While high school seniors are suffering serious cases of senioritis on their final sprint to graduation, many of their parents are cracking the books and crunching the numbers.

Hopefully they’ve used the net price calculators on college websites to get estimates of how much their children might receive in grants and scholarships to help offset each school’s “sticker price”—its published rate for tuition and fees and room and board.

The majority of first-time, full-time undergraduate students received financial aid at four-year public institutions (83%) and four-year private institutions (89%) during the 2013-14 school year, the most recent years for data from the National Center for Education Statistics.

Even so, many families find that college sticker prices are, well, too sticky.

Joe Messinger, CFP, a co-founder and the director of college planning at Capstone Wealth Partners, a fee-only RIA firm in Dublin, Ohio, sees a lot of what he calls “families on the bubble.” The parents are in their peak earning years, so they won’t qualify for need-based aid, “but they’re not wealthy enough to write the check for $25,000 to $50,000 a year,” he says. “They’re left behind in the financial aid process and it’s the perfect storm.”

Average published prices for 2016-17 are $20,090 for in-state public schools, $35,370 for out-of-state public schools and $45,370 for nonprofit private schools, according to the College Board. Annual price tags top $65,000 at some of the nation’s most elite schools. Institutions are starting to set their 2017-18 rates.

Published prices at four-year schools, adjusted for inflation, actually grew at a slower average annual rate this past decade than the prior decade, according to the College Board. But net prices are climbing, it says, because financial aid hasn’t kept pace with rising price tags. During the 2015-16 school year, the most recent for College Board aid data, full-time undergrads received an average $14,460 in aid, including $8,390 in grants.

All families should file the Free Application for Federal Student Aid (FAFSA) because each school calculates a personalized expected family contribution (EFC) and determines aid awards differently. Thanks to recent changes, the FAFSA is now based on actual income from two years ago instead of estimated income from last year. And students can file it as early as October 1 for the following school year, three months ahead of the old start date.

Financial aid expert Mark Kantrowitz, publisher and vice president of strategy for the college search and scholarship site Cappex.com, urges students to file the FAFSA as soon as possible. “A dozen states offer state grants on a first-come, first-served basis until the money runs out,” he says, “so students from these states who don’t file in the fall may miss out.”

It doesn’t look like schools are changing their aid packaging philosophies as a result of the earlier availability of FAFSA data, he says, but they are awarding aid sooner.

Students who applied to schools under early admissions plans for fall 2017 enrollment received actual financial aid award letters (instead of estimated awards) with their offers of admission, he says. He expects regular-admissions candidates to receive aid award letters mostly in early March instead of late March or early April—giving them more time to visit schools and speak with financial aid officers before the May 1 decision deadline.

“Families will not feel as rushed and can make a smarter, more informed decision on the financial trade-offs,” says Kantrowitz.

Upon receiving their award letters, they should recalculate their net prices, he says, and use a comparison of net prices to appeal to the less generous colleges for more financial aid. College Navigator, a free tool from the U.S. Department of Education, can be used to see if a college front-loads grants to freshmen or also awards upperclassmen, he says.

Don’t count on receiving fat admissions envelopes from the well-endowed Ivies. Their need-based policies are very generous. But since their acceptance rates are so low, says Kantrowitz, “Often, students treat them as a lottery, where the cost of the ticket is the application fee.” He recommends applying to at least one “financial aid safety school” that a family can afford without aid and where their child’s test scores rank above the 75th percentile for admitted students.

Students should search for scholarships on free websites, he says. (Cappex’s database can be found at www.cappex.com/scholarships.) Families should look to take advantage of education tax benefits, like the American opportunity tax credit and the student loan interest deduction, he says.
Students needing loans should first access federal student loans because they’re cheaper, more available and have better repayment terms, he says.
Families can expect interest rates on student loans to increase over the next several years in this rising interest rate environment, he says. There will be a more immediate impact on private student loans with variable rates. Rates on federal student loans, which reset each July 1 and are based on the last 10-year Treasury auction in May, are fixed for the life of a loan.

“Borrow as much as you need, not as much as you can,” cautions Kantrowitz. “Every dollar you borrow will cost about two dollars by the time you repay the debt.”

Advisor Action Points
“How are we going to actually pay the bill?” is a question Messinger of Capstone Wealth Partners frequently hears from parents of high schoolers. Some are financial planning clients; others attend his workshops or Capstone’s one-on-one coaching service, College Pre-Approval, to learn how to manage the many moving parts of college planning.

“My belief is that college should be preapproved, just like getting a mortgage,” he says, “so that it ensures students can graduate on time, with manageable student loan debt, without robbing mom and dad’s retirement.”

Messinger helps families select schools (from a financial perspective), maximize financial aid, use personal resources wisely and capitalize on tax benefits. One thing he shows parents is how they can manage cash flow when their kids go off to school—reallocate the hundreds of dollars they already spend each month on a child’s food, activities and other expenses. “They’re not free when they live under your roof,” he says, but parents often forget to factor this in.

Before a student even visits a campus, a family should figure out their EFC, estimate their four-year net cost and understand the vastly different aid policies of institutions, he says. For example, he notes that Tulane University and the University of Alabama, which is looking to boost its national profile, are awarding a lot of money in merit scholarships.

Messinger also encourages being open-minded. “People rule out schools on sticker price,” he says, “but our average private school is discounting 45% right now.”

CollegeData and the College Board have good online resources about aid packages, he says. Unfortunately, there are still no standards for aid award letters, he says, but the Consumer Financial Protection Bureau has a tool that can be used to help compare them.

Like Kantrowitz, he believes student loans shouldn’t exceed the student’s expected annual starting salary after graduation. Students undecided about their career path shouldn’t borrow more than the maximum allowable in federal direct loans (a total of $27,000 over the first four years), says Messinger.

To cut college costs, students may want to consider starting out at a community college or attending a satellite campus of a state school for a couple of years, he says.

Michael Beloff, a financial advisor with Barnum Financial Group in Shelton, Conn., says students can consider in-state colleges for the first year or two to save money. If they know which school they’d like to eventually transfer to, they should ask its staff what prerequisites might be needed and whether the courses they plan to take are transferable, he says.

“It’s hard for an 18-year-old to think about what they want to be when they grow up,” he says. But it’s important to ask, “Is that private school or that out-of-state school worth twice as much or two and a half times as much?” he says, when taking into account a potential career path and what the debt service may be upon graduation.

Families need to understand what the monthly debt payments will look like, regardless of where they hold that debt, he says.
So far, he hasn’t seen many results from the early filings of the 2017-18 FAFSA. But because the financial aid awards are based on 2015 data, he says, “This may be a boon for families that had financial struggles but righted the ship in 2016.”

Private institutions with strong endowments tend to be the most generous with need-based grants, says Beloff, and merit-based aid is really a function from school to school. A family he knows from the East Coast was granted non-need-based money from a West Coast public school looking for geographic diversity.

He encourages families to negotiate with schools once they receive their aid packages. “There’s no harm,” he says. “They’re not going to take it away just because you say, ‘Hey, can you give me a little more?’”

“Of course, one of the best ways to save money on the cost of schooling is to find a good fit for the student so they finish in four years,” he says.
According to a study he cites from Complete College America, only 36% of full-time students pursuing a bachelor’s degree at flagship or very high research public institutions completed their degree in four years. The figure was just 19% at non-flagship public institutions.

More Financing Strategies
Extended family members are also becoming a bigger part of the college financing picture. Gifting on the Ascensus College Savings platform, through its Ugift program, increased 299% between 2012 and 2015, says Steven Dombrower, the senior vice president of advisor strategy and investment management at Ascensus College Savings.

He attributes the growth to the tremendous amount of media coverage on tuition inflation, more parents asking family members to gift and enhancements Ascensus added to the platform, including electronic gifting capabilities. “Receiving from grandma and grandpa over the holidays the gift of college, versus some toy with 500 pieces that Dad is going to get frustrated putting together, because I’ve been there, that makes sense,” he says.

A 2016 study from the College Savings Foundation found that 80% of parents expect their children to help pay for college. When presented with a selection of options on how they expect their children to contribute, most parents chose getting a job (43%) or getting grants/scholarships/fellowships (29%).

Richard Polimeni, chair of the College Savings Foundation and director of education savings programs for Bank of America/Merrill Lynch, says that although early is better, it’s never too late to save. Families who open a 529 account when a child is in high school may be able to find other ways to fund the first couple of years of college, he says, and use this tax-deferred savings for the last couple of years or for graduate school.

“Every dollar you save now is still a dollar less that you have to find,” he says, “whether 10 years down the road or two or three years down the road.”