Understanding College Costs: A Comparison to Car Buying

Update:
After months of FAFSA delays, local colleges SVSU and Delta have begun releasing financial aid award letters which show the total aid package a student will receive this year.



Today, we’ll make it easier to understand paying for college by comparing it to something most of us are more familiar with- buying a new car.

We will explore the basic college expenses (tuition, fees, and books) and optional features (Out-of-state charges, housing, meals, study abroad, etc.). Then, we’ll dig into the discounts available (need-based aid and merit-based aid) as ways to save on the out-the door-cost (net price).

When we’re finished, you’ll understand the biggest factors that drive up (and reduce) the cost of college.

1. The Base Price: Core Costs
Just like a car’s base price, college has its core expenses: tuition, fees, and books. The base price is a large determiner of a car’s affordability, and tuition and fees make up the largest portion of the cost of college.

2. Optional Features: Enriching the Experience
Just as options like heated seats or all-wheel drive enhance your driving experience (and the value of the car), college expenses such as housing, meals, study abroad programs, and extracurricular activities can enrich your educational experience. These extras aren’t mandatory, but they contribute to personal growth, enjoyment, and an enhanced college journey. Note: I get that food and housing are necessities; however, moving away from home to attend college is optional.

3. Seeking Discounts: Need-Based Aid
Negotiating for discounts when you buy a car is a great way to reduce the overall cost and make payments more manageable. In the case of college, getting a discount will be based on your family’s income and assets, which you will report via the Free Application for Federal Student Aid (FAFSA). In the same way negotiations lower a car’s price, submitting your FAFSA opens doors to grants, need-based aid, and work-study opportunities, easing the financial burden of college.

4. Trade-In Value: Merit-Based Scholarships
Trading in your car for a better deal parallels applying for merit-based scholarships to offset college costs. By showcasing your achievements and abilities, you increase your chances of receiving scholarships that significantly reduce your financial burden. Just as a savvy car buyer cleans and shines their trade-in to get more money for it, students need to polish up their list of academic, extracurricular, service and leadership accomplishments in order to leverage their value.

Check the CCA Ultimate Guide to finding scholarships and download the Complete College Advising Scholarship Tracking spreadsheet for free!

5. Calculating the Out-the-Door Cost: Finding the Net Price
When we buy a car, the most simple formula is:
Base Price + Cost of Options – Discount – Trade-in= Out-the-Door Cost

The equivalent formula for college is:
(Tuition/Fees/Books) + (Housing/Meals/Other Options) – Need-based Aid – Scholarships= Out-the-Door Costs (Net Price)

Fortunately, every college is required by law to have a net-price calculator on their website. You can find them by searching for the name of the college + net price calculator.  Keep in mind each of these calculators is different and may/may not include all of the forms of need and merit based aid available to you.

Conclusion:
I hope this analogy has helped demystifying college costs and encouraged you to seek discounts by filing your FAFSA and leverage your trade-in value by applying for merit-based scholarships. To make it easier to compare the out-the-door prices for the colleges you’ve applied to, I’ve created an easy-to-use college comparison worksheet you can download for free. As always, I am here to help make the process as simple as possible and I am happy to meet with you individually to review your awards.

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