I recently spoke to families at Dana Farber Cancer Institute and repeatedly heard, “We’re not going to apply to (name your school) because they’re too expensive”. It is not uncommon for families to focus on the sticker price. And more often than not, Sticker Shock ensues. And it’s understandable!
With average tuition for a 4 year private college exceeding $40,000, it is easy to see how sticker shock can come about. Factor in housing, meal plans and books and supplies and those costs can exceed $55,000! At those numbers, one should be concerned with total costs!
But one thing many families don’t take into account when calculating cost is something called a discount rate. The discount rate is the reduction off the published price of tuition and fees due to the awarding of grants and scholarships awarded by these schools. For example, if a school took in $10,000 in total tuition and mandatory fees but gave out $4,000 in scholarships, their discount rate would be 40%.
A recent survey conducted of private colleges and universities by the National Association of College and University Business Offices showed that the average discount rate has risen to 45%! What this means is that 45% of the tuition and fees that these schools charge is going towards awarding scholarships and grants.
What does this mean for a high school student applying to college? Well for one, it means, DON’T GET STUCK ON THE STICKER PRICE!
Because at most schools, not every student receives a scholarship, this may mean that for some students, their individual discount rate may be much higher. Suddenly, a tuition charge of $40,000 may actually be “only” $22,000 if the discount rate is 45%. Factor in federal student loans which may be another $5,500 and you may be looking at a gap of “only” $16,500. It is still a large gap but considering we started at $40,000, the gap has been narrowed!
How can you get a feel for the schools you are looking at? Well, it can be very difficult to identify a college’s discount rate. For competitive reasons, that’s not something that is often published. You can however take advantage of some tools offered to you from the Federal Government. Each year, colleges and universities have to report a host of data elements as part of a data collection effort called IPEDS (Integrated Postsecondary Education Data System). This information is made available to the public in a (relatively) easy to read format. The College Navigator site takes all of this data and breaks it out into various categories. From percent of applicants enrolled to graduate rates. In addition, one can also find out how much scholarship and grants were offered to freshmen or the percent of freshmen receiving scholarships. This information will give you some clarity on the possibility of receiving a scholarship. If the school website states the average scholarship award is $30,000 but only 20% of incoming students receive a scholarship, well, you can figure the odds might be against you.
There is a lot to this process. In future posts, we’ll discuss the Net Price Calculator, how to use and what it may mean.
While this may seem confusing, my point is, Don’t NOT apply to a college because the sticker price seems too high. Sure, it’s good to have a safety school in terms of cost, but you never know what you may receive in scholarship funding. Good luck!