Financing college: What you don’t know can hurt you

by Deb Coco on February 10, 2015

We see it on the faces of almost every single parent who walks through our door. It’s the look of disbelief at what just ONE year of their child’s college education will cost, much less all four. The sticker price is staggering, ranging from $90,000 to $250,000, depending on the school and a variety of other important factors. Parents feel a bit deflated and this is understandable; they are facing the second largest investment of their lives, not to mention that most people have more than one child . . . needless to say it can be overwhelming.

And that is where we come in. At The College Advisor of New York, we’ve helped thousands of families find a way to send their children to college without “losing the farm.” How? Knowledge is power and financing college is no different. The earlier in the college search process that you understand how much money you will be expected to contribute towards your child’s education, the better chance of finding a way to come up with the money.

College consultants toss the term “EFC” all the time, but what does this acronym stand for and the bigger question is, what does it mean? It stands for “Expected Family Contribution.” This is the number that schools calculate to determine how much THEY feel YOU can contribute towards your child’s education. And believe me, it’s always much more than you anticipate. The simple example goes something like this. If “X” school costs $55,000 per year and your “EFC” is $20,000 per year, then you are expected to be able to pay $20,000 of that $55,000, and College “X” will come up with some – NOT all – of the difference in financial aid. However, if your “EFC” is $70,000 in that same scenario, you would receive no aid. I am oversimplifying it here, but this is the easiest explanation.

So how do schools calculate this number? There are two ways: the Federal Methodology and the Institutional Methodology. One is the government’s formula for need based aid and the other is the calculation required by many private colleges. Various colleges require both and neither formula assures that you will receive any aid; they just calculate your EFC to determine your financial need. Confused? You’re not alone.

There are so many factors that go into determining this magic number, but not many professionals out there that can help you A.) calculate it and B.) know what to do once you have it. One of the first questions we ask of our new clients is “do you have a financial advisor?” Many of them do, but most financial advisors and accountants do NOT understand the nuances of the college financial world (and they would admit that themselves). Just as we tell families not to rely on their English teacher to advise them on their college application essay, here too is a word to the wise: Seek out a college admissions counselor who knows the financial aid process. And because my blog always contains one shameless plug, here it is . . . The College Advisor of New York is the only college consulting firm that incorporates the financial aid process into the college search process. Dr. Dean Skarlis is the “go to” professional for financial advisors. He answers their college planning questions that so often arise with their clients. He also runs seminars and trainings specifically aimed at educating financial professionals on how to plan so that families can keep more of their hard earned money. He is one of the few people out there with this expertise.

What exactly does this mean to our clients? It means our parents have the peace of mind that on May 1 of their child’s senior year, they will not be staring at a college education they can’t afford. It means that they won’t have just one; they will have several college options to choose from. We help our families weigh whether it is wise to spend more money at the brand name school or less (often MUCH less) at the less well known university where they received a large award. And the game is changing here too, because we are finding that even our families with the ability to truly afford those expensive schools, are choosing the school that gave them aid in one form or another.

And that brings me to one more point. All financial aid is not created equal. Many of our families will never see any “need” based aid. But they don’t have to despair. We help them to seek out schools where their student will stand out, and thus receive merit scholarships. The caveat here is that all schools do not offer merit aid; another reason not to rely on a financial planner but to instead turn to a college admissions consultant who knows the big picture. The stakes are very high, and the road can be confusing. As I’ve said in past blogs, our process seeks a fit in three areas; academic and social for the student and financial for the family. By working with us, you know right from the start what you can afford. More importantly we help you strategize about how to cut your costs, and come up with the money to pay for school. That is truly peace of mind and one that will never leave you telling your child “we just can’t afford that school.”

{ 1 comment… read it below or add one }

Mary Ballin February 12, 2015 at 1:35 pm

Please add me to your email distribution list.
Thank you

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