Skewed Perceptions: “Only State Universities Are Affordable”

Why do so many college applicants only apply to public universities?

They believe that private schools will cost more money, and they won’t be able to afford it. At least this is what we are repeatedly hearing from families that we work with on their financial planning. There is a long-standing perception that public universities are always more accessible and more economical than private universities. It’s simply not true.

There are many families who aren’t even considering private universities as an option due to these perceptions, even though a private university might be the best option for the student based on available majors, class size, culture, etc. A family’s decision not to apply to a private university very seldom is based on the student’s academic abilities or the competition for admission.

To be honest, this is the very same thought process my family and I had when applying to colleges more than 20 years ago. It is not to say that I would have been any better served by a private college education; it is more the point that I didn’t even consider it an option strictly based on the perceived “price tag” and therefore didn’t apply.

This higher price tag does prove true on the surface if we look at the sticker price, but we can find a different outcome if we dig a little deeper.

The Reality: Private Schools Are More Affordable Than You Think

The reality is that if a family can afford to send their student to a public university (regardless of whether paying up-front or borrowing), they very likely can also afford to cover the expected family contribution of a more “expensive” private university. It can even be less expensive to attend private universities compared to public state universities. It only requires a good understanding of a few key concepts. Let’s take a deeper look at this.

In talking with college-bound families, we find the majority of them do not have a clear understanding of how important concepts like the Cost of Attendance (COA), Expected Family Contribution (EFC), and financial aid are calculated. Yet these are the very determining factors of the actual price tag for their student’s higher education:

Cost of Attendance (COA) – Expected Family Contribution (EFC) = The Family’s Financial Need.

The result of this formula allows the university to calculate what percentage of the family’s financial need they are willing to meet with aid.

The Cost of Attendance at many private colleges, including tuition, fees, room & board, has reached the incredible sum of $70,000 per year. But the real price, taking into account financial aid, is often significantly lower. How much lower you ask? In the chart below, we can see that although the total cost of attendance for the private university was approximately 2.5 times more than that of the public university, the expected family contribution was identical and the actual “net price” to the family was virtually the same.

Finding “Cheaper” Private Schools

How can this be? It all comes down to that simple little equation above where we said Cost of Attendance (COA) – Expected Family Contribution (EFC) = Family Financial Need.

Another way to look at financial need is that it is the amount of financial aid for which your family is eligible. Colleges will not necessarily meet your total need. Therefore, you want to find a private university that will meet, or come close to meeting, your total need. For instance, you’ll notice in this comparison that the private university not only met 100% of financial need, but they also met 88% of the need with gift aid. Gift aid is money that does NOT need to be paid back. The biggest equalizing factor is the amount of gift aid that the private university can provide through endowment funds.

The great news for college-bound families who invest the time in educating themselves on how these formulas work is that they can decide on which university to attend without it being purely a function of cost. Universities will evaluate each applicant’s need and available aid on a case-by-case basis, but having an understanding of how the financial aid system works really changes the landscape of possibilities for each college-bound student.

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