It's decision time: College acceptance letters are out and high school seniors are evaluating their offers to determine which school they'll attend.
While the school's location and culture remain extremely important, the net cost of the college — its price after all financial aid and scholarships are factored in — has become an increasingly important factor as well. Nearly 60 percent of students receive some form of financial aid to help defray college costs, and 47 percent of freshmen said they chose their college because it gave them financial assistance.
A college degree doesn't guarantee a job, of course, let alone a high-paying one, and with tuition continually on the rise, Americans are realizing that in many cases high price tags aren't worth it. "People shouldn't put their entire financial future at risk in order to pay for their kids to go to college," says West Virginia-based educational consultant Jamie Dickenson.
Understanding exactly what your financial aid letter says is critical to understanding the true cost of a school. The average sticker price for in-state tuition is $9,100, but the average net price is about $3,000, according to the College Board. At private colleges, the average published price is $31,230, but families pay $12,360. (This doesn't include room, board and fees.)
About 2,900 schools now use the Financial Aid Shopping Sheet, which makes it easier to compare offers from various schools. If your school doesn't participate, use this online tool from the College Board to make a fair comparison. Here's how to decipher your offer — and how to get a better one:
1. Know the cost of attendance (and consider extra costs).
The cost of attendance includes not only the total price tag for tuition but also room and board, meals, and supplies. The total cost also includes transportation and other education costs, but realistically you'll want to add at least another 10 percent for things like social activities and dorm décor.
2. Understand the difference between grants and loans.
While both grants and loans are considered financial aid and lumped together by some schools in your financial aid letter, their long-term effect on students is extremely different. Grants and scholarships are free money you don't have to pay back. The difference between the cost of attendance and the amount you receive in loans is what you (and your family) will need to pay each year.
Student loans don't have to be paid back while you're in school, but they continue to accrue interest and require payments right after graduation. Loans do not actually reduce the cost of college. Instead, after factoring in interest rates, they can often increase the overall cost of a particular school.
Experts recommend that students not borrow more than their projected first year's salary, and that parents not borrow more than one year's income or what they expect to be able to pay back within the next 10 years or before retirement.
3. Be wary of work-study programs.
Some colleges include work-study programs as a third form of financial aid. Experts say students shouldn't count on this part of the package. The jobs are first come first served with no guarantee you'll get one. Plus, the pay is generally lousy.
"Students often realize they might be able to find a non-work study job that pays better," says Meg Caddeau, a college admissions counselor with Manhattan-based educational consultants IvyWise.
4. Consider future years.
Look closely at whether your financial aid package is guaranteed after freshman year. It most cases it's not — and students will need to reapply each year by filling out the Free Application for Federal Student Aid (or FAFSA) and the CSS Profile (check with your colleges for their specific requirements). Even guaranteed aid packages may be worth less in the future as tuition rises.
"The financial aid changes year by year can be huge," says Daniel Riseman, founder of Riseman Educational Consulting in Westchester County, New York. Find out whether the grants have a minimum GPA requirement. Some schools routinely swap out grants for loans after a student's first year of attendance.
5. Remember you can appeal.
While federal aid dollars are based on a pretty rigid formula, schools have more wiggle room with what they award than many people realize. If there has been a change of circumstance since your child's application, such as a job loss or a medical condition (and you have documentation to prove it), sharing that information with the financial aid office could change your award.
If your student has received offers from two different schools, politely explain the situation to the admissions office at the stingier school to see if they'll match the competitor's offer.
"Once a school has admitted a student, they typically really want that student to attend, so they will do whatever they can within their means to get that student there," Caddeau says.