A majority of students and their parents have ruled out colleges based solely on published sticker prices without considering how much financial aid they might receive, according to a recent survey of college applicants. Most students and parents said they had not used online financial-aid calculators to determine how much they would need to pay at different colleges.
The findings come from the latest installment of Student Poll, a collaboration between the College Board and Art & Science Group, a firm that specializes in strategic marketing and planning for colleges. The survey, conducted in late November and early January, was designed to reveal how students’ perceptions of affordability had shaped their thinking about colleges.
Above all, the survey’s results suggest that many families make college choices without accurate or sufficient information. Fifty-nine percent of students said they had looked only at the sticker prices, while only 28 percent said they had considered the net tuition price of a college after determining what they might receive in financial aid. About 12 percent said they had not considered the cost of any college.
Next year, the federal government will require all colleges and universities to provide net-tuition calculators, which help families determine what they are likely to pay in net tuition, minus scholarships and need-based grants the applicant would likely receive from an institution. Yet only 26 percent of respondents said they or their parents had used one of the financial-aid calculators currently available, while 58 percent said they had not used one.
Moreover, students from high-income families made greater use of aid calculators than those in the lowest-income group (25 percent compared to 8 percent). In wealthier families, students were more likely to report that their parents had used the calculators; in the lowest-income group, students were the ones most likely to have used them. And among those who reported that they, their parents, or both had used aid calculators, a third said they were easy to understand, a fifth said they were not easy to understand, and 45 percent said that some were easier to understand than others.
As anyone who works in the admissions realms knows, choosing a college is not always a rational process. The same is true of perceptions of affordability. Although many respondents said they had ruled out colleges because of price, many students said they were willing to stretch themselves financially to attend colleges they perceived as expensive if those institutions offered something they valued highly, such as a specific academic program, a vibrant social life, or prestige.
Yet the survey’s findings also suggest that many respondents have unrealistic expectations about the amount of aid they will receive. Ninety-three percent of respondents said they planned to apply for financial aid. Of those students, 51 percent expected to receive need-based aid, 56 percent expected to receive merit-based aid, and 30 percent expected to receive some kind of aid for their personal achievements.
One striking finding: Nearly two-thirds of students with SAT scores of 1250 or higher expected to receive merit aid. Almost as many respondents with scores between 1000 and 1240 expected to receive merit aid, and so did about 45 percent of students with scores 1000 or below.
The widespread availability of merit aid seems to have created “a climate of expectations” among applicants, says Richard A. Hesel, a principal of Art & Science Group: “You have this sticker-price fear, but there’s also a lot going on that raises students’ expectations about what they’re going to get. I’ve seen this for a long time, and it’s gotten worse.”
Students also had high expectations about how far their grants and scholarships would stretch. On average, they anticipated that grants and scholarships would cover 35 percent of their college costs, with loans covering 21 percent, family or personal savings covering 17 percent, and 24 percent coming from the family’s earnings during college.
Despite students’ concerns about paying for college, most believed that their families would find a way to overcome financial challenges. Twenty-eight percent said that “My family and I will have to stretch a lot to afford to send me to college, but I think we’ll make it.” Among students who were not certain or who said it would be difficult for their family to afford college, 24 percent said they would “work something out when the time comes” and 15 percent said their family “would try anyway.”
The findings add up to a complicated picture. On the one hand, it reveals students’ optimism about attending college despite financial hardships. Yet the survey also suggests that many might lack accurate or sufficient information about paying for college. That said, the findings also suggest that colleges have plenty of work to do in educating prospective students and parents about the admissions and financial-aid process.
“A lot of students and parents stretch more than they should, and then they get into trouble, and this leads to retention problems,” Mr. Hesel says. “A college education is such a desirable goal, and people want it so much, there’s a lot of wishful thinking that happens.”
22 Responses to On Sticker Prices and ‘Wishful Thinking’
supertatie - May 24, 2010 at 3:51 pm
I’ve been in higher education for nearly 20 years, and I have seen the price of a year of college go through the ceiling. As odd as it may sound coming from a university professor/administrator, I am no longer “planning” financially for my children’s college education. As it stands now, I don’t think there is a university on the planet whose 4-year degree is worth $200,000 or more. If it’s gone (in the case of my own alma mater, which shall remain nameless) from $5500/year in 1980 to $53,000/year today, what will it be when my own grade school-age children apply for college more than 10 years from now?Instead, I am spending my money on K-12 education. And telling friends and family to do the same. For college, my children will go to the best school which costs them the least. And I will strongly encourage them not to take on debt for their education.The days when the Ivy Leagues were great schools and lesser schools provided mediocre educations are LONG over. The fact is that state schools, and smaller schools, and so-called “middle tier” schools – not to mention community colleges – provide excellent education, and at “reasonable” prices. Even with “financial aid,” students are graduating from college and graduate school with so much debt, they have a mortgage before they even have a job! No wonder they need two incomes to buy a house, or have a family.To borrow an oft-used phrase at the moment, the current business model in higher education is UNSUSTAINABLE. Rather than making education affordable, the easy availability of student loans has enabled schools to send tuition rates skyrocketing, far in excess of cost of living, or inflation, or any other reasonable measure of financial expense.Given students even MORE loans will only exacerbate the problem. And with state tax revenues falling, state schools are going to have to raise tuition even higher. More students will choose alternatives to the most expensive schools.We are fast approaching a tipping point, and the results will not be pretty.
22235933 - May 24, 2010 at 4:02 pm
I’ve already explained to my child that she’ll have to make do with going to the college to which I’m employed. She’ll have the benefit of attending at a much reduced cost. Once she’s through our system it will be up to her to finance her own education, much as it was my responsibility to finance mine. Unlike my parents and myself at the time, I now understand a great deal about financial aid and can guide her to make better informed decisions. At 13 she longs to be a film-editor, animator, game-design professional. While I support these efforts, I’ve strongly argued for a practical foundation like graphic design. Get the foundation first – reach for the heavens second.
newsoffice - May 24, 2010 at 4:09 pm
Like #1 and #2 I work at a university and my husband is a professor at another. Our kids will go with a tuition reimbursement school or a state school or someplace with merit aid attached to it. They will not go to the best school they get into. Between my husband and me we have two master’s degrees (from private universites) and a PhD (from an Ivy league institution) — we are great supporters of education but we also believe college tuition is a BIG rip-off. Biggest mistake people can make is to save for their children’s college. Whatever you can save won’t even scratch the surface. No one I know saves anything for their kids’ tuition. The overall feeling is: Why bother?
mkant69 - May 24, 2010 at 4:31 pm
My son, who is 7, wants to go to college to build a better robot dog. His interests will undoubtedly change as he gets older. I started saving for his college education before he was born, and I will do whatever it takes to ensure that he gets a quality postsecondary education, even if it means some self-sacrifice.
physicsprof - May 24, 2010 at 4:49 pm
From the responses ##1-4 it might appear that college education becomes less and less affordable with the time. Yet from statistical data we know very well that the fraction of 18-30 year olds who go to college is in fact growing. What gives?
22174061 - May 24, 2010 at 4:59 pm
Congratulations, mkant. You’re doing the right thing, and it can work – I began saving for my 2 kids’ college educations 30 years ago, and despite our family income never topping $75K a year was proud to see them graduate debt-free from expensive colleges in 2005 and 2208, respectively. We’ve never owned new cars, have lived in the same modest house for 25 years, and made saving and investing a priority. I agree that costs are higher than they should be, colleges must find ways to reign them in, and public and discounted (for employee dependents) options are often the best values. However, if your children are young it is not a mistake to live below your means and invest the savings for their future. Many families have apparently been doing this as evidenced by the high admissions yields at top schools, even among students from moderate-income families like mine.
22235933 - May 24, 2010 at 5:53 pm
physicsprof – The numbers of students going to college is growing but that’s no indication of whether or not costs are a barrier or not. Indeed, more and more colleges are reducing or eliminating their entry requirements and the student loan industry is all too willing to shell out billions of dollars to just about anyone who applies. Combine that with private schools and career colleges, it’s no wonder that more people are going to college. The problem is, the costs are not going down but only going up. This places an ever larger burden on the individual student and on the student’s family (and potentially the taxpayers) to repay loans or make up the time lost to earning a degree. These degrees are also becoming less and less valuable and more and more people earn them. Additionally, there is also the problem of a job market that is over-supplied with college graduates. The following is anecdotal but I consistently run into graduates from our system that are working in movie theaters, Walmart, BestBuy, and other retail and trade sectors. They didn’t need degrees for these positions and are behind their coworkers in actual discretionary income due to their student loan debt and/or the lost time involved in earning the degree.
22235933 - May 24, 2010 at 6:00 pm
22174061I don’t for a moment doubt your sincerity but such things are easier said than done. I commend you on what you’ve accomplished but I doubt that very many families can have similar achievements. Our household income is around $85,000 and even with a 529 program, 401k, and other education savings our savings over the last 13 years are only a fraction of what it would cost to put our daughter through undergraduate education at anything other than the state college much less an “expensive college.” Our home is 900 sqft and my car is a 1991 Geo Metro, hard to be more thrifty than that.Maybe you should write a book, I’d be eager to read it.
feudi - May 25, 2010 at 8:17 am
I agree with many posters here about the rising cost of higher ed. My pet peeve is the lack of precision in the use of the very words “financial aid”. The problem is that everyone from the US Department of Education to seasoned FAA’s use the term aid to include student loans, which as we all know are anything but aid! In fact, the new Direct Loan program uses the term “award” in much of it’s literature and software when discussing student loans. I think the newly mandated “net price calculators” could be of some help, but as the article noted, this software will be used mainly by those with some degree of financial expertise or sophistication. Sadly, many of our brightest young minds are leaving college with debt levels as high as a small mortgage. It is very discouraging the leave school and start an entry level job with $46,000 worth of loans to pay off over 10 or 20 years. In the current economy, I can easily see where student loans will be the next bubble to burst within the next two to four years.
dpn33 - May 25, 2010 at 9:01 am
My son’s college counselor once told the tale of his own son, admitted to an expensive, private liberal arts college and a large, state university. Tuition at the university was, not surprisingly, lower than that of the private school. But, with the financial support the private school offered (compared to NOTHING from the public school), the private school actually turned out to cost less. Naturally, his son chose the large, public university…We started saving late for my college son’s education (he was in middle school as I recall). Even so, that money did help. It’s gone now, with three semesters to go for him, but I’m not sure he would have even gone to college at all if he hadn’t found a place that was a really good fit for him. Fit is extremely important for college. Yes, you can get educated anywhere, but not all institutions of higher education work for everyone. My son likely would have done poorly and may have even failed at the large, public university where I work. I’ve seen too many students have to move around in order to get what they need out of an institution. Parents should try very hard not to dictate where their student will attend, but try to work with the child and with the institution to make it work. It’s worth it in the end to have a happy, well-rounded kid.(I went to a college that was a poor fit. The best thing I got out of that was my husband! Second best was a prestigious Ivy League degree, but I might have been a more successful and happier student had I gone elsewhere.)
dthornton9 - May 25, 2010 at 9:08 am
All of these comments are valid – our daughter is a newly graduated high school senior, and we have just been through the “process.” As a music major, it turns out that the state school didn’t accept her in the program – so our only choice is the more expensive option. The only different additional comment I have is that all college savings should be in the name of a grandparent or aunt/uncle. For every penny you have in a 529 – you get screwed on the loan/need aid end. We are now sending all our son’s money to a grandparent to put into savings in their name, not ours. And my husband has just accepted a one- to two-year position with the government in Afghanistan. The cash (more than double his current salary) will pay for both children’s college, and we pray he comes home safely!
tbstoller - May 25, 2010 at 9:18 am
Counting on tuition reduction as a university employee is a big mistake! When the small university I worked at closed last year, I saw parents left with out a good plan B for their soon-to-be college students. Fortunately, my son stubbornly refused to consider “my” school–in favor of a state university where he plans to graduate without debt if possible. Save what you can and be straight with your kids about your finances so they can make smart decisions about schools.The bigger issue of financial aid is that families wait so long for hard numbers from the colleges and financial aid offices present loans as if they are grants and scholarships. It is very easy for students to forget that they and their families are signing up for major debt!
11132507 - May 25, 2010 at 9:28 am
It was inevitable, but it’s finally materializing that year after year of above-inflation price increases and keeping tight-lipped or spin-doctory about why an education should cost $50K a year is a bad (and as one commenter pointed out, unsustainable) business model. And for the schools who answer “but x% of our students receive financial aid,” I point out that when Macy’s has a 15% off coupon in the newspaper every day, lots of people just wonder why they don’t just cut their prices 15%. Many now compare the effects of the myriad strategic financial aid models to airline pricing, and that’s not exactly a flattering comparison. Colleges could build cost neutral net revenue models without deep discounting that would eliminate much of the sticker shock, but still cling, against reason, to the Chivas Regal effect.A jumble of one-size-fits-all statistics in the guise of transparency and consumer advocacy won’t help because ultimately the only statistics that matter are the ones for each individual student. Unless everyone wants to go back to some good old days when only the priviliged could go to a 4-year college, the solution here is realistic pricing instead of the high tuition/high discount rate spiral that is now entirely out of control.
tridaddy - May 25, 2010 at 9:45 am
Sometimes I wonder how in the world I actually got my two sons through college with no debt remaining (the sons or us [parents]). They had two choices the university I worked for or a smaller one 25 miles away. Althouth the youngest did attend a CC on an athletic scholarship, which was a God send. To anyone who says don’t save, I simply don’t understand that mindset. It’s better to have dollars saved rather than none at all. For all of you with children yet to attend college – good luck and good fortune – you’ll need it to pay for it. Although I have no grandchildren presently, my wife and I are already contemplating setting up trusts for our “future” grandchildren so they can attend college, perhaps not debt free, but without hocking their future away.
11132507 - May 25, 2010 at 10:23 am
tridaddy is exactly right…the myth of “don’t save for college because you’ll get screwed in the Financial Aid Office” only leads to excessive borrowing because those who follow that advice find themselves with nothing to fall back on when junior doesn’t get the full ride they were rolling the dice for. I visit many HS’s every year to give a financial aid presentation and discuss that as a myth to avoid, I’ve seen it backfire so many times in 25+ years in this business. A dollar you already have is better than a dollar you’re hoping someone will give to you.
lotsoquestions - May 25, 2010 at 10:44 am
Regardless of whether or not one can afford it, isn’t the real question whether or not it’s worth it? Currently, most universities only have classes for about 30 weeks a year. If a college costs $51,000/yr and classes meet for 30 weeks, then the per week cost is 1700/wk. or nearly 250 dollars a day to go to college. One of our friends recently joked that it would be cheaper to send the kids on a cruise every week for a year than to send them to this college. ANother way to think of it is that every day in superexpensive college costs the same as a month’s worth of music lessons. Three weeks in this college now costs as much as a year at the pretty decent Catholic high school my kids attend. And we make enough that we won’t get financial aid — and I resent the fact that my full-fare will then be used to subsidize other people who failed to save for college (as well as the children of other women who chose to stay home while I worked.)
davechristy - May 25, 2010 at 1:58 pm
I am surprised by the expectation of some readers that the financial assistance from state supported universities should rival that of private institutions. While state universities have been aggressive at raising endowments for scholarships during the past several decades, the cost of tuition is lower precisely because the taxpayers provide a ‘scholarship’ to every state resident who enrolls.
connmom - May 25, 2010 at 7:40 pm
My two sons went to Brown and Harvard in the 90s, two years apart. Spouse and I are self-employed and it’s been feast or famine, meaning about $100k/year to $0/year and living off a home equity loan when it’s famine time. That said, we did not apply for financial aid for our sons. They both applied for and were accepted for the Nutmeg Scholars program at UConn, which guaranteed free tuition, room, and board, a stipend, and 4 years of a summer job they found for you in your field. The son at Brown hated it, the son at Harvard loved it. They both now have Ph.Ds and are earning $55k and $45k respectively. Our opinion at the time was that if you chose a private school over a public one then you were obliged to pay for it if you possibly could, even with HUGE sacrifice…we were nearly on the breadline for several years. A family stands together to educate its kids and if you choose private then leave the financial aid to those who are truly impoverished. Now I look back and feel sort of foolish about all of it. My sons are in nitch fields that offer few jobs, pay little, and do not allow them any possibility of being employed where they’d like to live. Had I to do it over again they would have gone to UConn for free, nixed the grad school, and chosen careers that were flexible and earned them a living wage.
mike3050 - May 26, 2010 at 9:53 am
“I’ve been in higher education for nearly 20 years, and I have seen the price of a year of college go through the ceiling. As odd as it may sound coming from a university professor/administrator, I am no longer “planning” financially for my children’s college education. As it stands now, I don’t think there is a university on the planet whose 4-year degree is worth $200,000 or more. If it’s gone (in the case of my own alma mater, which shall remain nameless) from $5500/year in 1980 to $53,000/year today, what will it be when my own grade school-age children apply for college more than 10 years from now?Instead, I am spending my money on K-12 education. And telling friends and family to do the same. For college, my children will go to the best school which costs them the least. And I will strongly encourage them not to take on debt for their education.The days when the Ivy Leagues were great schools and lesser schools provided mediocre educations are LONG over. The fact is that state schools, and smaller schools, and so-called “middle tier” schools – not to mention community colleges – provide excellent education, and at “reasonable” prices. Even with “financial aid,” students are graduating from college and graduate school with so much debt, they have a mortgage before they even have a auto insurance quotes job! No wonder they need two incomes to buy a house, or have a family.To borrow an oft-used phrase at the moment, the current business model in higher education is UNSUSTAINABLE. Rather than making education affordable, the easy availability of student loans has enabled schools to send tuition rates skyrocketing, far in excess of cost of living, or inflation, or any other reasonable measure of financial expense.Given students even MORE loans will only exacerbate the problem. And with state tax revenues falling, state schools are going to have to raise tuition even higher. More students will choose alternatives to the most expensive schools.We are fast approaching a tipping point, and the results will not be pretty.”You are right.
jlf24 - May 26, 2010 at 1:07 pm
The reason the cost is soaring is likely because of extraordinary capital projects, most of which have less to do with education (not new classrooms, new teachers, or new librarians) than with so-called lifestyle: 24 hour cafes, fitness centres, high-rise flashy dorms, stadiums, and a variety of professional, managerial offices and services, as well as new IT and sport expansions in almost all areas (and routine waste, of course; do they really _need_ 200 balloons for every orientation?). These create capital costs but also add significantly to the operating expenses of a school, in staff and running costs, as well as Health and Safety provisions and maintenance. I would bet there is also some thought that prices in certain sectors, top 25 Research U for example, should remain on a par, especially in certain areas, not unlike what happens in the housing markets. This is not only financially but environmentally unsustainable. And to think that one is duty-bound to mortgage the house, and eat bread throughout one’s 40-50s, in order to pay for it, is absolutely shocking. Worse, to think that the schools encourage–they must, because they run on borrowed money–the accumulation of a debt of anything over $20K (itself huge) earning _interest_ when the average starting salary is probably $50K or less and the cost of urban living is so high is just outrageous. Imagine if your children are in school now. Say they graduate with $50K in loans. They are not likely to pay that back before 40, and then if they buy a house at that point, they will be able to save nothing for their own children’s educations, which at the current rate are likely to be about $400K. Moreover, they will have nothing for retirement, which is unlikely to happen before 80, in any case. Their entire lives will be plagued, even determined, by an educational debt burden. It is worse than Dante’s hell, because like Bottom’s dream, it hath no bottom. I say this as someone who works in a university as a teacher. I am ashamed that American higher education treats its students as debt consumers, and continues to promise what they cannot possibly provide at a price too high for most to pay.
marka - May 26, 2010 at 11:55 pm
The thought & phrase that comes to mind is ‘subprime loans.’ The model is, indeed, unsustainable, and bears some resemblance to the latest financial debacle. Prices are inflated, and the ‘solution’ is to have purchasers borrow more $. Unfortunately, many are finding they cannot repay the loans, and need various deferments. Bravo to those who understand that an ‘expensive’ education doesn’t necessarily equate to a better education — you can get a good education almost anywhere, if you work at it.And for those advocating saving for a child’s education, they should learn from those advocating for gaming the system — the way finances are now set, those who save in their own names are punished by the financial aid formulas, and in their children’s names more so. Many, many financial advisors continue to inform investors that one should put money into tax-protected retirement funds first, in part because of the current punishment for those who actually save in their own or their children’s names. Nothing ‘wrong’ with saving the good old-fashioned way — just be aware that you will be paying much more than you need to, in effect subsidising others.
arrive2__net - May 28, 2010 at 8:20 pm
I think it is a good article that can inform prospective students and parents about information resources that can come in handy. Since I was once a community college instructor I have to say that I think states with economical community college systems give students a real edge in getting through at least the first two years without heavy debt. The research I have read about it found that students that went to community college later did as well academically in 4-year state institutions as the students who started at the 4-year state institutions. The parent’s comments above seem like good information. Every parent would like to send their child to the best possible college, but being middle class may mean you are too rich for need-based aid and yet really not rich enough to give your kids the boost you would like to give them. Bernard SchusterArrive2.net