Never pay list price!
That’s the mentality Americans have toward electronics, clothing, airplane tickets and cars. And now it’s getting easier to think the same way about college.
The website College Abacus, founded in 2012, lets prospective students and their parents compare the list price of a university to the net price, once software has determined the amount of grants and scholarships the school would likely offer. Universities are required to have such calculators on their websites, but College Abacus puts all the information in one place, similar to the way Kayak scrolls the web for a variety of airfares, then helps you find the best deal.
Despite an abundance of financial aid guides and how-to's, students can still overpay for college because they don’t research all the options that might meet their needs. “Before your kid falls in love with a school, find out what the real cost is going to be,” Abigail Seldin, co-founder of College Abacus, tells me in the video above. “There are very few schools that are so fundamentally unique you can’t find five others like them.” One or two of those five might be considerably cheaper, all things considered.
While a college education has become a key credential for attaining middle-class earning power, the cost has become a huge economic burden for many families. College tuition has risen nearly three times as much as inflation during the last decade, as private schools benefit from a flood of applicants and public schools hike fees to offset cutbacks in government funding. Soaring costs have led to a surge in the amount of student debt taken out during the last few years, with the total amount outstanding topping $1 trillion and the typical borrower owing more than $25,000 once they graduate.
A weak labor market, meanwhile, has left many grads with low-paying jobs and a lousy set of choices: Pay off those college loans, or pay rent? Economists worry that 20-somethings starting their working lives hamstrung with debt may never become the robust purchasers of cars, homes and amusements that their parents were. The slow-growing economy we have now partly reflects that.
Shrewder choices about how to spend scarce college dollars can knock down that starter debt load. Using College Abacus, for example, I compared the cost of Duke, the University of Virginia and Boston College (which my own daughter happens to attend). While Duke had the highest sticker price, the net price--which includes financial aid the school may offer but not outside grants or loans -- was at least $12,000 cheaper than the other two options for a hypothetical student coming from a middle-class family with two working parents.
Information from Abacus isn’t necessarily comprehensive. I tried to compare football powerhouses, for instance, and couldn’t get net-price data for the top three in the latest college football rankings: Alabama, Mississippi State or Oregon. Some schools block Abacus from scraping their pricing information, arguing that the firm is using proprietary data for its own gain. Meanwhile, Abacus is still adding colleges to its dataset.
Other organizations, such as the College Board and U.S. News & World Report, offer some form of net price data. But College Abacus says it's the first to build software that gathers the data from college sites and allows comparisons in one place. To get useful results from Abacus, you have to answer about 20 questions and provide basic financial information such as income and tax status. Abacus says it will never share customer data and points to the fact that its parent firm— Education Credit Management Corp.—is a nonprofit that, among other things, helps students struggling with debt manage their obligations. There's no charge for using the site.
Students and their families can still fill in missing data by going to the net price calculators on colleges' own web sites. And they should. “We’ve thrown out a lot of platitudes to parents,” Seldin says. “Private schools with high sticker prices, don’t even bother. If you’re middle class, nobody’s going to give you any money.” A bit of research may show those platitudes are false—and maybe save you enough cash to start researching that new car a lot sooner than you expected.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.