Personal Finance Nov 17, 2014 12:13 PM EST

A guide to figuring out your real cost of college


Many parents will not learn how much they must pay for their children's college education until financial aid packages arrive this spring. By then it may be too late to get a better deal.

Families need to be smarter about this if they want to avoid drowning in debt. That includes getting a realistic picture of how much financial aid, if any, to expect.

College consultants recommend calculating your "estimated family contribution" - essentially, the minimum you will be expected to pay - years before sending the first application. That gives you time to adjust your finances and look for generous colleges if you need aid. If you do not qualify for such help, you can seek out schools that offer discounts through merit scholarships.

Run the numbers every year, starting when your kids are in middle school, said Troy Onink, chief executive officer of college planning service "That way you're not caught by surprise, and you have time to plan."

The numbers may shock you. Affluent families may be asked to contribute a quarter or more of their annual incomes. A one-child family earning $115,000, for example, would typically have to contribute at least $25,000 to the cost of a college education, Onink said.

The actual contribution would probably be even higher, depending on assets like a house or savings. The formulas do not compensate for regional differences, so families in high- and low-cost areas alike are expected to pay the same.

At the other end of the spectrum, households with low incomes and few assets might have an expected family contribution of zero. That does not mean they automatically will get enough aid, however, as many colleges "gap" or meet less than 100 percent of a student's demonstrated financial need.

Various calculators on the Web can give you a rough idea of what you would probably be expected to pay. Consultant Lynn O'Shaughnessy, who runs, recommends the estimator offered by the College Board, which provides both federal and institutional results (here)

The vast majority of colleges calculate contributions strictly via a form called the Free Application for Federal Student Aid, or FAFSA. About 300 mostly elite schools also require the College Board's CSS/Financial Aid Profile, which digs much deeper into a household's finances and, in some cases, assets such as home and small business equity that are not counted under the federal formula.

You should start by inputting age data and your current income and asset figures. You can also look at various scenarios, such as whether using savings to pay down a mortgage or other debt could increase eligibility for aid.

Then compare your estimated family contribution numbers with the cost of a college education. The family expected to contribute $25,000, for example, would be unlikely to get need-based aid at in-state public universities, whose average yearly cost for tuition, fees, room and board is only $18,943 for 2014-2015, according to the College Board.

But the equivalent cost for an out-of-state public college is $32,762, while a four-year private college averages $42,419, so the family probably would get financial aid from those types of schools.

Those who need financial aid should look for institutions that meet the highest percentage of their students' financial need. The few dozen that cover 100 percent tend to be elite private colleges, but others, public and private, manage to meet 90 percent or more. The stingiest meet 70 percent or less.

Some disguise miserly packages by counting student loans, which ultimately increase the cost of education.

Parents who will not get aid but want a discount can evaluate public universities and seek out privates that offer merit scholarships. They are typically not available at highly selective universities, but many other private institutions use them as a recruiting tool.

To hone your cost estimates, you can start using the net price calculators on your targeted colleges' websites, said Mark Kantrowitz, publisher of college resource The calculators estimate how much of a student's financial need will actually be met and may factor in merit aid for those without financial need.

But remember, said Kantrowitz, these are just good ballpark figures.

Reuters, All Rights Reserved 2015

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