THCC Episode 121 – Net Price of Colleges: The Real Story

Brad Baldridge
Welcome to Taming the High Cost of College. In this episode, we're going to talk about the net price of schools. We're in talking about the six different types of colleges out there and how they matter as far as what you're going to pay, then we're gonna talk about a great resource that I think all families should get ahold of and study closely because it'll help you a lot in the college process. Let's get into it.

Presenter
You have kids, they grow up. And before you know it, it's time to plan for college. Where do you start? How much is it going to cost? Will you qualify for financial aid? Should you be looking into scholarships? When will you be able to retire? What about student loans? A list of questions is never-ending. The good news is all the answers are right here. Welcome to the Taming The High Cost of College podcast here is your host Certified Financial Planner, Brad Baldridge.

Brad Baldridge
Welcome to Taming The High Cost of College. Again, this is Brad Baldridge. I'm your host. This is Episode 121. So show notes are available on our website, where you can get all the links mentioned and all that type of thing. We have another episode where Chuck and I are going to talk this time about net price of college. At the end of the episode, I also talk about a great resource that I think all families need to download. So stick around and make sure you listen to that part as well. And let's go ahead and get into the main event. Alright, welcome back. Today we're going to be talking about the net price of college. I'm also working here with Chuck again, he's gonna help us go through the process on paying for college. And we're going to talk a little bit about again, focusing on what we call the "net price" of college. Welcome, Chuck.

Chuck Erickson
Hey, Brad, great to be back. Great to be here in talking about a little bit about your side of this, which is the money aspects. So I've heard a lot of families talk about the sticker price, which is the big scary number that a lot of colleges post on their websites. So that's the obvious sticker price. But what the heck is a net price?

Brad Baldridge
Net price? Well, a great question. So the net price is what we actually pay for college. In other words, there's a lot of sources what for what I would call free money, of scholarships, and that type of thing that brings the cost of college down to what we would call the net price. So an easy way to think about net prices, it's the sticker price or cost of attendance minus all the free money you might be eligible for brings it to your net price. And a lot of colleges out there have very high sticker prices, but they don't necessarily charge that full price to everybody. And in many schools, they offer enough scholarships to almost everybody that almost nobody pays the full list price anymore. Again, what have you seen out there? I think I've seen like University of Chicago is like 78,000 now for full class. Have you seen any colleges break 80,000 yet?

Chuck Erickson
I don't think I've seen at but we're coming close. And I think within the next year or two here, we're gonna have some colleges. Sarah Lawrence on the East Coast is also one that is in the high 70s. So I think we are going to see some colleges breaking ED as far as the sticker price. But as you mentioned, that is not always the cost that families pay.

Brad Baldridge
Right, exactly. And when we're talking about sticker price, again, that's not tuition either. I mean, tuition is a big number at the schools that, if it's 80, their tuition might be 50-55, even 60. But it also includes room and board, I guess technically, it's tuition and fees. I don't know why they bother, but they they segregate them for some reason, in some places. And that wasn't really a direct cost. And those are the costs that come directly on the bill. When you sign up for college, they're gonna send you some form of bill for tuition, fees, room and board, usually per semester. But in addition to that additional costs that count as far as costs would be travel, personal expenses and books. Those are the indirect costs. So you add all that up at a school, and that would be considered their cost of attendance. And that's the first technical term we've learned today. So cost of attendance is actually published by the colleges. That data is collected by the government and other sources. Usually, that's the data you see when you go to a database like Big Future or some of the other places where they're publishing the average tuition and the average room rates and room and board numbers, not necessarily exactly what you're going to pay.

Chuck Erickson
Great.

Brad Baldridge
So let's talk a little bit about the free money thing. Obviously, that sounds great. Everybody wants free money. But what does that really mean? We're talking scholarships, grants, and then some families to get it's not as popular but some families out there may get employed benefits or military benefits are a couple other, and you're on the fringe where if you have them great, take advantage of them, you need to check and make sure you if you have them. But then if you don't, it's not unusual that families don't, again, have military benefits as an example, because there's not a lot of military families out there these days. But if you do take advantage.

Chuck Erickson
Yeah, I completely agree. The biggest free money is coming from the scholarships in the grants. And there are a few families that have those special employee benefits and even fewer families that have the military benefits.

Brad Baldridge
Correct. And again, that would be a way tangent as well. There's a few families that are considering the military academies ROTC, maybe even going into the military first, and then coming out for college later.

Chuck Erickson
Yep.

Brad Baldridge
And all those are legitimate strategies for a small segment. And we'll probably cover that at some future podcast. Let's talk first about scholarships, then. So the who provides the most scholarships out there?

Chuck Erickson
Oh, that's the easy question. And so one that I don't think most people understand, the most scholarships are offered purely from the colleges themselves. There's a big misnomer that scholarships are coming from some hidden box or hidden account somewhere out there. They're actually coming directly from the colleges. And that's when, as we talked to the last episode, finding the best fit can also help you find the places that are going to give you the largest scholarships, if that is something that's important, too.

Brad Baldridge
Right? Absolutely. So a lot of the schools, and again, we talked about the most expensive, but if we even looked at like the average, private, somewhere in the 45-47,000 range, a lot of those schools are going to offer scholarships to at least some of the people that come to those schools. And then, how often do you see it now? I mean, I see it, not clearly often. But occasionally, you'll see a college that advertises something to the effect of 99% of our students receive some form of scholarship, or 75%, or some big number like that.

Chuck Erickson
I'm actually especially in that that middle tier category. And even in the lower cost category for private schools, there are quite a few colleges that are still offering significant scholarships to the majority of their student body. So if that's something that's important for families, and they want to find schools that offer those scholarships, they may need to be looking at a different set of colleges that have a higher percentage of students receiving those scholarships, merit scholarships.

Brad Baldridge
Exactly. These colleges are handing out these scholarships and getting into little more technicalities. Now, some of them are based on need, and some of them are based on merit. And, again, that we're not going to get into the great detail on the differences. But just understand that need again, is based on family finances. We're going to talk more about financial aid in a in a future podcast. But it's again, it's based on family finances. So parents income and assets, the student's income and assets are the big driving factors. And again, most students don't have income, don't have assets. So really, it's based on mom and dad. And then merit-based scholarships are based on all kinds of things. Can you give us a couple examples of merit scholarships that you've seen recently?

Chuck Erickson
Yeah, there's obviously there's the academic merit scholarships that are really built off the student's academic profile that could include their GPA, possibly their test scores, what type of classes in rigor they've taken in school. I've seen other scholarships that they are based off of particular academic interests, so they kid wants to major in physics. And the college offers a scholarship for students who want to major in Physics. So those could be some different options. There are some other scholarships that are for specific talent levels. So there are obviously athletic scholarships, but then there are theater music, and, and a wide variety of interest scholarships. The newest one that I'm seeing lately is the esports scholarships. So for students who want to be competitive and play in eSports, that's a new scholarship that I've seen more of, but I've also seen scholarships, based off of volunteerism are based off of students interest in particular social justice issues. So there are a wide variety of scholarships out there, and colleges typically list them on their website. So you can see if the college has one of those available, that students can either apply for, or they are automatically considered for when they apply.

Brad Baldridge
Right, absolutely. So there's all kinds of scholarships that colleges are offering. It's important that families understand again, in my opinion, that the scholarships that colleges are offering, they're not doing it out of the goodness of their heart, and they're not doing it to save you money. That's not their goal. They're giving out scholarships because it's good for them. And again, they don't mind that it's also good for you, but ultimately, they're using scholarships as a tool to do what they need to get done, as far as how they're going to recruit and build a class and that type of thing. Some colleges have a lot of prestige, or whatever it is, and they can command full price or nearly full price. But many other colleges, they know they're not going to get be able to get full price. So they're willing to offer scholarships as a way to attract students.

Chuck Erickson
Yeah, another way of thinking about scholarships, it's really a discount or a coupon, because that college sees something in the student that makes them interesting. And that student would fill a need for that college in their class. So they're wanting to make sure that they're filling all the various spots in their class. And they use scholarships, i.e. discounts to meet those needs, and to have the right mix of students on their campus.

Brad Baldridge
Right. Absolutely. And another important thing, obviously, if it isn't obvious, there's the scholarship that comes from school A is only useful at school A, you're not gonna say, 'Well, thank you for the scholarship. I mean, it was spended at some other school.'

Chuck Erickson
I have had parents asked me that I've had parents asked me to say, 'Hey, we got this great scholarship from this college, would this other college possibly accept this scholarship because it's a bigger scholarship.' And I said, 'No, you got to use the scholarship where it's awarded to, you can't transfer a scholarship to a different school. Sorry.'

Brad Baldridge
Right. Now, another source of funds, of course, is grants. And now grants typically come from the federal government state, and grants are a little more portable, especially federal grants, right. federal grants are usable at any college that accepts federal aid, which is essentially almost any college out there.

Chuck Erickson
Yeah, correct. We're just shy of 100% of colleges that are part of the federal aid system. There are a few colleges out there that aren't participating, but almost everyone does. And typically, if a student receives a federal grant at one college, they will likely receive the same federal grant at a different college. So those are the same regardless as to where a student applies.

Brad Baldridge
Right. Now, the challenge with federal grants, in general, they tend to target low income families and they're very need based. So not only do you need to show a need, but you need to show a substantial need for federal grants. Now, specifically, the Pell Grant and the Supplemental grant.

Chuck Erickson
Yep.

Brad Baldridge
Which means, again, typically families, under 50,000 family income, maybe up to 75,000, if you had very unusual circumstances. But a lot of families just aren't going to qualify for the federal grants, the most common federal grants, and they're just going to have to go on without them. And then we have the state grants, which they're all over the map, depending on the state you live in. So California, I know has grants up to incomes of 150,000. Now, if you're living in California, and income of 150,000 isn't the same, at least in some areas as as what 150,000 would sound like in the Midwest or some lower cost of living areas. But it is still quite generous as far as a state grant is concerned.

Chuck Erickson
Obviously, where we are, we have the Wisconsin Tuition Grant that's being offered to families that are planning to have their students stay in Wisconsin, and attend either a public or a private institution inside the state. The thing that I really liked about that grant is that it is not specific as to if a kid goes to public or private, it is available to families for any type of institution as long as they're staying in Wisconsin.

Brad Baldridge
Right, exactly. But you do have to be a Wisconsin resident going to school in Wisconsin. Other states, most states, will require that their grants be used in-state, sometimes you can use them at the public or the private schools in the state. Sometimes the grants are only useful at the public schools in the state, or they have different amounts, depending on which type of school you choose. Every state is different. So you really, that's, most families, that's a homework project is to understand how your state system works and figure out if there's anything that you could benefit from. But the other thing to look at, if your your student happens to be crossing state lines, and they're going, they live in one state and going to school, out of state somewhere else, the state they're going to school and may have some benefits that are available to the student just because they're attending college in that state. I've seen situations where I guess I haven't seen grants, but I've seen loans as an example where it's eligible that anybody that's a resident of the state, and it's also available to anybody that chooses to attend college in that state.

Chuck Erickson
I am noticing that there are some private schools that will award... so for example, if a student in Wisconsin decides to attend a private school outside of Wisconsin, that college may offer a grant to match the grant that the kid would have used if they stayed in Wisconsin, so it's like a scholarship, but they're basically saying, 'Hey, we know you would have gotten this money, if you would have stayed in your home state, we're gonna award you a similar amount of money via grant or via scholarship if you come to our private school in our state.' It's not common, but I do see that a few times.

Brad Baldridge
Yes, exactly. So why would a student earnings? Why would a college offer that to your student? They've got their reasons, they're trying to attract students, you have to remember that colleges are a business, their customers are students, they need enough customers to run the business. And many colleges will say, giving a 20% discount is better than no student at all, as an example. So they put some money on the table, and depending on the student, it may be more.

Chuck Erickson
Yep.

Brad Baldridge
So that's the basic concept. So that's the free money idea, right. So now going back to our original formula, its cost of attendance minus the free money equals your net price. So now, you take a generous private school where the cost started at 75,000. But they gave you 50,000 off. Well, now the real cost of that college is 25,000. And a lot of states, 25,000 might be what your state college costs. And in a lot of states, you don't get much aid. So therefore 25,000 minus zero is still 25,000. And lo and behold, they cost about the same. So I have a lot of parents have this idea that we can't possibly go to a private school, because we can't afford it. And that may be true. But you really need to understand that there may in many situations, there are private schools, and or auto state public schools that may fit your situation and may actually come in at a price that's similar to your in state numbers.

Chuck Erickson
Yeah, I even had a family just this year applied to the in-state flagship as well as another public that has reciprocity, and then also to private schools, and the two private colleges, and this family didn't believe they would ever be able to attend a private school, they didn't think they would ever be able to afford it. And the two private colleges actually offered more free money, then what the public schools cost, obviously, but then, by figuring out their net price, the family actually found that it was cheaper for their student to attend the private school than to attend to either of the public options that the student was looking for, thanks to all the free money because the of the family's particular situation, the kid was really bright, the family was not very well off so that he got a lot of money for those private schools and is now able to attend a private college actually below the cost of the flagship institution.

Brad Baldridge
Right, absolutely. So I encourage families to understand how it's going to work for your family. I mean, one of the biggest challenges out there is understanding how this all works. And not assuming things will go a certain way based information that's not accurate. A lot of people will say, say to me things like, 'Well, my brother in law didn't get any aid in this situation, therefore, I won't.' Which may or may not be true, but the challenge is, is your brother in law exactly like you? Is his other income the same? Is the student's academic profile the same? Are theylooking at exactly the same schools? Is everything the same, or you're just extending apples to oranges and trying to make a comparison that just isn't accurate?

Chuck Erickson
That's an excellent point. Brad. The other thing that I've seen families forget about is that if the oldest sibling did not get a ton of financial aid, but now the second sibling is going in, and they're going to be in college at the same time. And the parents go, 'Well, we already applied before we didn't get anything, so we're not going to apply again.' And I have to remind them that something has changed, you now have two kids in school. And that's going to change your scenario and change how the government looks at your family. So I encourage all of my families to apply for aid every time a student goes in, because then you got to find out if you actually can get any.

Brad Baldridge
Right, absolutely. I mean, the default should be fill out all the financial aid forms and give it a shot. If you're a multimillionaire and making a million dollars a year and you don't think it's worth your time, well, maybe it isn't because you can just afford to write the check. But for the rest of us who find 20 or 30, or 40 thousand dollar checks to be a concern, we probably should just go ahead and fill out the forms and understand the process. And that I think is, I offer a course and there's all kinds of different ways that and we'll delve into this a little further as well and how to figure it out. But I guess the final concept to talk a little bit about is when you get to this net price, so it could be, either the state school starts at 25, zero free money, we still have to pay 25, it could be a private school starts at 60, we get 20,000 off. So now we owe 40. But almost always a family is going to have a net cost, that's not zero, it's going to be some additional cost. And that's the part that needs to get paid. And there's this, and again, to the very simplest way to think about it is that's going to get paid by the student and or the parent. But the caution is the student can't necessarily cover the whole amount, I've had families say things like, 'Oh, little Johnny's gonna go get a whole bunch of loans, and he's just gonna pay for everything with loans,' then they realize, well, there aren't loans that Johnny can get all by themselves. So you need, potentially parents are going to need to get involved in the loans, either sign or co-sign the loans.

Chuck Erickson
And those are potentially, they could be higher-interest loans. Also, that means that you figured out how to pay for it for the first year by taking out loans, but how does that become compounded over the four years, and that's when we see those stories of the students who graduate from college and have a debt load of 80 to $100,000, is because the families have basically taken out the entire thing as a loan. And now they have to struggle with that upon the student's graduation.

Brad Baldridge
Right. And I think in some cases, I think that college industry is a little bit complicit because a lot of times on a financial aid offer. There is a bunch of big loans on there, and they call it financial aid, just sign here...

Chuck Erickson
Yep.

Brad Baldridge
Parents, and just sign here, student and the next thing you know, yes, college is covered. But there's the surprise at the end, when they say, 'Oh, all those loans now need to get paid back.' And you need to do the math and understand, well, what kind of payments might there be?

Chuck Erickson
One, I'm sure you do this as well. But I always tell families, if when you get to the financial aid letter, it never hurts to contact a professional like yourself or myself, and have us walk them through what all the lines are so that they know what they're signing up for. Because you are correct. There's there's a thing called the Parent PLUS loan that many families get, and they just think that that's extra free money. And it's not free money, it's a loan. So parents accidentally will take out the Parent PLUS loan when they really didn't need it.

Brad Baldridge
Right? Absolutely. So in the end, when we get to this net cost, and again, for a lot of families, your state school might be the number to beat. So somewhere between 15 and 30,000, I think is a fair number to assume as far as your net cost of a state school, even if you don't get much aid, at most, in most states, Illinois and Massachusetts. And there's a couple states that are quite expensive, where you're closer to the 25-30 range. And then especially Midwest and mountain states in Wyoming and Iowa and some of those states, their their costs are in the more reasonable 15-18,000 net cost. But for most families, college is not going to be zero, it's going to still be 1000s of dollars. That's going to have to come from somewhere.

Chuck Erickson
Yeah, so you talked about the student contribution and the parent contribution.

Brad Baldridge
Correct, yeah. So those two things are essentially going to be three broad categories. It's going to either be money that's been saved up for college, some savings or investment is going to be a loan for the student or for the parents, or both. Or it's going to be additional work or additional income somehow, whether it's mom and dad deliver pizzas on Friday night, the student delivers pizza on Friday night as extra income or, I've seen all kinds of situation mom goes back to work full time because the kids are off to college now. So the she can work full time again, all that type of thing, or the student picks up additional income somehow. And then, of course, in the saving and investing. Some parents have done a great job of putting away lots of money for college and some parents only have a little bit but that all those pieces have to come together to cover that contribution. Alright, so another way that I like to look at colleges is put them into buckets. And this is a generalization. There's lots of schools that don't fit neatly into the bucket system, they have some characteristics of multiple buckets, or they don't belong in any bucket or whatever it might be. But again, it just helps us get our head around conceptually what some of the options out there are. So when I work with families, a lot of times we talk about there being six types of colleges out there. Let's get into that now. And bring up the right slide here. We'll edit that out. And that too.

Chuck Erickson
So with these six different types, and as you mentioned, these are broad categories, that there aren't colleges that neatly fit into any one of these six, that might be complete outliers. But it seems like these six are really divided three in the public area and three in the private area.

Brad Baldridge
Correct. Yes, yeah. So if we talked about public schools, we have our in state state schools, which again, most people that's relatively obvious, if I live in Massachusetts, and I go to college in Massachusetts, I go to a state school, I get the in-state price, which is often very reasonable. And again, reasonable relative to other colleges, for many families, it's still a big number. But I'm talking a relative value now. But then we also have two groups of out of state colleges, we've got the out of state colleges that offer some form of discount from their out of state price, whether they could offer scholarships, or reciprocity or different systems. And then there's the other state public schools that essentially charge the full out of state price. And they, again, a lot of these schools are relatively highly rated. And lots of families and students want to get into them. So they have the luxury of saying, 'Well, you can pay full price. Or if you're not willing to pay, then we'll pass on you. And we'll go to the next person because somebody out there is going to pay full price. We're overwhelmed with applications.' Yep. So what are the top schools that you can come up with off the top of your head that fall in that category?

Chuck Erickson
Yeah, so for the public schools that basically don't offer a ton of out of state assistance. And they say, 'All right, the full prices don't go up price. Things that popped my head are UC Berkeley, UCLA, University of Texas at Austin, University of Michigan, University of Wisconsin at Madison, University of Illinois, Urbana Champaign, it really is typically, I would call it ESPN Flagship Schools, the schools that you see on the sports channels, often that are flagship, those are often the ones that yep, everyone wants to go there, and they will take the full price. University of Virginia is another one, Georgia Tech. So yeah, they're all over. But it's schools that families can fairly easily name off the top of their head.

Brad Baldridge
Right. And another interesting thing is, some states have have a stick it to the outsiders mentality, where in state tuition, it was 11,000. And out of state tuition is 45,000, where it's just crazy, that double, triple, more than triple what the in-state number is. And some states are just in-state is 11. And out-of-state is 16 for tuition. And if you go back to the cost of attendance, remembers tuition, room and board, books, fees, beer and pizza, the whole cost of a typical college student. The only thing that changes in state out of state for the public schools is the tuition and fees.

Chuck Erickson
Right.

Brad Baldridge
The dorms, you pay the same price, the books, obviously you buy wherever you buy them. And of course, there's no they have no control over those prices, etc. So it really, for the most part is just the tuition that goes from, so when I say 11, at a state school, that would be a common tuition, but the total cost of attendance for in state might still be 25, because it's another 11 for room and board. And it's 3000 for personal expenses and 1000 for travel and 1000 for books. Again...

Chuck Erickson
Yep.

Brad Baldridge
In round numbers.

Chuck Erickson
And for public schools, they often will publish the in -state and out-of-state tuition, right on their admissions website. They may not publish the room and board as easily on admissions, you might have to go digging around in the residence life area to find out what the room and board is. But yeah, they typically will publish the in state in the out of state tuition prices on their admissions website.

Brad Baldridge
Right, exactly. So I know you're in Wisconsin. So can you tell us a little bit about the reciprocity that Wisconsin has with Minnesota?

Chuck Erickson
Sure. So this is an annual agreement that is signed by the governors of Minnesota and Wisconsin every year and has continued on for many years. But basically in the state of Wisconsin students can go to any University of Minnesota System or Minnesota State System College for the same price as a Minnesota resident and vice versa. So Minnesota students can come to Wisconsin and go to any of the UW campuses for in state price that way. And that's probably the biggest reciprocity for Wisconsin students. There are some other options for Wisconsin students, there's a group called the Midwest Student Exchange. This allows students to go from Wisconsin to other states in the Midwest and attend typically publics, there are a few privates on the list. But it's mostly public schools that are looking for more students. So these are typically your smaller campuses. So you're, for example, Purdue University at Fort Wayne, which is not the flagship campus, it's another campus, Wisconsin residents can get a reduced tuition price, if they will go to that particular campus. And there's nothing that they have to apply for. It's just an agreement that, again, these public institutions have with each other to offer discounts. So students can go to another state.

Brad Baldridge
Right. And we just use Wisconsin as an example. But I know, Texas, and Oklahoma around the panhandles there where you're in the panhandle of Texas, Oklahoma, and Arkansas, and a lot of other states are a lot closer than most of the Texas schools. And there's a lot of reciprocity where you can go to something a little more local, and get a reduced rate, whether it's in state or not, I don't know the exact details. And all these agreements, there is no, that I'm aware of a central clearinghouse or any place where you can say, Well, I wonder what's available to me. You talk with your school counselors, talk with your local colleges, and just ask them what they know, exists 'cause, as an example, here in Wisconsin, most school counselors know about the Wisconsin reciprocity because they deal with a lot of Wisconsin students, but they're not gonna know much about how things work in Florida, or Texas or California, but someone locally in California, probably what, so it's just a matter of talking to a couple people that you trust, like your school counselor, or admissions people at some of the colleges you're looking you're talking with, to get a feel for what is out there for you.

Chuck Erickson
Or you can always call me.

Brad Baldridge
Yeah.

Chuck Erickson
I'm a great resource to help across state lines, because I work with students all across the country and all across in various states. And this is a question that comes up from families a lot is, 'My student wants to go farther away, but we don't want to pay the full out-of-state price.' And I go, 'Well, great. There are some options for you based off of where you live, and what states your students want to look at as well.'

Brad Baldridge
Right, exactly. Alright, so we've just covered the 3 state public school types out there. So let's talk about the three private school types. So we'll start at the, we've got the elite colleges, which is self explanatory, it's the Ivy League, and the ones that are trying to become like the Ivy League. And, and then there's some probably liberal arts colleges as well, that would fall into that category. But these are those types of schools that have the name recognition, that have the prestige, and have the huge endowments where they marched to their own drum, because they can. Right? Harvard and Yale have more than enough applicants that they could charge anything they wanted, almost, and do it however they wanted. And ultimately, they do do it however they want. Because they're in charge. And they've got enough applicants that will do whatever we asked them to. So but a lot of these at the top of the heap, as an example, don't offer merit aid, some colleges would say, 'Well, you need to be a rock star just to get accepted here. We don't want to be in a position to try and pick among the rock stars and say, Well, this guy is better than that guy, or this gal is better than that gal.' So they just say no merit whatsoever. Just be thankful you got accepted, and call it a day on that. On the other hand, they're very generous when it comes to need based aid. They may use formulas that are more generous than average. And whatever the formula says, they have, again, they've got multibillion dollar endowments, they've got lots of sources of funds to help. So what I tell people about the elite schools is if you can get accepted, and again, the elite schools are, I don't know, top 2 or 3% of applicants will get accepted typically.

Chuck Erickson
Yeah, probably around there, or how I say it, the 98% will get declined. So...

Brad Baldridge
Right.

Chuck Erickson
Don't look at the accept rate, look at the decline rate, which could be 98% of students are told no.

Brad Baldridge
Right. Exactly. So, again, for any for the right, kids, it's a great opportunity. But again, we're talking about something that 75% of the population already knows that's really not an option, we're going to be going to local schools, local state schools, maybe private schools, but the elite schools are not on our list. Because we don't believe in that type of thing, or just as likely, we know we're not going to get accepted. So we're not going to bother. So that leaves us with the other two types of private schools, which would be private schools that want you. And then private schools that will just take you. So the difference there is, if they want you, they may put some money on the table, we talked earlier about how colleges offer scholarships sometimes need based sometimes merit based to students that they want to attract. So if they consider you attractive, in a academic sense, or athletic sense are, again, many different categories, they may offer additional funds, in order to be competitive with what your other options are.

Chuck Erickson
Yeah, and this is where I really can help a family think about strategy that way, because also, even geographic difference can be part of this factor. So students in the Midwest who are willing to go to college outside of the Midwest, there are colleges that are looking to bring Midwestern students there, and vice versa, students who are in Florida, we're looking to leave Florida, their colleges for whom they are wanting students from another geographic area. And we'll possibly offer more scholarship money to try and attract that student. So that they say colleges love to say that they have students from all 50 states. So if you're from a state that they do not have represented, you might be worth more money to them. So hey, students in North Dakota and Montana and Wyoming, you all are worth some money if you're willing to leave your state.

Brad Baldridge
Right? Well, on the flip side is all you students out in California and New York and Florida that if you're willing to go to Nebraska to go to college.

Chuck Erickson
Yeah.

Brad Baldridge
You may have a good shot.

Chuck Erickson
Absolutely.

Brad Baldridge
That's I think a bigger challenge for a lot of Midwest colleges is attracting people from the coasts and getting some people that are seriously considering their colleges.

Chuck Erickson
Yep.

Brad Baldridge
Okay, so colleges that want you versus colleges that will essentially have you or take you but not offer much money. What do we mean by that? Well, again, let's say we have a college where the average ACT score is 25, which might be an SAT score of say, 1200, or something. It's not awful, but it's not great. Then your student puts up a 22, which is average or below average for a typical state, they might say, 'Well, we'd be happy to have you as a student, but we're not going to give you big discounts.' So we cost 60, we'll give you a $5,000 scholarship, so you're gonna have to pay 55.

Chuck Erickson
Yeah, so this is a student who is technically admissible to the college, but they are not truly sought after. So they meet the basic admission requirements that that college may have set. And those are not typically public, they keep those typically internal to say, here's the range of what we admit to the student is admissible. But the college goes, 'Well, if you want to come, you can, but we're not going to give you a ton of money for it.'

Brad Baldridge
Right. And again, if you look at it from the college's perspective, they might be building their class and saying, well, we want these kids because they play the tuba. And all our tuba players just graduated. So the band directors and the activity director really want some tuba players. And these kids are going to play soccer, and they're strong academically as well. So they're going to remain eligible. So the culturally wants them. And these are going to be our political leaders. And these are going to be our academic superstars. And these are our eSports kids. And this kid over here, what does he bring to the table? Oh, he comes with a big check. He's paying full price. That's what we like about him. He doesn't fit many of our other categories. But if he's willing to pay full price? Well, as an institution, we do need to bring in tuition dollars in order to balance the books and pay our employees. So a certain percentage of the people that we bring in, have to pay above average prices, in order to, again balance the books, and that's not every school. And that's why the elite colleges that can march to their own drum, right. Harvard has a multibillion dollar endowment, they've got more money than they need, plus or minus tuition money is rounding error for the Harvard budget. Right, but many schools are they call them tuition driven. In other words, they have to have X millions in tuition come in the door, in order for their institution to survive. And yeah, when they're building their class, that's part of their criteria that they have to pay attention to.

Chuck Erickson
And the vast majority of colleges are tuition driven, there's this notion that colleges just have all this money just laying around. And that's not true, it's a very small amount of colleges that have significant amount of money laying around. And then there are a lot of colleges that have a little savings account, that they really do need those tuition dollars in order to make ends meet and be able to offer everything that they want to offer. And if they don't bring in a class, which we do see time and again, then that's when you hear of colleges making the budget cuts or changing programs, or eliminating sports or something like that. Because as you said in the beginning that colleges are businesses, so they need to be able to keep the lights on and keep people paid and keep facilities open.

Brad Baldridge
Right? Absolutely. So that was a lot of information. So let's boil it down to, 'Okay, well, that was interesting, what do I do about it?' So I think some action items that you might pull out of this idea is think about the six types of colleges, and figure out which types might be appropriate for you. Are elite colleges a consideration? Are they off the list already? Are you or your students interested in just very local? Or are you willing to go cross country and how to state? And are you looking all over the country, you get if you're looking all over the country, that now means you have a bigger project ahead. You're gonna have to visit Texas and Virginia and California, or come up with something so you don't have to visit. In other words, do something online or come up with a way to but again, somehow you're going to have to gather information far and wide and build that in your process. So now, once you've worked through the six types of schools, if it's just a couple local state schools compared to I'm looking at mid level private schools within, 1000 miles of the Midwest, that's a lot of schools, how are you going to work through that? Are you going to figure out which ones cost what for youa and figure out will I qualify for need based aid? Will I qualify for merit aid? Lot of this is going to be covered in future podcast here so stay tuned, as far as the details. But for a lot of families, let's start with the broad six categories and say, 'Well, I can eliminate this category in that category,' or 'I can eliminate all categories, but one.' That helps get your head around, well, how much work do I have to do and what's going on. And then of course, start understanding that for a lot of families, your net price is not going to be zero, it could be 10,20,30,000 thousand dollars times 1,2,3, kids. Where's all that money going to come from? Maybe you've saved a big pile of money, and now we're going to spend the money efficiently. Perhaps you've saved some of the money, but based on your back of the napkin calculations, you're going to come up short. And then in some families, they've not saved much at all, and they're really starting from square one in that regard. So yeah, I think that's where you start, then you just jump in with both feet, or at least start thinking about what things do you need to learn about need based aid, merit aid, all the different categories

Chuck Erickson
And of course, if completely confused, they should give you a call.

Brad Baldridge
Absolutely. Alright, so I think that covers the six types of schools, we went through net price a little bit. In the next episode, we're going to talk about choosing majors. So we've talked about picking colleges last time. This time, we've covered net price and some of the financial stuff, we're going to go back over and talk a little bit more about majors and some of that some of those considerations. And in the future, we're going to cover more financial topics like scholarships, and financial aid. But we appreciate you guys hanging out and listening and we'll talk to you all soon.

All right, that was a great discussion of the net price and the six types of colleges. But don't go away. We've got one more thing to talk about. Right now I'm looking at a chart for Massachusetts where we can actually see some net prices. So if your income is between 75 and 110. Harvard University's net price is around 15,000. MIT is 14, and Williams is 14,000 as well. Now, more expensive schools in that same income bracket would be Worchester Polytechnic at 38,000 toughsat 27,000. Emmanuel College at 28,000, Fisher College at 26,000. But there's lots of colleges in Massachusetts with lots of different price points. We're going to talk more about this chart and we have a chart like this for every state. We'll explain that a little bit and how you can get your own copy in Brad recommends

Presenter
The latest tips, tricks and tools you can use today. This is Brad Recommends on Taming The High Cost of College.

Brad Baldridge
Today on Brad recommends, I'm recommending our net price by income PDFs that are available on our website, we have one for each state. And what this is, is a chart with all the colleges in a particular state, at least all the four year colleges, their total cost of attendance as published. So that would that would be their tuition, room and board books, fees, beer and pizza, the whole cost of a typical college, what it actually costs according to their list price. But then we also have the net cost. And the net cost is the total cost minus all the free money that many students get for college. So the free money could come from federal government in the form of Pell Grants. And other grants could be local state scholarships or state grants. And then finally, the aid you receive from the college itself, whether it's scholarships or grants from the college. So again, as we've been talking, the actual price you pay is substantially less. And these net price charts are a great way to see what the average net price is based on a particular income. So there's five income categories, there's 0-30,000, 30-48,000, 48-75,000, to 75-110, 000, and then 110,000 plus. So on these charts, there's all the colleges. So again, as an example, the Illinois chart has 24 colleges on it, the 12 public state schools and 12 private schools. California's chart has a lot more because California has more colleges, but there's the 9 UC schools, the 23, California state schools, and then 29 more private schools. And again, not every college shows up on the chart, but it's most of the major ones are there. Massachusetts has a lot of private colleges. So the Massachusetts charts have 14 state and 42 privates. Now these, I encourage you to go ahead and go to our website, tamingthehighcostofcollege.com/121. Right below the podcast player there, there'll be a place where you can enter your email information and, and be able to download all these charts. There also be a video there that will explain this in more detail. I'll do the best I can explaining it in audio only, which of course is a bit of a challenge. But there will also be a video there where I explained it again, where you can actually see the chart that we're looking at and explain it in more detail. So what are these charts useful for? Again, an example I gave before, we mentioned that Harvard, MIT, and Williams are 14 or 15,000. net price, even though their list price is between 71 and 73,000. But why does that happen? Again, all the free money that those schools offer. Now Worchester Polytechnic is 67,000. And their net cost is 38,000 for that income bracket. Apparently they don't have quite as much free money as some of these other schools.

And then in that bracket, the most expensive school is Emerson, which I believe is mostly a performing arts-type school. But they're at 42,000 at that same income. So you can use this chart to see based on your income, what some of the low cost or higher cost options might be. I think this chart is great if you're just starting out just to get a list of the colleges in your state, or at least most of the major ones. And some real quick pricing, how much they might cost, both total cost and net cost. And help you build the budget help you start working in what college is actually going to cost you. You're a little farther along in the process. And now you're doing your research and actually visiting colleges, it might help you pick colleges to visit. And once you have this information, you might take it along on the visit and talk to the college about what these numbers mean. And more specifically, are you likely to get this average type of award? Because one of the cautions that we have coming up is not everybody is average. And then finally, if you're near the end of the process you actually have offers. This is a good way to keep the school honest, do you have some numbers to compare. It's like when you're shopping for a car and you're able to download the invoice prices and the list prices and all that type of thing off the internet these days where you could actually know what a fair price for a car might be based on some research before you go to the dealership. Same can be said here where you can get some information on pricing just to keep the school honest. Again, you can download your charts and get access to the video by going to tamingthehighcostofcollege/121. That's where we have the transcript in the show notes and all the information about Episode 121. And there'll be a place there where you can click to download all the charts. Again, you can pick your state, you can download other states, if you want, you can share it with your friends and neighbors, whatever you'd like to do. But let me give you a couple of quick warnings about this chart as well. As I mentioned, these are all averages. So often, total cost even is an average. So some families pay more or some families play less than a lot of colleges, for example, the business school or the engineering school might have a higher tuition or bigger or more lab fees for sciences, or things like that. So there could be a difference of 1000s of dollars between one major and another major. And of course, there's also big price differences between one dorm and another dorm, etc, etc. Plus the amount of aid you received is based on an average, right, so the free money is on average, many families get more, many families get less. So the real challenge is not only to figure out what the average family got, but more importantly, what you're going to get. And that information, unfortunately, is not easily attained just from the chart, you're gonna have to do more work. We cover that in our courses, we cover that in some of our other podcasts. Another warning is all the state schools on these charts, all those numbers are based on you being a resident of that state. So you in essence, in-state tuition, if you're choosing to look at schools that are public, but out of state, oftentimes there's a price differential. And again, out of state state schools will have a higher tuition than what the end state families typically pay. And we don't have a lot of data as far as what the net cost for out of state kids would be at a state school. For whatever reason that information is not collected very much. And other than anecdotal evidence, we don't have a lot of that data. Unfortunately, that one's a little more challenging. We do cover it on the on the deeper levels on how to get involved if you are looking at that. But that's a like I said a bigger challenge, as we mentioned earlier in this podcast. So I encourage everyone to get out there and get a copy of these charts; they are very useful. Befre I let you go, quick reminder that we do appreciate any reviews. So if you are listening via Apple or Google or Spotify or Spotify or wherever you get your podcasts, we'd appreciate a review if you have a few minutes. And then we'll see you next week.

Presenter
Thank you for listening to the Taming The High Cost of College podcast. Now it's time for you to take action head to tamingthehighcostofcollege.com for show notes, bonus content, and to leave feedback for Brad. The next step on your college journey starts now. Brad Baldridge is a registered representative of Cambridge Investment Research and an Investment Advisor Representative of Cambridge Investment Research Advisors, a registered investment advisor. Securities are offered through Cambridge Investment Research Incorporated, a broker dealer, and member of FINRA and SIPC. Brad owns two companies: Baldrige Wealth Management and Baldrige College Solutions. The Baldrige companies are not affiliated with Cambridge Investment Research.

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