Everyone tells you that if you don’t have a lot of money you should really go to one of the cheap state universities to save money. Spending $20,000 for college rather than $50,000 makes sense. Right?
Here’s the problem. What a college costs means nothing. The only question is what are YOU going to have to pay for that college. For a full review of how college financial aid check out my Basics of College Financial Aid. But let’s review because so many people get this wrong.
To get financial aid you fill out the FAFSA (Free Application for Federal Student Aid). Based on your families income and assets a standardized formula says your family can pay X dollars. This is known as your Expected Family Contribution. For our example let’s say $10,000. You are looking at two colleges. A state university(college “A”) that will cost $20,000 for tuition, room and board and a private university (college “B”) that costs $50,000 for the same things.
Your need at College “A” is $10,000 ($20,000 cost of college minus your expected family contribution of $10,000).
Your need at College “B” is $40,000 ($50,000 cost of college minus your expected family contribution of $10,000).
Now, in an ideal world every college would cover your full need so College “A” would give you $10,000 and College “B” would give you $40,000. But that is not how it usually works.
The problem is that College “A”, your state university, practices what is known as gapping. Gapping simply means that they won’t give you everything that you are entitled to according to the FAFSA. A typical state university may gap 40% or more. Instead of giving you $10,000 to pay for college, College “A” only give you $6,000. So, your cost for the cheap state university is your expected family contribution of $10,000 plus another $4,000 of gap. Total cost for the cheap school? $14,000.
College “B” on the other hand does meet 100% of your need. So they give you $40,000 in financial aid. Your total cost at the expensive college? $10,000.
But our story is not over. Because the percentage of students that actually graduate from a college in 4 years is typically much higher at the private colleges when compared to the state colleges. 4 year graduate rates at state schools are commonly in the 20 to 30% range. Typical 4 year graduate rates at private schools are in the 60 to 70% range.
If you look at some of the best known state schools you will see 4 graduation rates that are much higher than is typical of most state schools. UC Berkeley for instance has a 4 year graduation rate of 69%. Looks pretty good. But the 4 year graduation rate at the University of Pennsylvania is 89%.
And for today I am ignoring the very real advantages that can occur at the private colleges that typically have much smaller class sizes and much more personalized attention from professors.
If you are from a family that will not qualify for financial aid at even the most expensive colleges then the yearly cost of the state university may be less but you will most likely end up paying for more years. But for many families, that cheap state school is going to be anything but cheap.
Do your homework. Better yet, have your parents do their homework. After all, they are going to be the one’s paying most of the bills anyway. Most private colleges don’t meet 100% of need but on average they meet more need than the public schools. Want to know where you can find this kind of information?
Go to CollegeBoard.org to search for the colleges in which you have an interest. For each college look at the information on average amount of need met. The higher the percentage the better. For graduation rates go to College Navigator. Check out the retention and graduation rates for each college.
Are state universities an appropriate choice for some students? Yes. However, if your criteria in choosing a college involves trying to find the cheapest option, most students need to keep looking.