College costs of attendance create a shock for many parents. At the high end, a bachelor's degree can run well above $300,000. Even the low end tops $100,000, cost-of-attendance. Why so much?

Before delving into the answer, here's a qualifying statement. This BLOG is posted at one point in time addressing a matter that changes in the details every year. Therefore, this article has numbers that reflect the circumstances today. Every year the numbers change. Be aware.

That's a good place to start the changing numbers. Two forces drive those changes. First, nearly every college (or university), every year raises either tuition, mandatory fees, dormitory charges or meal plans; or some combination of those. As of this writing, the increase averages 3.5% (three and one-half per
cent). That means a four year total for a bachelor's degree will be more than 14% (fourteen per cent) greater than it is today.


What does that look like in dollars? In my state (North Carolina) the UNC system universities average cost of attendance is $25,000 (rounded off). A year from now, if the averages hold, that will rise to around $25,875; and by year four the costs will have grown to $27,717. Add up the four-year costs and you have a sum greater than $105,370. The difference may not look like that much on paper, but is your family income rising that fast? Inflation is a bugger!

Why is it colleges can get away with raising their charges every year? First, be aware that some colleges are adverting "No Tuition Increase." They are not lying, but neither are they saying "No Cost-of- Attendance" Increase." Tuition is generally less than half of the total costs of attending a public university. At private colleges that is not true, but private colleges also offer threshold grants-in-aid that substantially reduces tuition charged to students.




Another reason colleges confidently raise their charges annually is the eye-watering amount of money they receive from the federal government, Department of Education. We're not talking student loans. We're just talking about billions of dollars transferred from the U.S. Treasury to nearly every college in
America (very few exceptions to that). Furthermore, public universities receive billions more from their state legislatures in education subsidies. That is why there is such a thing as "In-State tuition." Taxpayers have already paid for college through the taxes their state collects from them every day.

We've barely scratched the surface driving the charges colleges present to their students. Here's the point: enrolling in a college to obtain a bachelor's degree is a consumer purchase. Even for one child, it is probably the second most expensive purchase a family will make. For families with two or more
children, paying for college will equal or exceed the cost of their home. One is wise to approach the purchase of high education with a wariness that matches the costs. A wise consumer of higher education services (a college degree) can economize without diminishing the value of the education. 

How much money should I get from FAFSA?


That is a question I am asked often. The answer is none, zero, nil. No matter who you are, or how little money you earn or have you can be flat penniless and FAFSA will give you no money, because FAFSA has no money.

Stop. Before you recite in your mind all of the stories of friends and family who received substantial sums of money "from FAFSA," let's get the facts straight.

What is FAFSA? The Free Application for Federal Student Aid. The key is the third word application.

FAFSA is the way you apply to receive federal student aid. FAFSA is, in itself, just a way of transmitting data to a college's financial aid office.

Let's back up and explain FAFSA from the beginning. FAFSA became a thing in 1992 under a revised Higher Education Act authorization of the Congress. FAFSA replaced a form called the Common Financial Aid Form, CFAF. The intention was to expand access to college by expanding eligibility for financial aid
from the United States Treasury, administered by the Department of Education.




The Department of Education, through its arm, the Office of Federal Student Aid (FSA), establishes eligibility for assistance on a grid that factors income, assets, family characteristics (single, divorced, number of dependents, etc.). That assistance includes free money (PELL Grant, Federal Supplemental
Educational Opportunity Grant FSEOG), education loans directly to students, and to parents of students.

How much free money is authorized, and whether the loans are subsidized (U.S. Treasury picks up the interest) or not is calculated based on the information put on the FAFSA. That information is shared with any college you request. The actual dollars authorized by the FAFSA calculations are sent to the college
to be disbursed to the student.

In the financial aid offices, there is some discretion; meaning the financial aid officer handling a student's application can bump the figure up a little, and even reduce it a little. There are guidelines to follow, and it is called "Professional Judgment." Those in-house decisions can be appealed, but any increases will likely be modest.



Beyond that, most states and colleges use the FAFSA information to determine additional financial aid a student may be line to receive. States also have funds available based on need and eligibility. The colleges themselves have a pot of their own money they also distribute based on both need and merit.
Merit means, how much of a "scholarship" you are offered is a measure of how much the college would like to have you matriculate. With the exception of an endowed scholarship (where a donor makes monetary awards) the scholarships offered by the colleges themselves are actually discounts on tuition.
To recap, how much money will you receive from FAFSA? None. FAFSA will be transmitted to the colleges you choose. In the college financial aid offices available monies will be offered in a Student Aid Report (sometimes called a Financial Aid Report). That report will include the federal benefits offered
(including loans), the state awards offered, the college's own awards and loans offered. If, adding all of those up, the sum does not yet attain to the total "Cost of Attendance," that will be indicated as "Unmet Need." 

Do they want you as much as you want them?

Three points:

1.  the size of the wealth transfer is a six figures expense.
2.  Be a wise consumer.
3.  It's a "No Returns, No Refunds, No Exchanges" policy.

First, just how badly do you want to give a college $120,000? And it could be more than $300,000, depending on which colleges we're talking about. In my experience, choosing a college is one of the largest emotional purchases there are. From the first conversation to graduation day the experience is entangled in the parent-child relationship. By age 17, that youngun' knows where your buttons are, and they know how to push them.

High school students do not approach college choices as financial stewards of their parents' retirement funds. Yet, let's face it, the retirement fund is getting squeezed hard in order to pay for college for one, two, three or more children. Even at the low end of costs, parents with three children are spending
upwards of $400,000 dollars and that's on the bet that the kids will all graduate in four years. Statistically, that is unlikely; not even a 50-50 chance; unless you reframe the endeavor from "Mom and Dad" to "wary consumers."

Second, you are the buyer. Colleges are the sellers. Buyer beware. As with any other seller of any other service or product, discounts are possible, but not automatic. How badly does the college want to make this particular sale?

Reframe your picture of the college-parents relationship from "a good school where my child will get a good education," to "my child is six-figures in their revenues column." That is what it looks like in the business office. Of course, there is a concern for each student's welfare. I don't deny that, but there is
also an absolute necessity, in the business office, that they "make the numbers."

When it comes to non-federal, need-based financial aid (FAFSA), colleges have a challenge. What is the minimum amount of "scholarship" (the discount off of published price) we can offer and still induce this student to matriculate? They're guessing, but it is an educated guess (no pun intended). They have data
that is decades long to help them accurately predict how much they have to give in order to share your bank account for four years.

Treat this as a negotiation, because that's what it is. At the same time, however, be respectful. The financial aid people are not professional sales agents. They can be put off by a hard-driving parent. Third, "No Returns, No Refunds, No Exchanges." All sales are final. Not many people give thought to the
actual, tangible value of a bachelor's degree; much less to even one semester in college. A bachelor's degree has no residual value. You can't sell it, trade it or transfer it to any other person. Colleges do not offer refunds. The choice of where to begin a college education should be made from where you want to finish. Don't go thinking you'll transfer it you aren't thrilled. Go thrilled, and stick it through to the end.