STICKER SHOCK is common when families begin the college search—with good reason. According to the U.S. Department of Education’s National Center for Education Statistics (NCES), inflation-adjusted college costs have more than doubled over the past 30 years.
Annual tuition, fees, room and board for fulltime undergraduate students at four-year colleges averaged $26,100 in 2015-16, the last year for which NCES data is available. That average drops to $22,400—if you include junior colleges. On the other hand, private colleges on their own averaged $43,100.
So is all hope lost when paying for college? Absolutely not.
NCES data also indicate that 83% of new college students receive some financial aid, up from 70% 15 years earlier. In other words, the vast majority of first-year college students receive financial help—more than 2 million students each year.
You might presume this help is mainly in the form of student loans, which merely postpones paying for college. But in fact, scholarships and grants—money that doesn’t have to be repaid—constitute the bulk of financial aid. NCES data show that first-year college students receive an average $7,700 in grants and $3,200 in loans. The $10,900 in total support covers 48% of the $22,400 average annual cost.
The biggest source of grants is—surprisingly—neither the federal nor state governments, but rather the colleges themselves. They provide about $4,600, or 60% of the grant total. Colleges effectively offer a significant discount off their published list price to almost half of new students. For example, many of my kids’ friends received in-state tuition equivalency when attending out-of-state universities.
To be sure, these various averages may be a little misleading. The more expensive the college, the larger the amount of grant money that’s likely to be awarded—and this may somewhat skew the averages. Still, it all adds up to serious dollars. CollegeBoard.org estimates that last year $184 billion in total aid was distributed, including $99 billion in grants, $55 billion in loans and $30 billion in other direct forms of support. In effect, students receive more than $100 billion each year in free money.
Want a piece of the action? You might think that the easiest route is to have a student with extraordinary talent in, say, athletics, music or dance. This couldn’t be further from the truth. Only about 3% of elite athletes make NCAA scholarship-eligible teams, plus those receiving athletic scholarships capture only a small piece of the total scholarship pie. The NCAA reports that more than 150,000 athletes receive $3 billion per year in scholarships. This works out to only about 2% of the 7 million-plus students receiving scholarships and just 3% of the total money.
Instead, the best path to financial aid is clearly through strong academics—achieving A grades and high test scores on the SAT or ACT. Colleges are looking for the best students. Meanwhile, poor performers will be challenged to gain admission, let alone receive aid. Good students from families having financial need will generally benefit more from grants and scholarships. But need isn’t mandatory to receive financial support. Remember, more than 80% of new students get some help.
There are plenty of resources to assist families, including the Education Department’s StudentAid.gov, Edvisors.com and FinAid.org. Many college websites offer calculators that estimate potential financial assistance. Colleges also have financial counselors ready to help.
NCES data indicate that roughly 20% of families never apply for financial aid. This suggests that most families that seek financial aid receive some assistance. But clearly, the onus is on families to apply. Make no mistake: College is expensive. But the nearly $200 billion per year of available aid can go a long way to alleviate the initial sticker shock.
John Yeigh is an engineer with an MBA in finance. He retired in 2017 after 40 years in the oil industry, where he helped negotiate financial details for multi-billion-dollar international projects. His two children are both recent recipients of merit-based financial assistance to help with college costs. His previous articles were Bracketology, Don’t Concentrate and No Free Ride.
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two things I realized too late for it to be useful for us:
1. if a two-earner family, consider having the lower earner stop working a year before college. The difference in FAFSA and EFC for us was about $20 000. That is, assuming decent grades, the colleges will offer grants worth $20 000 to match the EFC.
In numbers, suppose college fees are $60 000 and EFC with two earners is $56 000. Drop one of the salaries and EFC drops to below $40 000. The colleges will now typically offer about the $20 000 in grants, so the actual fee payment is lowered by that amount.
We did this the wrong way around, my wife had to leave her non-profit job and go back to a better-paid cubicle farm job, in order to pay for college. I didn’t realize how much difference this would produce in the EFC.
2. if more than one child attending college, try to have them all in college at the same time. The EFC is split across all the children. Per example above with EFC of $56 000 but two in college, EFC for each child is now only $28 000. That can help quite a lot.
Both my boys have ACT and SAT scores in the 98th percentile, and numbers of AP classes averaging 5 (highest possible AP score). That wasn’t enough to get any academic grants or scholarships from any of the schools they applied to, state or private. So good grades and scores are necessary, but not enough. The only kids I know who got academic grants had better than perfect GPAs, valedictorian from large school, 99th percentile ACTs, etc etc.