If you read this blog often enough, you might get the impression that I’m totally anti-private school. I frequently advise you guys to ditch private schools and their fat tuition bills in favor of cheaper public schools, and all else being equal, that’s probably going to be my advice most of the time.
But I’ve got nothing against private schools per se; I’m just against overpaying for anything, and certainly a big-ticket item like a college education that’ll likely be financed with loans.
Many private schools, though, do have deeper pockets and fewer students to whom their financial aid cash gets distributed, so don’t write off any particular school just because the sticker price is high. That’s just the starting point. To that end, Natalie needs some advice:
Dear Judge Josh,
I have a question about college costs and financial aid that I hope you can help me with. I’m currently looking at two different colleges, one that is about $32,000 a year, and the other $43,000 a year. I’ve looked to cheaper in-state colleges with a total cost around $20,000 a year but a friend who applied and received her financial aid package that had an EFC close to mine was told she would have to pay even more than the FAFSA estimated…quite a bit more.
Yes — just because your EFC is a certain amount (let’s say $8,000) doesn’t mean that every school is automatically going to offer you every additional dime in financial aid to offset the difference. I know you know this, but I’ll say it just the same — a GIANT factor in your school decision is going to be the financial aid package that each individual school you’re interested in offers you.
The fact that I will most likely have to take out such a large loan has put me off the less costly colleges and looking at the ones with prices that would typically intimidate me and brings me to my question: because my EFC is high for a $20,000 a year college, would I be able to actually save money if I attended a university that cost twice as much?
Well — possibly. Your EFC is what it is — it’s not based on what schools you want to attend or how much they cost. It’s based on the financial resources of you and your family.
But you haven’t indicated in your email that either of the more expensive schools you’re consider have made you a significantly greater financial aid offer. And if they haven’t and/or don’t make you a significantly better offer, then you don’t really have any reason to believe that you’ll be paying any less to go there — in fact, you’ll be paying more, since the original price is more.
Does that make sense? Am I understanding you correctly?
Please help, I have to reply to an acceptance letter soon!
You bet. There are two main issues at play here: the difference in credentials between you and your friend, and the difference in the financial aid offers among the schools you’re applying to.
First issue: Both you and your friend may have equivalent EFCs, but that doesn’t mean you’re equals in terms of the financial aid you’ll be offered. Maybe you have a stronger resume and will get offered more money. Or maybe it’s weaker, and you’ll be offered less money. Maybe one of you has characteristics that are more sought after than the other. Whatever the differences between you, my point is, there are differences, and those differences may affect your total aid award, regardless of your EFC. The feds determine your EFC and you’re not going to change it — focus on the total financial aid picture at one school versus another.
Second issue: Is it possible that the higher cost of attending more expensive (and I assume) private schools will be offset by a larger financial aid award from those schools? Sure. Rich Parents University may cost $50,000 a year vs. the $20,000 price tag of Poor Folks State College, but if RPU offers you $45,000 per year in financial aid and PFSC only offers you $5,000 per year, then we’ve got more to consider.
But that’s not the end of things. Using the example above, you’ll need to come up with $5,000/year out of pocket to attend RPU, but $15,000/year to attend PFSC. But how much of RPU’s offer is in loans? If they’re giving you $45,000 per year in aid but $20,000 of it is in loans, then the equation changes again. In that case, even though RPU is offering you more money total, you’re still gonna be paying more money back in the long run if you go there.
And what if the loan package you’re offered (by either school) is in the form of a PLUS Loan (that your parents have to take out)? Are your parents willing to do so? Are you willing to ask them to? A big factor, to be sure.
All that said — buyer beware, my friends. You’ll see this phenomena at work your entire lives — that of the expensive product (private school) offering you a big discount (financial aid package) to entice you into spending more money on their product. It’s a great marketing technique.
Ever seen those BMW ads on TV offering up to — oh, I don’t know, $8,000 cash back on a new 5-series? Sure you have. Ever seen a similar commercial offering $8,000 back on a 2010 Chevy Malibu? Hell no, and you never will. But which car is cheaper? Yeah, it’s the Malibu, by about $20,000, even after that $8,000 “cash back” from BMW.
Ever seen the coupons in the newspaper for “Get $1 off when you buy two bottles of Heinz ketchup”? (Of course you haven’t — no one reads the newspaper anymore, let alone clips coupons — but I digress). Anyway, yeah — sure, $1 off sounds good, but it’s much cheaper to buy a cheaper brand of ketchup with no coupon.
Anyway, you get my drift. This happens everywhere, and private schools do it, too.
Natalie sounds like she’s in a time crunch here, but for the rest of you reading this — be sure to apply to all the schools that you’re seriously considering and get written financial aid offers, then crunch the numbers like we did above. And remember, you can always appeal your financial aid awards — and I recommend you do that whether you need the money or not.
As the greatest penny-pincher I know (my mother) always says — it never hurts to ask. Even if school costs $30,000 and an appeal gets you an extra $1,000 in grants — hey, that’s $1,000 you didn’t have before. Consider this: Is there ANY other situation in life where it’s not worth $1,000 to pick up the phone and make a call (or write an appeal letter, etc.)? Hell no. So why not do it with respect to financial aid? All they can do is say no. No big deal if they do.
I hope that answers your question, Natalie. What about you all — any comments or advice for Natalie? Let her know in the comments below.