FAFSA Friday: How Can I Figure Out What College My Family Can Afford?

The Squeeze

• Which schools a student can afford to attend depends on several factors, including how much their family has saved, their earning potential during and after school, and the total cost to attend their target school.
• You need to know the net price of a school — how much it costs in tuition, supplies, and room and board, minus any scholarships or grant amounts you don’t have to pay out of pocket.
• The Department of Education provides multiple resources to help families figure out how much it’ll cost to attend any school, plus the typical outcomes for students from each institution.

You probably have a general idea of the cost of college — high. You’re not wrong.

But the actual cost to attend varies significantly from school to school, and not just public versus private. Follow these steps while planning for college to find the schools that are a good financial fit for your family.

Take stock of your resources

You have to first know what you have to spend before figuring out what you can afford. So take an inventory.

• Scholarships: How much has the student been offered, or could they possibly win, in scholarships?
• Grants: How much grant money is available to the student, including federal grants awarded via FAFSA? (Yes, fill out the FAFSA, regardless of how you plan to pay for college! It’s commitment-free and lets you see your options.)
• College savings: How much money do you have saved in a 529 college savings account?
• Other savings and contributions: How much money do you have in additional investment or savings accounts available to spend on education? Will relatives, like grandparents, make contributions to educational costs. 
• Your income: How much of your income can you pay toward education expenses while the student is enrolled?
• Student’s income: How much can the student earn while in school to pay toward expenses?

Between your savings and income, you can figure out how much your family can afford to pay out of pocket, before debt, for a student to attend college.

Find your desired schools’ net price

Create a list of target schools based on what your student wants to get out of college. For example: Do they want to move to another city or state? Do they want to be well-positioned to get into a specific graduate, medical or law school? Do they want to study a unique major? Has any school offered them a scholarship?

Once you have a variety of target schools, figure out the net price of each.

The net price is the school’s cost of attendance minus any scholarship and grant funds the student will receive. The price of attendance includes tuition, fees, books and other costs charged by the school, educational equipment and supplies, plus living expenses like food and housing.

Colleges that receive federal funds (just about all accredited institutions) are required by law to include a Department of Education net price calculator on their website under the Higher Education Opportunity Act of 2008.

Search for [institution name] net price calculator to find it for your target schools.

Check the College Scorecard

Check the Department of Education’s College Scorecard to get more information on your target schools.

The Scorecard includes tons of information about schools, including financial information like average annual cost of attendance, salary range after graduation and total debt after attendance.

Between this resource and the schools’ net price calculators, you should get a solid understanding of how much it’ll cost your student to attend any of the schools on your list.

Figure out how much you’ll need to borrow

This is a simple math step: For each school, find the difference between the net price for four or five years and your available resources. Here’s how to add it up:

• If your savings are more than the net price, hurray: your student can attend the school without relying on debt or additional income while in school. 
• If your total resources (including from income) are more than the net price, they could attend without student loan debt but may have to work while in school.
• If your available resources are less than the net price of a school, the student will need to borrow money to attend that school.

This process helps you see how much debt a student would need to take on to go to their dream university.

To determine whether that debt is a reasonable investment in their future, experts recommend keeping total student debt less than their expected starting annual salary. Following this guidepost, most students can afford to repay the debt on the standard 10-year plan.

Consider their major

The student’s field of study seriously impacts what they can expect to earn after school in their chosen industry. Take that into account when figuring out an expected salary and “reasonable” student debt.

Caveat: You can’t know for sure what they'll earn, so this part of the equation will always be an imprecise factor.

Average salary data for various fields comes with many assumptions: that the student earns their degree, can find a full-time job where they want to live, has leverage to negotiate a competitive salary, doesn’t face wage discrimination and more.

You also can’t assume they’ll remain in the expected field long term. Life experiences like raising children, relocating for a partner’s circumstances or simply realizing their first career isn’t a fit could push them in a totally different direction before they’ve shed their debt.

Student debt is an investment in a student’s future, and any investment comes with unknowns and risks. In this case, your best way to predict whether the investment will pay off is to get a good idea of what the student could earn in the future — and their major is a huge factor in that.

Understand student debt

As you consider how much debt a student would need to take on to go to a target school, make sure you and your child comprehend how that debt works, including:

• Federal versus private loans: They’re both debts, but they work pretty differently. Private loans require a student to have good credit or borrow with a creditworthy cosigner. If the student doesn’t qualify for enough federal aid to cover their costs, consider whether you’ll be able to fill in the gaps with private loans.
• Repayment options: Private loans pretty much work like any other debt, while federal loans come with tons of flexibility in repayment. A student could take on “unreasonable” debt. Still, they may be eligible for student loan forgiveness, income-driven repayment, deferment or forbearance to keep the debt from burdening their budget.
• Bankruptcy options: Er, lack of them. Federal and private student loans are nearly impossible to discharge in bankruptcy, so this is likely a debt that’ll live on until it’s repaid or forgiven.
• Political context: Student loans are a hot topic for many of our representatives and lawmakers. A student’s options for federal loans — including eligibility, repayment and forgiveness — could change significantly in the time between starting school and the years they spend repaying the debt.

Consider alternatives

For many of us, college was sold as the one path to a successful career. The generation entering college now has learned from some of our mistakes.

Students are increasingly considering alternatives to four-year colleges and universities, including:

• Community colleges and technical schools.
• Workshops and bootcamps, like coding bootcamps.
• Community-based learning opportunities.
• Professional certifications.
• Apprenticeships and internships.

Don’t be afraid to explore alternatives if a student’s desired college path is too expensive for your family to take on.