Sticker Prices Hide

The Real Cost of College

Written by Tod Fothergill and Tom McGrath of Strategies for College

Although it's very tempting, it's generally a bad idea to select or eliminate a college based on published sticker prices in guide books, software and other media. Guidebook prices are often incomplete and misleading and software is often out of date. More importantly, even if the source is accurate, the published cost does not reflect what you will be required to pay.

Private colleges costing $25,000 or more, with merit money available to qualified students, may present a better overall financial package than another college costing far less, and even a better package compared to out-of-state, public univerisites which usually offer only federal student aid. For many middle-income families, the only aid available at public universities will be student loans. These institutions often create the largest financial burden to a family despite having the lowest published sticker price.

Due to the increasing use of "preferential packaging" of financial aid and "leveraged analysis", a student's academic position in an admitted freshman class can aggravate or enhance the financial aid award letter. While not used by all colleges, these practices assign financial penalties to students who enroll in a "reach school" (a college where the student is accepted but is in the bottom quartile of the admitted class).
Furthermore, if you are trying to decide between two colleges and:

One of the colleges has a substantially cheaper total costs, but uses leveraged analysis, the more expensive college may provide a better financial aid package,
OR
If the colleges have identical costs of attendance you may receive entirely different financial aid awards should one of the colleges be using leveraged analysis or preferential packaging.

Sticker price shopping would never reveal these outcomes.

Seldom will you know which colleges is offering the best deal for sure until you see the award letters from each college to which the student has been accepted. They usually arrive in late April of senior year. It is for this reason that students should apply to 6-8 colleges, and family financial constraints or limitations should be as much a part of shaping the initial list as are the student's academic credentials and personal preferences.

Here is the bottom line: Experience shows that the differences discussed above can be as large as $10,000 or more, and that these differences are masked by sticker price. To evaluate the time value of differences of this magnitude, refer to the table in "Be a savvy consumer"