Why the college with the highest sticker price isn't necessarily the most expensive—and how advisors can help families make smarter education funding decisions.

For many families, the college planning process begins with sticker shock. A university advertises tuition and expenses approaching $90,000 or $100,000 per year, and parents immediately assume the school is financially out of reach.

But what if that published price isn't what the family would actually pay?

The reality is that college pricing is far more complicated—and often more favorable—than most families realize. Need-based financial aid, merit scholarships, institutional subsidies, and differences in financial aid formulas can dramatically change the actual cost of attendance.

For financial advisors, understanding these differences creates an important opportunity to help clients make better college decisions without jeopardizing their retirement or other financial goals.

During a recent Financial Experts Network webinar, Phillip Levine, Professor of Economics at Wellesley College and author of Hidden Tuition: An Insider's Guide to College Pricing and Financial Aid, explained how college pricing really works and shared practical strategies advisors can use to help families navigate the system.

The session also featured Jonathan Sparling of the Private College 529 Plan, who discussed an alternative approach to managing future private-college tuition costs.

The Biggest College Pricing Mistake: Focusing on Sticker Price

One of Levine's central messages was simple: Ignore the sticker price and focus on what the family will actually pay.

Unlike most purchases, college does not have one price that applies equally to everyone.

Two students attending the same institution may pay dramatically different amounts based on family income, assets, academic qualifications, and the college's financial aid policies.

Colleges generally offer two major categories of assistance:

• Need-based financial aid: Assistance determined by a family's financial circumstances.
• Merit-based aid: Scholarships awarded for academic achievement or other institutional priorities, sometimes regardless of financial need.

Levine explained that many private colleges offer substantial merit scholarships to attract students, including those from higher-income families.

A student might receive a $30,000 annual scholarship from a college with a $90,000 published price. While the award sounds impressive, the remaining $60,000 cost may still exceed what the family would pay elsewhere.

Conversely, a college advertising a much higher tuition price could ultimately be more affordable because of generous institutional grants.

The lesson for advisors: A large scholarship is not necessarily a good financial deal. What matters is the remaining cost after financial aid.

Why Colleges Charge Different Families Different Prices

College pricing reflects a complicated combination of institutional expenses, financial resources, and enrollment objectives.

Levine explained that heavily endowed colleges can use investment earnings to subsidize educational costs and provide substantial need-based aid.

Public institutions receive state funding that helps reduce costs, particularly for in-state students.

Private colleges with smaller endowments often face greater financial constraints. Many use merit scholarships and tuition discounts to compete for students.

As a result, financial aid is not simply about helping families who cannot afford college. It can also serve as a tool for attracting students and managing enrollment.

This helps explain why two seemingly similar colleges may offer very different financial aid packages to the same student.

It also explains why families should avoid eliminating colleges solely because their published tuition appears unaffordable.

Net Price Calculators: One of the Most Valuable College Planning Tools

Before families finalize their college lists, Levine recommended using each institution's net price calculator.

These online tools estimate what a student may pay after accounting for grants and scholarships.

They typically request information about family income, assets, household circumstances, and sometimes academic qualifications.

The resulting estimate can help families identify colleges that may be more affordable than expected.

Levine also discussed MyinTuition, a simplified college cost-estimation tool he helped develop to make preliminary financial aid estimates more accessible.

However, advisors should remind clients that net price calculators are estimates, not guaranteed offers.

Families with complicated finances—including business ownership, unusual income, or significant changes in financial circumstances—may receive estimates that differ from their eventual aid awards.

In these situations, contacting the college's financial aid office may provide additional clarity.

Some institutions may even offer preliminary financial aid reviews before students apply.

Advisor takeaway: Encourage families to compare estimated net prices before making emotional commitments to particular colleges.

FAFSA vs. CSS Profile: Small Differences Can Have Major Financial Consequences

Another important discussion focused on the two major financial aid applications: the FAFSA and CSS Profile.

The Free Application for Federal Student Aid (FAFSA) is used to determine federal student aid eligibility.

The CSS Profile, administered by the College Board, is used by participating institutions to gather additional financial information when determining institutional aid.

These systems do not always treat families the same way.

Families with multiple children in college

Under the current FAFSA formula, having two children enrolled in college does not automatically reduce each student's Student Aid Index.

However, some institutions using the CSS Profile consider overlapping college attendance when determining institutional financial aid.

For families with children close in age, this distinction can meaningfully affect affordability.

Divorced or separated parents

The FAFSA generally uses financial information from the parent who provided more financial support during the relevant period, with additional rules when support is equal.

Some CSS Profile colleges request financial information from both parents, including a noncustodial parent.

That difference may substantially change the aid calculation.

For advisors working with divorced families, understanding which financial information each college requires is especially important.

The key point: Financial aid eligibility is not determined by one universal formula. Institutional policies can significantly influence what a family ultimately pays.

Should Families Prioritize Retirement Savings Over College Savings?

Levine addressed a question financial advisors frequently encounter: What happens when clients cannot afford to fully fund both retirement and college education?

His recommendation was to prioritize retirement savings.

There are two important reasons.

First, retirement savings typically benefit from a longer investment horizon and potentially valuable tax advantages.

Second, qualified retirement account balances generally are not reported as assets under the federal FAFSA formula, while certain nonretirement savings—including parent-owned 529 accounts—may be considered.

This does not mean families should abandon college savings. Rather, retirement security should not be sacrificed simply to eliminate future education borrowing.

Advisors should also consider how asset ownership affects financial aid.

Student-owned assets are generally assessed more heavily than parent-owned assets under the federal methodology.

Grandparent-owned 529 plans may offer additional advantages because they generally are not reported as parent or student assets on the FAFSA, and qualified distributions are not treated as student income under the current federal formula.

However, CSS Profile institutions may apply different rules.

Planning opportunity: Review education savings, retirement contributions, and account ownership together to identify strategies that support the family's complete financial plan.

Can Outside Scholarships Actually Reduce Financial Aid?

Families often devote significant time to searching for outside scholarships, assuming every award will reduce college costs by the full amount.

Levine cautioned that this is not always the case.

Some colleges adjust institutional aid when students receive scholarships from outside organizations.

For example, a $5,000 outside scholarship might reduce the family's bill by $5,000—or it might replace some existing institutional assistance.

The result depends on the college's scholarship displacement policies.

Financial advisors should encourage families to ask financial aid offices how outside awards will affect their final costs.

The same principle applies to merit scholarships offered directly by colleges: the important figure is the total amount the family must pay.

Is Student Debt Always a Bad Decision?

With widespread concern about student loan balances, some families view any education borrowing as a financial mistake.

Levine offered a more nuanced perspective.

Excessive borrowing can create serious long-term financial challenges, particularly when students do not complete their degrees or pursue programs with limited earning potential.

However, modest borrowing may be reasonable when it allows students to focus on academics instead of working excessive hours.

The appropriate decision depends on the amount borrowed, expected earnings, repayment terms, available family resources, and likelihood of completing the program.

Advisors should help families distinguish between manageable education financing and debt that could undermine future financial stability.

An Overlooked Risk: The Financial Health of the College

College affordability is not only about tuition and financial aid.

Levine also discussed the financial challenges facing some smaller private institutions, particularly those with limited endowments and declining enrollment.

Families should consider whether a college is financially positioned to remain stable throughout the student's education.

Two indicators worth examining are:

Enrollment trends: Persistent enrollment declines may signal financial pressure.

Endowment spending: Colleges withdrawing unusually high percentages of their endowments year after year may face sustainability challenges.

Levine noted that an endowment spending rate around 5% is a common benchmark, while consistently much higher withdrawals may warrant closer scrutiny.

These indicators do not predict whether a particular institution will close, but they can help families identify questions worth asking.

For advisors, institutional financial health deserves consideration alongside tuition, academic programs, graduation rates, and career outcomes.

Private College 529 Plans: An Alternative Way to Prepare for Tuition Inflation

The webinar also introduced a less familiar education savings option: the Private College 529 Plan.

Jonathan Sparling explained how this prepaid tuition program differs from traditional 529 investment accounts.

Rather than relying primarily on investment growth, the Private College 529 Plan allows families to purchase a percentage of future tuition and mandatory fees at participating private colleges using current tuition rates.

Consider a simplified example.

A college currently charges $40,000 in annual tuition and eligible fees.

A family contributes $20,000, purchasing the equivalent of 50% of one year's tuition at that institution.

If tuition increases to $71,600 ten years later, that purchased percentage would still cover 50% of eligible tuition and fees, representing $35,800 in future tuition value.

The plan includes approximately 300 participating private colleges, and families do not need to choose a specific college when making contributions.

Sparling also discussed flexibility for families whose children ultimately attend nonparticipating institutions.

Under the plan's rules, qualified withdrawals at nonparticipating schools are generally based on contributions plus up to 2% annual compounded growth, depending on the underlying plan trust's performance.

Beneficiary changes and certain Roth IRA rollovers may also be available, subject to applicable requirements.

As with any education savings strategy, advisors should evaluate participation, refund provisions, liquidity, eligible expenses, and the family's likelihood of attending a participating institution.

Five Questions Financial Advisors Should Ask Families About College Costs

The webinar highlighted several questions that can improve college planning conversations.

1. Have you compared estimated net prices instead of published tuition?

Families may be surprised to discover that seemingly expensive colleges offer substantial financial assistance.

2. Do you understand how each college calculates financial aid?

FAFSA and CSS Profile policies can create meaningful differences, particularly for divorced families or those with multiple children attending college.

3. Are you balancing education funding with retirement security?

Paying for college should not jeopardize a family's long-term financial independence.

4. Have you considered all the costs beyond tuition?

Housing, meals, transportation, books, borrowing costs, and potential additional semesters can significantly affect affordability.

5. Are you evaluating the college's long-term financial stability?

An attractive financial aid offer is only one component of a sound college decision.

Final Thoughts: The Best College Deal Isn't Always the Biggest Scholarship

The biggest takeaway from Levine's presentation is that college affordability requires looking beyond the advertised price.

A college's financial aid methodology, endowment resources, merit scholarship practices, and enrollment objectives can dramatically affect what families actually pay.

For financial advisors, this creates an opportunity to provide value beyond traditional 529 savings recommendations.

By helping families understand net prices, evaluate financial aid, coordinate savings strategies, and assess borrowing decisions, advisors can bring greater clarity to one of the largest financial commitments many clients will make.

The goal isn't necessarily to find the college with the lowest sticker price. It's to help families find an educational opportunity they can afford without compromising their broader financial future.

Additional Resources and Fact-Checking

The following resources provide additional information and verification of the financial aid rules and planning concepts discussed during the webinar.

• Federal Student Aid: https://studentaid.gov/ — FAFSA eligibility, student loans, and federal financial aid information.
• Net Price Calculator Center: https://collegecost.ed.gov/net-price — Find college net price calculators.
• CSS Profile: https://cssprofile.collegeboard.org/ — Institutional financial aid application requirements.
• MyinTuition: https://myintuition.org/ — Simplified college cost estimates at participating institutions.
• Private College 529 Plan: https://www.privatecollege529.com/ — Participating colleges, prepaid tuition benefits, and plan disclosures.
• IRS 529 Plan Guidance: https://www.irs.gov/taxtopics/tc313 — Federal tax treatment of qualified tuition programs.

Fact-checking note: Current federal FAFSA rules support the distinctions discussed regarding multiple children in college, parental reporting, retirement account assets, and grandparent-owned 529 plans. CSS Profile treatment varies by institution. The Private College 529 Plan's features and illustrative tuition growth examples reflect the webinar presentation; advisors should confirm current terms in official plan documents. Institutional merit-aid practices, specific college financial conditions, and future tuition increases are not guaranteed.

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