Last Updated: Oct 17, 2018
Studies show that 65% of families look at a college’s tuition “sticker price” and stop there. But you need to go further. Many schools offer their own scholarships and need-based aid that can significantly reduce the actual cost to attend. That reduction in the sticker price is called “discounting.” When the money comes from the institution versus an outside source like a Pell Grant, it’s called institutional aid, and these “discounts” are typically grants and scholarships, which you don’t have to pay back.
Below are some examples of different kinds of institutional aid. If you don’t dig further and ask colleges what is available to you, you’ll never know. Remember, estimates are free!
First of all, fill out the FAFSA (the Free Application for Federal Student Aid)—do it, do it, do it! It doesn’t matter how much money your parents think they have—you don’t want to leave any money on the table, and “need” is defined differently at different schools. The release of private information (in terms of net worth) through the FAFSA doesn’t make the school fund you differently except in a “need” way. Many institutions also require students to fill out a FAFSA for institutional need-based aid.
Need-based aid is relative—it depends on not only how much money you and your parents have but also the cost of the institution. You almost always need to fill out the FAFSA to qualify for need-based aid. The resulting numbers for this will take you and your family’s income and savings into account and crank out a number called your EFC (Expected Family Contribution).
This number sometimes shocks people who have saved, making them feel “punished” for saving. The savers will come out on top in the end because a family with the same income (and the same number of family members) will end up with the same EFC. Savers will have the money and non-savers will need loans. So plan ahead. The EFC is generally what colleges use to figure out how much need-based aid they can afford to give you. Few families can actually meet that need gap.
Merit-based aid is relative, but at least you know what you’re up against (i.e., a President Scholarship is yours if you have a certain ACT score and GPA), and you understand that someone with a better record gets more merit-based scholarship dollars. The college itself decides where the lines are in terms of GPAs and test scores and the associated dollar amounts. Some institutions may also offer a legacy grant or grants to members of a particular religious group.
Athletic scholarships are popular talent-based scholarships. They do, however, differ from college to college, as some even include food and housing (not to mention free jackets, shoes, hats, etc.)! There are several different athletic organizations, but two in particular come to mind: the NAIA, which allows athletic scholarships at all levels, and the NCAA, which allows athletic scholarships at the Division I and II levels but none at Division III.
Scholarships and grants might have strings tied to them: you'll have to maintain a minimum GPA, the scholarship is only for the first year, you'll need to earn points at attendance at campus events, or you must serve the college as a student representative at public functions. Some “payback” is often required to keep the scholarship. And remember that transfer scholarships are generally a smaller amount than those offered to first-time college students, so balance that when looking at attending a community college and transferring to a four-year school.
The most important thing to remember when comparing prices? Don’t get too excited because of the dollar amount of the scholarship. Look at how it affects total cost. A $25,000 scholarship at a $50,000 institution still leaves you with $25,000 to pay, whereas a $12,000 scholarship at a $24,000 institution leaves you with $12,000 to pay, even though they’re both a 50% discount. Some schools want to keep your attention on the dollar amount of that scholarship rather than the total tuition price, hoping you’ll pick the place with the bigger award. Be careful that you’re not drawn in by a bigger merit award but a smaller need-based grant or vice versa. Look at total dollars you will need to fund by looking at total institutional aid.
Be sure to look at the total academic year cost too—don’t be blinded by semester pricing that is half the total amount. Consider the total cost to attend, meaning tuition, housing (room), meal plans (board), fees, and books. Your college or university’s financial aid office has to provide you with a COA (Cost of Attendance) so you can do a real side-by-side cost comparison.
Sometimes schools look like they have lower tuition but have lots of fees, so be sure to add those in when looking directly at tuition comparisons. Housing and food are generally about the same everywhere you go, but tuition prices can vary greatly. You have control here though, because you can choose a smaller meal plan and cheaper housing if your college or university gives you the option to choose.
Eligible for federal work-study? It will be listed on your award letter as long as you’ve filled out the FAFSA. The school really shouldn’t list this in your aid package as a way for you to pay tuition, fees, room, and board, because you have to earn it first by working a campus job. Think of your federal work-study as pizza money.
Yes, you’ll most likely need to take out loans to pay for all this. That’s okay (within limits), because studies have shown that a college degree will earn you, on average, one million dollars more over your lifetime than someone with only a high school diploma.
Just stay in control. Don’t take out extra loans to buy a better entertainment system, have a fancier car, or live in a student apartment complex with a pool. Why? If you take out these unnecessary excess loans, you’ll be burdened with extra debt for the rest of your life. Seriously. Six months after graduation, when the monthly bills start coming due, someone with minimal college debt and someone with maximum college debt will be paying the same for rent, car payments, and food. The student with minimal debt won’t have student debt payments the size of a mortgage to boot.