Financial Games Colleges Play

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About this time, colleges are sending out two types of letters. The good letter is the acceptance letter and weeks later, the bad letter telling students how much it will cost.  Unfortunately, the bad letter, the financial award letters, are hard to read, leaving out vital information often deceiving families about the financial award and cost of college. 

Award letters are not standardized.  Each college has their own format with terminology and jargon specific to their school.  Because of this, families are left to compare award letters and they're not doing an “apples to apples” comparison. 

Some letters do not tell the total cost of college or what your actual out of pocket costs are going to be.

 Northern Arizona University sent a student an award letter that said the total financial aid offer was $30,890.  This is actually the cost to attend NAU but the problem was $25,075 of the aid came in loans.  This is deceptive!  It’s like buying a car for $25,000 and because they gave you a loan, the car was free!

At Temple University, a student received a financial award letter saying they were pleased to offer a combination of grants and loans totaling $25,909 for the freshman year. Unfortunately, the letter failed to mention that Temple costs $33,048 a year to attend. That was the total cost of college and included tuition, room, board, and living expenses. This student could easily have shown up for school only to find out that they had a $7000 shortfall.

Selecting a college is one of the biggest financial decisions a family can make. It's also turning out to be one of the most complicated. Understanding exactly what you're going to pay for college includes the following:

  1. What is the true cost of attendance? The true cost of attendance includes tuition, books, and room and board, incidentals, and travel expenses.
  2. Is your financial award a gift or a loan?
    • A gift will look like tuition reduction or a scholarship.  A gift is money you don't have to pay back.
    • Loans must be paid back.  There are several types of loans that families can be offered. There are student loans and there are parent loans.   What are the interest rates?
  3. Work-study might also be included as a way to reduce costs of college.

Understanding the true cost of college will ultimately lead you to the best financial decision when selecting your student’s college.