Finding the Right Financial Fit

In a guest post, Vic Davolt, director of admissions at Regis University, shares his perspective on college affordability as both a higher-education administrator and a father. Mr. Davolt will be one of the presenters at a session on the topic at the NACAC conference on Saturday.

The date was September 6 and the cover of U.S. News & World Report read “How to Pay for College.”  Articles included in that rankings issue were titled “Is That the Real Price?,” “State U. Wants You,” “The Debt Load,” and “The Ins and Outs of Aid.”

The Year was 1999. My eldest son was seven.

Fast forward 12 years. While the world has changed dramatically, how to pay for college is still a headliner topic for college admission counseling professionals and the American public. My son is 19.

I communicated about this topic recently with my high school counseling colleague Frank Palmasani, creator and founder of a free informational website, I asked him what problems are new and different than a decade ago from his perspective. We corresponded about what he reminds his site users and workshop attendees— salaries have not risen significantly in the last 10 years, and at the same time, given the challenges of the job market, a college-educated work force has become more important. He reminded me what we all know on the college side—that sticker prices have risen at levels that have exceeded inflation.  In addition, resources from federal and state governments have been static or decreased.

These variables aren’t new and have continued to put pressure on colleges and families. What is new is how many colleges and families are responding with more affordable options and better financial decisions. Enter my family with examples that may surprise you given that I’m a part of this particular session at NACAC.

I’m the director of admissions at Regis University, and the parent of a college sophomore. Direct costs at Regis are $40,588. Over four years that is similar to the median-priced home here in Denver!

Like many Regis families, my household did not save $160,000 or more for college. I have always preached to families to make fit their priority for college choice decision making but rarely talked to families about financial fit.  In our case, my wife and I were committed to paying the price for whatever college our son decided would be his best match.

I guess I should have been more careful about my commitment! His best fit was in Southern California and priced at $49,990. No tuition break was available there, like the one he could get if he attended Regis. He was offered a $12,000 annual scholarship and our balance was lowered further with an institutional need-based grant and my son’s opting in for Federal Direct loans of $5,500.  We still owed over $26,000. My wife had always planned to return to work to help with this financing need. But no public teaching jobs were available because of the economy.  Nonetheless we were committed to supporting his decision. So, to pay for it within a manageable monthly budget, we borrowed from the government with the Parent PLUS loan.

This nearly eight-percent interest rate government loan allowed my family to pay the bill now and later. The loan was applied to the bill and monthly repayments deferred until February of my son’s freshman year. Variable monthly payments for up to ten years were available. But note, to borrow the balance owed and repay in the recommended time frame, our family will repay the principal plus $18,000 in interest—$42,000 for one year. So much for scholarships and financial aid to offset our costs. Multiply that times four years and we’re scheduled to pay nearly the full $200,000 sticker price.

Why would we borrow like that? We did it last year because we wanted what was best for our son. We did it with hopes that he could get a Tuition Exchange (TE) benefit starting his sophomore year (TE is a consortium of private colleges that can offer tuition breaks to employees of member schools). We did it hoping our local public school district would pass a mill levy and teaching jobs would become available.

The answer about TE came in April: “No.” The mill levy failed.

Thankfully for my chances of actually retiring in the future, my son elected this year to transfer to Regis and now our out-of-pocket cost is a much more affordable $10,000. My son had a tremendous growing up experience away, but decided that being nearer home had advantages he preferred. The costs also played a factor, though had he wanted to return to his first college, we would have borrowed more.  Now, though, his education is actually a realistic financial fit for me and my wife.

While the PLUS loan is a financing option that many colleges now show families on the financial aid award, Mr. Palmansani and company would advise families like mine to avoid the level of borrowing my wife and I secured. demonstrates options families should consider in discerning good and bad college financial choices. Presenters Melody Chambers from Truman State University and Nicole Farinella from Robert Morris University (Illinois) will exhibit how both public and private educations are available sans the need to borrow excessively.

My family also offers an alternative example to my son’s freshman year. My twin nieces just enrolled at Ms. Chambers’s Truman State, one of the nation’s most selective regional public universities.  My sister and brother-in-law are public school teachers near retirement age, and likely had little more put away for college than the Davolt clan did. Yet, they were able to send two students to a prestigious university and not borrow a dime in parent loan! And Truman State, where they could get low, in-state tuition, was the girls’ top choice and best fit. Add the fact that federal financial aid takes into account two in college at the same time on the parent portion of the Expected Family Contribution, and their experience is an example of the affordable options available to families.

A lot of media attention continues to be given to the price tags of the nation’s most expensive colleges. Even more attention has been given to the double-digit percentage tuition increases at public universities. This oft-repeated message suggests that higher education is getting to be out of reach for average Americans.

In 1986, according to the Social Security Administration, the average worker wage was just over $17,000, and  the average public four-year college cost $4,200 (so about 25 percent of income), according to the College Board. Public four year costs have increased more than 200 percent since then (sounds daunting). But average worker wage income has risen to nearly $41,000 and with an average price tag of just over $10,000 in direct costs, public universities’ costs remain 29% of household income.  I’m no economist, but even after adjusting for inflation multi-year variables, public education remains affordable.

Consider also the value of America’s community and junior colleges. In 1980 my nearby community college was in a very dated military barracks. Today’s community colleges offer world class facilities and highly-qualified faculties— at four percent of median income. And, if the federal aid form says the Expected Family Contribution equals zero, the Federal Pell Grant will usually cover 100% of those two-year colleges’ costs!

Private colleges are an option too. Ms. Farinella will show how Robert Morris operates at a much lower tuition price tag than most private universities. At Regis, 32 percent of our freshmen are ethnic minorities, many of them first generation. Our generous scholarship and need-based grant program makes our $160,000 education attainable by even the financially neediest. Middle class families aren’t cut out either. Even though they don’t get much in need-based aid, the discounted price they pay is affordable because of our significant merit-based awards. At many universities, in fact, merit scholarships provide aid to meet financial need that is not recognized by the federal form.

Affordability was a real issue in 1999. It is still today.  NACAC members must help families find not only a good fit for their student, but a good financial fit.

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