A family with a household income of $150,000 and assets for college of $110,000 can afford, after estimated aid, to pay for Forbes' 2014 Top Ten Colleges, but could not afford Forbes' bottom ten colleges. See 2014 Best College Rankings. The reason for this is that the top ten colleges will meet 100% of a student's need for college aid and the bottom ten colleges will meet a much lower percentage of a student's need for aid. Also, because the Top Ten Colleges use one formula to determine a student's need for aid and the Bottom Ten Colleges use a different formula to assess aid eligibility.
Moreover, the aid award from the top ten colleges will consist almost entirely of grants or scholarships, with possibly only a small amount of work-study or student loans (most will not include any loans at all). In contrast, the bottom ten colleges will likely offer a Stafford Loan as the first and most significant part of the student's aid award.
In the screenshots below, note that at all of the Top Ten Colleges, the affordability indicators (like a traffic light) are all green! What this means is that the estimated aid based on a household income of $150,000 and $110,000 of reportable assets on the aid forms, brings the annual net cost down low enough that the family can afford, using that $110,000 of assets, the annual estimated net cost (including a 6% annual rise in costs) for all four years it takes to get a four-year degree. Conversely, assuming the exact same situation, the family would need more than $110,000 of assets to fund the net cost of college at ALL of the bottom ten colleges. So, the colleges that are ranked the highest by Forbes are actually all affordable (green lights) and none of the bottom ten colleges are affordable (red lights). NOTE: The order of the colleges in each list is not the same as their rankings in the Forbes Best Colleges List. The software reorders them based on estimated annual net cost, and the US Military Academy (West Point) is free to attend. EFC calculations assume $150,000 adjusted gross income and $110,000 of reportable assets (savings and investments) owned by the parents. Other factors will affect a family's calculated EFC, and this calculation was for illustrative purposes only.
This example highlights the reality for middle income families that the best colleges in the US can be affordable, and in fact, may be more affordable than the perceived low-cost colleges that have much lower sticker prices to start with. Since the top colleges are highly selective in their admissions practices, I often tell parents that if your child wins the admissions lottery, and the child is eligible for need-based college aid, then the child will win the financial aid lottery, too.
Troy Onink is the CEO of Stratagee.com where he provides college funding advice to families seeking their best strategy to pay for college and preserve assets for retirement. The software is not available to the public.
