feels right in an intuitive sense, which is what they are best at in their late teens.
Some students may thrive in a sprawling state campus with big sports programs and lots of activities, while others may prefer a smaller, liberal arts college.
There is no formula to determining which college is best; you have to know a child's personality, social skills, learning style, and needs. However you do the evaluation, the child should feel comfortable with the campus, class sizes, and programs. While having a specific major in mind certainly helps, be careful not to pressure them to decide what they want to do with the rest of their life when they're still a teenager.
Colleges That Provide Grant-Based Packages
If you're a debt hawk, as we were, you can keep your own list of colleges that your children have seen that favor grants over loans.
First, do your homework. You should focus on colleges that don't saddle their students with much debt. That eliminates most for-profit colleges and, surprisingly, many state universities.
Every college on your preferred list can tell you how much debt their graduates have and how much non-loan aid they provide.
The newly revamped government site College Navigator will give you a good snapshot of who's providing the most non-loan aid. It's a good first stop in finding the right college fit at an affordable price.
I like College Navigator because it allows you to search for colleges by states and zip code while breaking down the best values. It will tell you which colleges have the lowest "net" price after all aid is offered. That's what you're likely to pay, not the horrific "list" price that most colleges display.
If applying to multiple colleges, compare the aid offerings. Who's offering the biggest tuition discount, work-study, or grant package? What's your "net cost of attendance" after all grants, loans, and other forms of aid are subtracted from total expenses from each school?
Good sources for surveying what colleges have to offer, tax benefits, and financial aid are:
- Finaid.org. Has authoritative articles on financial assistance and a search engine for scholarships.
- Edvisors. Provides a private loan search engine and a wealth of information on college financing.
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© 2015 John Wasik. Excerpted from the new book The Debt-Free Degree by John F. Wasik. The ebook is available on Amazon.com and other sites.
© 2016 John Wasik
John Wasik is the author of 15 books, including most recently The Debt-Free Degree (Forbes Signature, $4.99). Wasik is a contributor to The New York Times, blogs for Forbes.com and speaks across the country on investor protection issues. You can download the book here.
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