The first step in college planning is to understand that rarely do 2 families ever pay the same tuition, at the same school. If you’ve sat on an airplane and wondered how they can charge almost everyone on the plane a different price – welcome to the world of college pricing. College tuition schedules are highly variable, and the tuition that is charged to a family is predominantly based upon that family’s financial position (income and assets). The higher the income and the larger the asset base of the family, the higher their tuition will be. A students grades are also an important factor, and we’ll delve into that later in this Module.

It’s also important to know that with college pricing models, everyone starts at full price (sticker price, as it’s called) and then tries to find ‘financial aid’ (grants, federal aid, scholarships) to bring the price down. The discounts can be significant - the average net price at public colleges is approximately 50% of the sticker price. The discounting is even greater at most private colleges.

Here’s a stark example of a how a college pricing model functions: a rich student with poor grades who is accepted will receive very little, if any aid. They will pay ‘sticker price’, or close to it. Conversely, a low income student with excellent grades will pay little or no tuition. Now, we’ll explain how the college arrived at one student paying full price and the other paying no tuition, or close to it.

The aid (discounts) which people are seeking comes in 2 forms, ‘need’ and ‘merit’. Need based aid makes college affordable to low income students. Your clients however, will rarely qualify for this form of aid. Merit aid is just as it sounds – if you’ve made the grades, you might get the aid. Who provides the aid? Need based aid comes from federal, state and college grants. Merit aid is generally provided by the college and is typically referred to as ‘institutional aid’, as well as scholarships.

Here is an overview of the key aspects of applications that may make aid available to you. We won’t go into excessive detail here. We will provide you with a high level understanding of the key applications, and the types of student aid that ‘might’ be available to the family.

FAFSA (Free Application for Federal Student Aid). The FAFSA serves 2 primary functions: 1- it is like a ‘global application’ that you must fill out because most colleges won’t even accept a college application without having a FAFSA on file for the student, 2- the financial information contained in the FAFSA will guide the college in determining the Expected Family Contribution (EFC, which is just a cute term for tuition) they will charge the family.

To complete the FAFSA, you’re going to need information from your clients’ tax return, such as annual income and assets. FYI- the hardest part of filling out the FAFSA is getting all of the information together that goes into the FAFSA. Start this early so that you’ve got the necessary documentation on time. Here’s your starting point for the FAFSA. The good news about the FAFSA is that when you submit it electronically (easy to do) every college that you consider applying to will have direct access to your application.

Here’s a little helper - if you do a Google search on ‘filling out the FAFSA’ you will find a mind numbing amount of resources, most of which are as time intensive as the FAFSA itself. That said, here is a solid guidance resource for filling out the FAFSA. If you prefer video tutorials, this series of short videos was created by a financial aid expert at Stanford FAFSA Walkthrough.

The FAFSA is the big hurdle in the applications process, and much of the other work you’ll do in preparing your client for applying to college flows off the FAFSA – so get that out of the way first.

Next up - College Student Scholarship (CSS) Profile. The likelihood of getting scholarship monies is over-rated. However, once you’ve filled out the FAFSA, it is worth repeating the abbreviated process of filling out the CSS Profile. Be advised that many institutions will promote the fact that ‘$ billions in scholarship aid are available’ as though the money is easy to get. Scholarships disbursed by the Feds or state are generally reserved for outstanding or needy students. Scholarships awarded by a specific college are inherently unique. It is also worth noting that scholarships are generally awarded for a single year. Advise the family not to bank on an award unless it’s being explicitly granted.

Your client should be informed that they can negotiate the ‘aid package’ that will be offered by a school. When a school accepts a student, they’ll send an acceptance letter with an offer of aid. The ‘aid’ will include federal and state aid (if it’s a low or middle income family), as well as the ‘institutional aid’ which is a grant that is unique to each college. The institutional aid IS negotiable – it is a grant that comes out of the school’s budget and the admissions personnel have broad discretion in the amount of institutional aid they offer. Module 4 of this System provides deep detail regarding college pricing models, and how to use the information for negotiating a deep discount.

Financial Positioning – this is the exercise of structuring and presenting the clients’ finances and assets in a manner that reduces their tuition liability. The family’s primary residence is exempt from their net worth calculation. Retirement assets are also not counted in the calculation of EFC, but other assets: savings, CDs, money market accounts, investment real estate, stocks, bonds, mutual funds, commodities, are all included in the EFC calculation. If your client wishes to engage in structuring their finances in a way that reduces their tuition, they should consult an expert in what is allowable in the current year, as well as a tax lawyer.

Here’s an opportunity to engage your clients and help them to understand where the value lies in college, and it’s not in the brand on the diploma. It is important that college be explained to your clients in investment terms: Attending college incurs an expense. The return on that expense is determined by the education received. Degrees in healthcare, comp sci, finance and engineering pay very well. Soft degrees (humanities and liberal arts) pay far less. In fact, Science, Technology, Engineering and Math (STEM) related jobs pay 2.5 times more than jobs derived from ‘soft’ degrees.

Most families are not aware of the disparity in pay between STEM majors and soft degrees. However, when you explain this to them, you’re introducing them to an incredibly valuable line of thought. When you explore various academic majors and the jobs that map out from those majors, these tangible insights start to become actionable. Our College Buddy provides occupational outcomes for 48 different majors, where recent grads are employed.

Families should not be stressing over which over-priced private schools they should apply to. Shift the discussion to academic majors that lead to real careers. This is a game changing discussion and your clients will be immeasurably thankful for you showing them where the real values lies in college. We’ve got 2 additional programs to illustrate the jobs that flow out of various majors, along with academic requirements and other relevant information.

Career Buddy – a solid reality check regarding the jobs that actually exist for recent grads, and the competition for those jobs. This ones’ an eye opener.

Job FutureCaster – this is a true ROI college planning program. It’s packed with information regarding future job opportunities, what it costs to acquire the skills for those jobs, and the long term ROI for each job.

Many families have strong preconceptions about which colleges their kids should consider. They’re generally following the notion that expensive private colleges offer the best education, and a refined ‘college life experience’. It’s no surprise that hundreds of ‘privates’ have tuitions over $50,000 annually – they’ve done an exceptional job of cultivating their cache’.

Families typically under-estimate the cost of college by 50%, or more. They assume their kid will be done in four years (5.3 is average) and they don’t fully load all of the costs and incidentals that can blow up a budget - that’s one problem. Another problem is that families look past their local state college, which generally offers solid educational value. We don’t ever tell a family what to do – we give them all of the available options. Those options can offer starkly contrasting results. Here are some of those options:

Four-year college

• Private college – plan on $15,000 to $80,000 annually.
• Public state college – plan on $5,000 to $15,000 annually.

Two-year college then transfer to a four-year college (save one-third compared to public state college in total tuition costs).

Two-year trade/vocational college. $2,000 to $3,000 annually.

The College Rankings Index is another of our programs that brings reality front and center to the discussion. It shows the schools that offer great educational value, and those that don’t. The Index empirically determines the Economic Value Added, by each college ranked within our system. Climbing walls and social scene are not part of the calculus. Grad rates, occupational outcomes, and other economic factors are what the Index is comprised of.

Also, it’s well worth knowing that hundreds of 2nd and 3rd tier private colleges are closing each year. Ensure that your families avoid schools that offer low value, and those that may actually close their doors. There are many hundreds of great colleges to choose from, and we’ve ranked them for you. What you’ll see generally as you scroll through the College Rankings Index is that public state colleges tend to rank very highly.

One last point to remind your clients of…. they’ve paid state tuitions long before even sending a kid to college. A chunk of their taxes have gone to funding the public college systems.

The ETC College Admissions Probability is a fundamental tool for financial advisors in college planning. It personalizes a combination of FAFSA and test score information to provide a family with 2 incredibly valuable data points:

• The probability of the child being accepted at specific colleges.
• The Expected Family Contribution (tuition and fees) that each college will expect them to pay.

The FAQ and User Guide for this program contains some of the most strategic information available regarding college admissions pricing models. Your clients will find this intelligence to be incredibly valuable. When you generate a list of prospective colleges, you’ll be enabled to make deeply informed decisions regarding finalizing the college selection. Share this with your clients – they will appreciate the value and guidance you’re providing to them.

The ETC College Business Plan will replace the need for hundreds of hours of data collection, cost/benefit analyses, cost accumulations, and so forth. Just run your analysis, and you’ll instantly receive all of the input costs, along with the earnings outcomes, formatted as an income statement, in an Excel spreadsheet. The spreadsheet includes 4 year, 5 year, and 6 year graduation assumptions – so you can really ‘run the numbers’ with your clients! This is an exceptional value adding program to your business.

The ETC College Business Plan is revolutionary in the world of college to career planning.

We’ve provided here a listing of various assets and resources that are relevant to the college planning process.

SAT – learn here about the testing dates, locations, fees and other information relating to the SAT

ACT – learn here about the testing dates, locations, fees and other information relating to the ACT

Lean on our Checklist as your ‘project management’ document. The Checklist allows you to easily upload the schools being considered for applying to, and then manage all of the important steps and dates along the way. FYI - most advisors set this up with the family and then hand it off to the client for the ongoing maintenance. Another valuable tool for your business.

We also offer a variant of this program to families – the ETC College to Career Planning System. This version of the program is considerably longer than the Financial Advisors’ version. It offers extensive insight into the need for students to understand that college is not a career unto itself, but a crucial stepping stone to the job market. We also cover the hazards of student debt as few others will warn an 18 year old of the damage they can do to themselves with an onerous debt burden. We encourage all parents and students to immerse themselves in the excellent insights provided by the ETC College to Career Planning System.