Your dream college looks expensive, but it might be affordable

Some of those expensive colleges might be more affordable than people think. Some students and families will be eligible for need-based funds.

Ann Hermes/Staff/File
January 26: New Rochelle High School senior, Carlos Rodriguez fills out FAFSA forms in the school's library with his mother, Nelly Minier, on January 26, 2014 in New Rochelle, New York. The event, 'College Goal NY: FAFSA Completion Events for New York State Students,' is held for annually and assists over 100 New Rochelle High School seniors and their families.

Earlier this month, my sons experienced their first college football game as we traveled to Charlottesville, Virginia, to see Notre Dame play the University of Virginia. It was by far one of the most exciting sporting events we have ever attended, with multiple lead changes, trick plays and a dramatic finish that saw the Fighting Irish score a touchdown in the closing seconds to win the game.

My boys were hooked. They now want to go to Notre Dame.

The last time I checked, Notre Dame cost more than $60,000 a year to attend, which is high enough to scare most parents away from even asking for an application. But maybe it’s not such an impossible goal to send your kids to the university they’ve set their sights on. Let’s take a deeper look into how college selection affects financial aid and see why a school such as Notre Dame might be within your reach after all.

We first need to determine the “true” cost of attending a school. And to get that figure, you need to calculate your expected family contribution, or EFC. This is the minimum amount that colleges will expect you to contribute toward the cost of your child’s education.

The EFC is calculated based on the information you provide on one of the two financial aid forms, the Free Application for Federal Financial Aid (FAFSA) and the CSS/Financial Aid Profile. All colleges that award federal aid require the FAFSA. Some schools also require the CSS Profile to determine eligibility for their own institutional aid.

Information you provide on the forms is used in one of three aid calculations, or methodologies, to determine your EFC. The FAFSA uses the “Federal” methodology, while the CSS Profile uses the “Institutional” methodology or the “Consensus” methodology, depending on the college. Each methodology has its own formula for assessing a family’s income and assets for aid purposes.

For example, depending on the methodology used, College X might take into account 100% of your home equity when looking at your assets, while College Y excludes home equity altogether. That is why it’s so important to understand what aid calculation each college uses.

Once your EFC is calculated, your eligibility for need-based aid is determined by taking the cost of attendance and subtracting your EFC. The result (assuming your EFC is smaller than the cost) is your financial need.

Let’s take an example of someone applying to two colleges — a state school that costs $25,000 and a private school at $60,000. If the family has calculated its EFC to be $25,000, then its out-of-pocket cost at both schools would be the same: $25,000. The student would not be eligible for need-based aid at the state school, but would have a financial need of $35,000 at the private school. If that private school met 100% of the student’s need with grants, then both schools would effectively be identical in price.

As you can see, your child’s eligibility for need-based aid is relative to the cost of attendance. The higher the price tag, the greater the likelihood you have of qualifying for need-based aid. In fact, most elite schools will meet the majority of a student’s demonstrated need — Notre Dame, for example, says on its website that it will meet 100% of a student’s financial need.

If you happen to be a good candidate from an admissions standpoint, the college would probably meet your need in the form of grants, tuition discounts and scholarships, minimizing or eliminating the need for student loans that would have to be paid back. This is a prime example of how college selection and affordability are integrated.

College will most likely be one of the largest investments you ever make. You need to determine your best strategy to pay for it and protect your assets and income for retirement. That strategy should be based on your family’s unique circumstances, coordinated by your advisor, and it should cover college selection, financial aid, tax aid and the best use of your personal resources.

If your current financial advisor is not providing guidance in this area, find an advisor who can. The right college planning strategy can make all the difference for your child and your retirement.

Learn more about Brett on NerdWallet’s Ask an Advisor.

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