Whats’ your plan?: 09/13/12017

By Scott Arens | Pioneer Review

In the last installment, we talked about the price of a college education: the Annual Cost of College (ACC) or Cost of Attendance (COA). Again, this is the total of the various expenses a student would incur over the year at the college of their choice as calculated by the institution. These figures are easy to obtain from an Internet search or from any of the college’s catalogs. If you pay these amounts, you are overpaying for college.

This is not a good college funding strategy, especially if your plan is to take out loans to pay your college bill. Four years of paying that price tag will get you or your student heavily in debt. Who gets through college in four years? The last figure I ran across stated that it’s more like six, increasing the cost. The interest on a loan of this size is comparable to the amount I paid for my first house in the 1980s. So, a better strategy includes lowering the price you pay for school, getting the degree in the most timely manner, and minimizing the loans. Lowing the price, this is where the term “net price” comes into play.

Net price is what college will really cost you. The federal government gets involved here. You will be filling out the Free Application for Federal Student Aid or FAFSA. This form will let you know your Expected Family Contribution, or EFC. EFC is obtained from the information you report about your family’s income and assets on the FAFSA. This figure will become the minimum of what colleges expect you to pay for a year of college and is completed annually. You will be doing a FAFSA for each year of attendance; it looks like the 2018-2019 form is due Oct. 1 of this year. Cost of attendance (COA) – Expected Family Contribution (EFC) = Financial Aid. This calculation is what you are eligible for in federal, state, and institutional aid. So, the net price or real cost of college is your EFC, aid the college doesn’t cover, and any financial aid loans taken to pay the bill for the year (EFC + Uncovered Aid + FA Loans = Net Price).

Let’s leave it here for now and let you get use to all the acronyms. Next week, I would like to build on this discussion and paying less for college. If you have questions or suggestions, please email me at Scott@ArensCP.com.

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