Three Steps to College Planning

It seems like everyone is talking about our student loan crisis. We heard about it from the presidential candidates last year. We’re hearing about it in Congress. We’re even hearing rumblings from banks and the financial industry. Unfortunately, it’s all talk right now, and talk isn’t going to help you pay your college tuition.

What will help is an understanding of the information behind all that talk and a solid plan that uses the information to your advantage. So, keep calm, and sharpen a pencil or open a spreadsheet to get started.

Step 1: Determine the net price of the schools you are considering.

The good news is that the cost of actually attending your dream school is probably less than you think. The tuition costs published on school websites, the sticker price, is not what most students actually pay. That price, called the net price, is the sticker price minus any federal aid, scholarships, or work study programs you qualify for. Your net price is lowered by any financial aid offered by the federal government or by the schools you are considering. A study quoted by Forbes stated that 87% of students applying for private colleges received some form of financial aid from those schools. Combine that with the 85% of students qualifying for federal grants and loans, and you’ll see that the net price of your dream school might just be within a realistic price range.

Schools publish a net price calculator on their websites to help you estimate this cost. But, you’ll need some specific information to do the calculation. For example, the University of Wisconsin-Madison’s calculator requires your EFC, or estimated family contribution. This is the amount the federal government assumes your family will be able to pay toward your college costs. If you’ve completed your FAFSA, or federal financial aid form, your EFC will be calculated for you. If not, you can estimate your EFC using calculators like this one from the CollegeBoard. Once you plug in your EFC, the calculator will estimate the amount of any additional aid and subtract that from the school’s overall costs. This gives you a net price: the actual amount you will need to plan to pay for that year.

Step 2: Calculate the savings and loan amounts you need to cover your net price.  

The Internet is here to help you with this part. Several college planning websites offer cost planning calculators that will help you estimate savings amounts and loan balances. If you have a few years to save, calculators like this will show a realistic amount you can save toward your future tuition. They will also show how much you might need to take in loans over the course of your education and will give you an idea of how much the loans will cost each month after you graduate.

Step 3: Take a hard look at whether a school is worth the price it will take to get you there. 

Business people determine whether to take financial risks based on a concept called ROI, return on investment. ROI answers the question: “How much additional money will I make if I invest a specific amount now?” Your college tuition is an investment and, therefore, a financial risk. Considering the ROI will help you make a good decision about that risk. Will the school you are considering give you a benefit worth the investment you will have to make? Or would a less expensive school give you the same benefits and, therefore, a better return on your investment?


These are difficult questions that require careful research into different schools and the job market. Check out the program requirements and the graduation rates on the colleges’ websites. Do some online research on the type of careers you will be planning for. The federal Bureau of Labor Statistics has lots of information about what jobs are predicted to grow in the future. Finally, talk to family and friends who have been to college. Ask them about how they feel about the ROI on their college tuition investment.


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