Say if a college’s COA is $70k, NPC is $40k, should a family plan for 4 year college cost as:
(A) 4 years x $40k NPC = $160k
(B) 1 year NPC $40k + 3 year x $70k COA = $250k
© 4 x $70k COA = $280k
Not sure if a family can count on NPC or any financial aid offered at the time of admission will be available for years 2-4 of college.
Also how much to add on for year to year COA increase.
Thank you.
Well…before you do this…you need to determine how much you can actually afford to pay for college for each if four years.
Then you need to run those net price calculators. View them as an estimate of your net costs.
If you are self employed, own a business, own real estate other than your primary residence, or parents are divorced…the NPC is less accurate. Also, when will your kid start college because the NPCs are currently set for students starting in fall 2019.
In terms of subsequent college years…you apply for aid annually using prior prior year tax year information. So for 2019-2020 you would be using 2017 info. If your financial picture changes, your need based aid will probably change too…at least at schools that guarantee to meet full need for all. At schools that don’t guarantee to meet full need, you should have no expectation of increased aid if your income goes down in subsequent years…you might get more need based aid at schools that don’t meet full need…but you might not.
I would suggest adding 3% or so to the annual cost of attendance at schools for subsequent years.
And biggest caveat. If your kiddo is applying to colleges that guarantee to meet full need, MANY (especially the most generous) have single digit acceptance rates…so admission is the first hurdle.
What colleges are your student considering?
ETA…if you think you can pay $4000 a month…start putting that amount into a dedicated savings now…and see if you feel this is sustainable for four years.
How volatile will your income and other FA factors be over the years that your financial situation will be evaluated for FA purposes? Consider:
Also, if any money is from merit scholarships, consider the renewal criteria – if the criteria are strict (e.g. college GPA > 3.5 needed or other conditions where there is a significant risk of not meeting every year), consider the risk of losing the merit scholarship.
Also, consider the risk of the student needing more than 8 semesters of school. The risk is probably minimal for the strongest students, but can be significant for many other college students based on prior academic record (e.g. a high school 3.0 GPA student with 1100 SAT score may be considered college ready, but is less likely to finish in 8 semesters than a high school 4.0 GPA student with a 1500 SAT score) or other factors like known medical issues that may cause some semesters to be lost to medical withdrawal.
It depends on if the amount coming from the school is merit or need based too. If merit, it’s likely to be the same all 4 years as long as grades are at the required level. If it is need based, what when into the calculations? Is there a 529 plan that will be getting lower as bills are paid for freshman and sophomore years? Will there be another child starting college? Income or assets going up or down?
Colleges do not generally “bait and switch”, but changes to your financial situation can affect your aid. Income increases, inheritances, sale of property with equity going into a savings account, capital gains income, etc can all reduce your aid in future years. Also, the cost of the college usually goes up a bit each year.
Just save as much as humanly possible. Nobody knows what college costs and financing will be like X years out. I wouldn’t rely on the current NPCs. Besides, the NPC you used is for one particular college, right? Some colleges could be substantially less generous.
So … how many years out are you talking about? Are your kids toddlers? Middle schoolers? High school sophomores?