Planning for College

College is likely the first six-figure financial decision a family makes together. The sticker prices are alarming — but almost nobody pays sticker price. This guide covers how to find what you'll actually pay, how to compare schools on financial terms, how much borrowing is manageable, and when a more expensive school is (or isn't) worth it.

Sticker Price vs. Net Price

A college's published "cost of attendance" includes tuition, fees, room, board, books, and estimated personal expenses. At many private schools this number exceeds $80,000/year. But the cost of attendance is not what most students pay.

Net price = cost of attendance minus grants and scholarships (money you don't repay). At selective private schools, institutional grants can cover 40–60% of sticker price for middle-income families. At public universities, in-state tuition is already subsidized, so the gap between sticker and net is smaller.

When comparing schools, ignore sticker price entirely. A $75,000/year private school with $45,000 in grants costs $30,000/year net — less than some state schools for out-of-state students.

Understanding Your Financial Aid Package

After you file the FAFSA (Free Application for Federal Student Aid), each school sends an aid package. These letters vary in format and can be confusing. Here's what matters:

• Grants and scholarships (free money): Subtract these from cost of attendance. They include federal Pell Grants, state grants, and institutional scholarships. They don't need to be repaid.
• Work-study: A part-time job allocation, not a discount. You earn the money by working. Don't count this as aid that reduces cost — it's income you trade time for.
• Federal subsidized loans: The government pays interest while you're in school. These are the best loans available — low fixed rate, income-driven repayment options, potential forgiveness programs.
• Federal unsubsidized loans: Interest accrues from day one but still carries federal protections and a fixed rate.
• Parent PLUS loans / private loans: Higher rates, fewer protections. These are the most expensive way to finance college.

Ask each school's financial aid office: "What is my net cost — the amount after subtracting only grants and scholarships?" That number is your basis for comparison.

The Debt-to-Income Test

Total student loan debt should stay below your expected first-year salary. This rule isn't arbitrary — it keeps monthly payments at roughly 10% of gross income on a standard 10-year repayment plan.

You can look up expected salary outcomes by school and major using the U.S. Department of Education's College Scorecard (collegescorecard.ed.gov). Filter by field of study for more realistic projections than school-wide averages.

Where the Money Comes From

Most families pay for college with a combination of sources. Here's the typical breakdown and how to think about each:

• 529 savings: Tax-free growth, tax-free withdrawal for education. If you started saving early, this covers part of the bill with no debt. Even $200/month for 10 years at 7% growth produces about $34,000.
• Current income (cash flow): Paying part of each semester's bill from earnings. This works better at lower-cost schools where the annual bill is manageable.
• Federal student loans: Up to $5,500–$7,500/year for dependent undergraduates (varies by year). These should be used first because they carry the best terms.
• Parent contributions: From savings, income, or Parent PLUS loans. Parents should not raid their retirement accounts — there's no financial aid for retirement, but there is for college.
• Work during school: 10–15 hours/week during the semester is manageable for most students. Beyond 20 hours, grades and time-to-degree often suffer.
• Scholarships: Apply to everything. Even small $500–$2,000 scholarships add up. Focus on local/regional scholarships with fewer applicants rather than national competitions with thousands of entries.

Comparing Schools: What Actually Matters

Once you have net prices from each school's calculator, compare them on these dimensions:

1. Net cost per year: What you actually pay after grants/scholarships. The only apples-to-apples number.
2. Total net cost: Net cost × years to degree. A 5-year program costs 25% more than a 4-year program at the same annual rate — and you lose a year of salary too.
3. Debt-to-income ratio: Total borrowing ÷ expected first-year salary. Under 100% is manageable. Under 50% is comfortable.
4. Graduation rate: A school with a 40% 6-year graduation rate means most students either don't finish or take extra time (and extra cost). A cheaper school you don't finish is more expensive than a pricier school you graduate from on time.
5. Time to degree: Average time to bachelor's degree ranges from 4 to 6 years depending on the school. Every extra semester adds tuition and delays earnings.

When the Expensive School Is Worth It

Sometimes paying more makes financial sense. The expensive school may be worth it when:

• The salary premium is large and well-documented. Some schools and programs reliably produce higher starting salaries — and the data is public on College Scorecard. A $15,000/year salary difference recovers $60,000 of extra education cost in 4 years.
• The graduation rate gap is large. If the cheaper school has a 50% graduation rate and the expensive one has 90%, the expected cost of not finishing (lost tuition + lost time + lost earnings) may exceed the price difference.
• The program doesn't exist at the cheaper school. Specific professional programs (nursing, engineering, architecture) may only be available at certain price points.
• Institutional aid makes the net cost close. A $78,000/year school that gives $50,000 in grants costs $28,000 net — comparable to many public universities.

The expensive school is probably not worth it when the primary argument is "prestige" without measurable salary data, when the debt-to-income ratio exceeds 100%, or when the same program exists at a school that costs half as much.

The Financial Application Timeline

Key dates (these shift slightly each year — check studentaid.gov for current deadlines):

• October 1 (senior year): FAFSA opens. File as early as possible — some state and institutional aid is first-come, first-served.
• October–January: Submit CSS Profile if required (mostly private schools). Run each school's net price calculator.
• March–April: Receive financial aid offers. Compare net costs across all schools.
• April: Appeal if circumstances have changed. Financial aid offices can adjust packages if you have a competing offer, a job loss, medical bills, or other changes since your tax return.
• May 1: National decision day. Commit to a school and submit your deposit.

College Planning Checklist