I feel like the surgeon who is operating on his own child.
Well, not exactly. Let me explain. I’m not a surgeon. I’m a wealth advisor, specializing in the financial aspects of college planning. And fortunately, my daughter is not on the operating table. She’s a high school junior, currently scouting colleges.
We are beginning the college search process by creating the “first draft” of potential universities. I use this term because right now, we are casting a very wide net. The goal is to find schools that meet her most important criteria and tend to offer generous merit aid. College tuition is like the “rack rate” at a hotel – most people don’t pay full price for either. Similarly, schools often have “net prices” that are dramatically different from each other and from their published sticker prices. These savings can easily approach six figures over four years!
You might be thinking to yourself, “sure, you can always find a lower-cost school, but it won’t be as good.”
Think again. In 2016, New York Times columnist Frank Bruni published an excellent book on the subject “Where You Go Is Not Who You’ll Be”. In it, he wrote, “Elite colleges do not have all the best teachers, students and facilities. What they have is a history of acclaim that is easier for people to buy into than question.”
In addition, researchers Stacy Dale and Alan Krueger performed two long-term studies of college graduates. They concluded, “When we adjust for student ability, our estimates of the return to college selectivity are generally indistinguishable from zero.”
In other words, yes, people who graduate from the most selective colleges tend to earn more than those who attend less selective schools. But by controlling for student ability, the researchers concluded that the selective schools did not create successful graduates. Rather, selective schools tend to attract people who already possess qualities such as intelligence and drive that make them successful. When the researchers compared graduates of elite schools to similarly intelligent and driven graduates of other schools, they found virtually no difference in lifetime earnings. In full disclosure, the researchers did find modest differences for two subsets of their study. First-generation college graduates and underrepresented groups, including African Americans and Hispanics, appeared to benefit from attending brand-name schools.
I have shared this with my daughter, so she understands that the logo on her diploma matters about as much as the logo on her jeans. That is why we are very comfortable and excited to cast a wide net that includes many lesser known, but fine schools. Some of those schools use generous merit aid to lure good students away from brand-name schools. This is especially true for students who have grades and test scores among the top 25% of applicants.
This is important to us because like many our clients, my family is in the very fortunate position of not qualifying for need-based financial aid. We know this because our Expected Family Contribution (EFC) is greater than the sticker price of most colleges. As a result, most brand-name schools will expect us to pay full price, which often equates to more than $80,000 per year! Personally, when similar and even superior educations can be had for a fraction of that, we prioritize value over prestige. If you saw the car I drive, you would understand.
To begin the process, we entered my daughter’s primary criteria into several college search engines. My favorite ones are CollegeBoard, CollegeData and College Navigator. She is looking for a small or mid-sized school that offers a computer science major near a city in the West, Northeast or Upper Midwest. However, it’s important to note criteria is more than majors and locations. It’s crucial to investigate the financial strength of schools, experiential learning opportunities, graduation rates, safety and housing. An often-overlooked dynamic is whether a school focuses on teaching or research. At some schools, there is an old saying, “publish or perish.” In other words, at many of the most prestigious schools, undergraduates take a backseat to grad students and professor research.
While those criteria narrow the options, we looked at the merit aid practices of each school to produce a truly manageable list. There are a few ways to do that. You can research specific schools on the CollegeData web site. The “Financials” section of each school profile shows how many students with and without need received “Merit-Based Gifts” and the average size of those gifts. All this data is self-reported by each school to its Common Data Set (CDS). This information contains a wealth of information — financial and otherwise. The CDS can usually be found by doing a web search for “Common Data Set” and the school’s name.
A second option is to visit a school’s Net Price Calculator (NPC). This can be hit or miss though because not all calculators estimate merit aid. As a rule of thumb, if an NPC does not ask about student test scores and/or GPA, the estimate is likely to be rough or the school simply doesn’t give much merit aid.
Finally, the approach I prefer to use is software created by College Aid Pro (CAP). After entering my family’s financial information and my daughter’s academic record, CAP does all the work for me. It allows me to enter specific schools – and based on the software’s extensive database – it estimates what we are likely to pay after scholarships and grants. Perhaps even more helpful, the software allows me to search for schools that meet my daughter’s criteria and have a history of generous merit aid. This has opened our eyes to some very exciting options that we might never have discovered otherwise.
By using these resources, our list sits at about 40 universities. After visiting colleges virtually and in person over the coming months, we will whittle the list to approximately 10 schools. I hope this helps you find schools that will prepare your children for success and happiness without compromising your retirement or other financial goals.
As always, if you would like more personalized guidance, please contact your financial advisor. Because the choice of a college is one of the most costly and emotional decisions a parent will make, we are eager to help.
David Ressner, Buckingham Wealth Partners.
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