Answers on affordability
The mother said it bluntly: her daughter shouldn’t consider private nonprofit colleges because they wouldn’t be affordable. At the Minneapolis Convention Center, where the National College Fair was held this fall, she had stopped by the Minnesota’s Private Colleges table to share her conclusion.
Yes, the list price at private nonprofits is higher than at publics. But the amount of gift aid is typically much larger too.
It was a declaration, but also a question. I responded by noting how grants and scholarships are both widespread and sizable. And I even had some supporting facts in mind: There’s the one that nine out of 10 first-year students receive grants and scholarships they don’t have to pay back. And that for the average first-year student at Minnesota’s Private Colleges, the value of those grants and scholarships is more than $19,000.
Did my quick response — and a handout or two — have any lasting impact? The mother looked surprised, in a good way. And she had bothered to stop by to raise the issue. But who knows if she’ll prompt her daughter to find out more. Unfortunately, figuring out what is affordable in higher education isn’t simple; families need to learn about financial aid, understand how it works at different institutions and consider what makes sense for them.
Fall is the season for college fairs and admission sessions at high schools around the state. For the college staff at nonprofit colleges who are regularly on the road and at these events, they get plenty of queries on the affordability front. And the complexities of college pricing, unfortunately, only feed concerns and uncertainty.
First, there’s the fact that the listed price isn’t what most people will end up paying, in particular at private nonprofit colleges. All kinds of institutions in Minnesota offer gift aid, in the form of scholarships and grants, notes Jeff Olson, director of financial aid at Bethel University. So that gift aid lowers the listed price to a “net price,” which families then pay — using a mix of savings, income and borrowing. Yes, the list price at private nonprofits is higher than at publics. But the amount of gift aid is typically much larger too.
...rather than ruling out a whole category of colleges as unaffordable...families need to be more patient — to find out more about financial aid and the net price after gift aid.
Clarifying what is possible with gift aid is a big part of the conversation with families when talking about private nonprofit colleges, said Brian Lindeman, director of financial aid at Macalester College. He’ll often note that two out of three students at Macalester qualify for need-based gift aid, which breaks down some misperceptions about who can afford to go there. “I often start talking about how students from all kinds of economic backgrounds can attend,” he said. “We give a lot of financial aid to people who need financial aid, and less financial aid to those who need less. In fact, students from lowest income families can qualify for enough aid to pay their whole tuition.”
So rather than ruling out a whole category of colleges as unaffordable because of that initial listed price, families need to be more patient — to find out more about financial aid and the net price after gift aid. Unfortunately, the averages for amounts and availability of grant aid only get you so far. As the financial aid experts said, families really need information tailored to their situation.
Number one tool for early answers
“The challenge for a family, even one that does a lot of research and knows different aid programs, is that nobody is every really average,” Lindeman said. “It’s similar to how we know that the average temperature in St. Paul is 47 degrees. But we know that your results will vary, depending on the day.”
But how do you find the forecast for your family, to move beyond averages? The number one thing to do, Lindeman said, is for families to use a net price calculator, which is an online tool on every college’s website.
“When people have no idea what to expect in this murky process, it can shed a lot of light,” he said. “It can be very encouraging or it can be discouraging, but it is the best tool there is to take some of the mystery out of the process. They need to get an estimate that is based on their own situation.”
The number one tool may also be the most underused. Bring it up with a room full of parents of high school students and you’ll see only a couple knowing nods — in a sea of quizzical looks. But once they hear about it, parents are really interested, Olson said. They are eager for that ability to get an early read on what can be doable financially. The results can create a sense of what is really possible.
When you think of the main ingredients of a financial aid package, you’re looking at grants, scholarships, work study and loans. Covering the meanings of these categories is something Olson addresses with families. The challenge to understanding financial aid doesn’t stop there though. He said different institutions handle aid differently, as will different programs at a college — say enrolling as a traditional undergrad vs. starting an evening-weekend program.
"Using these online tools at two different institutions will let families see early on how much financial aid packages can vary from one school to another."
Again, net price calculators can come to the rescue. Using these online tools at two different institutions will let families see early on how much financial aid packages can vary from one school to another, Lindeman said.
Take the example Olson used in a presentation this month. He had used net price calculator results from last year for a fictional family of four with one in college and an adjusted gross income between $30,000 and $40,000. For this lower-income family, he imagined them looking at three different institutions for a bachelor’s degree: Macalester College, the University of Minnesota-Twin Cities and St. Cloud State. And Macalester’s estimated net price ended up being the lowest, at $9,825, compared to estimates above $11,500 at the two public institutions.
Grant aid for low-income families may come as no surprise, even if the availability at any one institution may not fit with people’s assumptions. But what about for families that are more comfortably middle class? Should they assume they won’t receive any grant aid? The answer is no — they can end up eligible for both merit and need-based grants, depending on the institution and their situations. (More than one kid in college, for example, often increases eligibility for grants.)
For more well-off families, net price calculators can give helpful early estimates too. To get an early gauge on merit aid, the calculators may ask questions about grades and class rank. Consider the results on Bethel’s calculator for a family of four with a total income of $120,000 and a student taking AP and IB courses. In this case the estimated total for scholarships and grants from the institution for the first year was $15,000 — significantly cutting down the total cost of attendance.
Again, net price calculators can come to the rescue, helping correct faulty assumptions. But like any tool, they can only help if someone puts them to use.
Public vs. private pricing
For many parents, there are questions about why private nonprofits start with higher price tags — before you get into the impact of gift aid. The millions of dollars of direct appropriations that state government makes to Minnesota’s public institutions is part of the answer, Olson said. A second factor he said is how private nonprofits set tuitions in a way that allows some of it to be given back in the form of gift aid, in particular to those with need.
And then there’s the factor of what’s unique at private nonprofits, in terms of the student experience. “We’re looking at a high-touch experience; a higher level of care comes with a higher cost,” Olson said. “We have a focus on access to teaching faculty and smaller classes, and what that translates into in terms of students’ ability to succeed.”
And like many things, timing matters. When it comes to families building their understanding of how college can be affordable, Olson encourages them to avoiding waiting to get started. “The earlier you begin,” he said, “the better the odds that you’ll get into a college that is affordable for you and will meet your needs.”