Schools Making College More Affordable: Pricing resets, % of income, and other methods

Paying for College Financial Aid (Need-Based, Merit Aid, Loans)
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I recently learned that Whitman has instituted a new policy whereby families pay no more than 10% of their income without considering assets.

This level of transparency is awesome on so many levels. It also makes it easier for families with academically prepared but not off-the-charts-stellar kids to consider schools that might be better fits for their students with the knowledge that the school will be affordable and not dependent on whether the student is lucky enough to get enough merit aid to make the school affordable. It will also likely decrease the number of applications sent out, meaning that colleges will have a better idea of which students are actually seriously considering them vs. trying to develop a complicated yield strategy to handle students who are shotgunning colleges because they don’t know whether a preferred school will end up being affordable.

Colgate has also instituted a plan, but it is dependent on “typical assets.” And I have strong feelings about “typical assets” surrounding financial aid since the definition of “typical assets” can often lead to poor financial practices for families, especially those that are near the advertised limits for free tuition (see rant for more details).

Feel free to comment about the Whitman 10% Promise, and please share information on any other colleges that are instituting similarly transparent policies that do not consider assets or that set the level of typical assets at a financially advisable level (i.e. where there’s enough assets for a suitable emergency fund, equity in a median-priced home, etc.).

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We will miss you..: College closings, mergers, risks of closing
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As someone with a kid a few years from application season, who is less than 50k out from paying off our mortgage, and whose home value has basically doubled in the past 5 years, I have been spending A LOT of time this summer researching how colleges are handling assets in their financial aid formulas and how schools handle home equity is WILD (net price results have ranged from 12k to 78k and it’s the home equity that seems to really run up the price at some colleges because otherwise our assets are fairly low/typical).

So far, the colleges that have come in less than Whitman’s price with the 10 percent promise are Princeton, Johns Hopkins, and Harvard.

Williams and Oberlin are more or less the same net price as Whitman for our income/asset level. Amherst, Dartmouth, Pomona, and Wesleyan are about 2 or 3k higher.

Then, Swarthmore, Yale, Wellesley, Smith, Barnard, Hamilton, St. Olaf (not sure if this one is based on merit or fin aid though?), Bowdoin, Cornell, Bard, and Davidson are 4 to 10k higher (in that specific order).

The colleges that have come back 12k to 21k higher than Whitman’s price are Colby, Bates, Colgate, Penn, Dickinson, BU, Bryn Mawr, Macalester, Carnegie Mellon, Wake Forest, Brown, Haverford, Carleton, Bucknell, Duke, and Conn College.

The colleges that are coming in 24k+ over Whitman’s price and are seemingly hitting home equity hard (and thus out of our price range!) are Claremont McKenna, Middlebury, Emerson, Vassar, Mount Holyoke, Tufts, Kenyon, Emory, and NYU.

I’m still making my way through schools and making a spreadsheet of everything to compare, but thought I would share what I’ve found so far because in our case the high home equity makes a huge difference. I really appreciate Whitman’s approach and have been surprised to see it come in as one of our best net price results so far.

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We discussed briefly in another thread that it appears there will be families in roughly the top 1-5% range in terms of AGI percentiles (for the relevant age range) that will get aid from Whitman but can’t get it even from the likes of Harvard. Toward the bottom of that range, they could be getting up to like $34K or so from Whitman. And that is assuming no assets–”typical” assets (and above) would sweep in many more families in the top 5-10% range, with even higher amounts of aid.

As an early retiree couple with atypical assets relative to AGI, and a D30, this is pretty interesting news! And I certainly wouldn’t mind if there ended up being more price competition like this.

Of course whether aid for top 1-5% AGI families really counts as “need” aid is a bit fuzzy. But I think this is indirect confirmation that between the domestic “cliff” (more of a gentle strolling path, but still) and just more effective competition from various publics, US privates may need to engage in more such price competition in what used to be strictly full pay ranges (absent merit, of course).

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Another thing I really like about Whitman’s 10% Promise is that families with a fairly steady income year-over-year are protected from tuition increases.

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Cooper Union currently offers a 50% tuition scholarship to every student who is admitted. Starting in 2028-29, it will be tuition free for all students.

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Not the same as a percentage of income, but Beloit is guaranteeing that direct-fees to the school (tuition & fees plus room & board) won’t exceed $30k/year (with an allowance of 2-5% annual increases based on inflation).

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Wheaton College dropped their tuition $30K…from $69K to $39K, for Class of 2027.

It will be interesting to see how much discounting they do from there.

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As an addendum to my reply that I made in July, I have recently rechecked NPCs at various schools (using the same numbers I was running over the summer) to see if there were any changes to aid formulas and have been surprised to see aid increase / net price numbers go down. Hard to say whether it’s due to expanded aid from schools or if schools are allowing higher assets than before, but there is a notable difference. In particular, Vassar’s net price now comes back 10k less than before, Kenyon’s is 18k lower (this one was especially surprising to me!), and William and Mary went from no aid offered to now estimating about 12k in aid (for out of state).

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Another trend is 3-year Bachelor’s

e.g. Merrimack - Three-Year Applied Bachelor’s Degrees | Merrimack College (25k/year!)
or
Suffolk To Launch Pilot 94-Credit Applied Bachelor's Degree - Suffolk University

Merrimack also has a VERY low-cost BAs in humanities: Humanities Major | What is a Humanities Major | Merrimack College

Neither is super selective, obviously, but both known regional schools - though suffolk primarily for its law school

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Yes, “typical assets” is one way that a financial aid promise can mean less than it appears, similar to “meet full need” when the college can define “need” however it wants.

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You really cannot fault a college for not wanting to fund the scion of a multi-generational wealthy family. Dad is a social worker. Mom is a part-time librarian. They are also beneficiaries of great-grandpa’s trust. Once a year the heirs gather in Bermuda at Granny’s palatial home so the cousin’s can squabble about who inherited the Cartier bracelet and matching tiara, once worn by Princess Alexandra, and who got the Picasso drawings.

There are families where the earned income is quite modest and somehow the lifestyle is quite extraordinary. “Typical Assets” do not “punish” ordinary people for having emergency savings and owning a home. It’s a check on the modest earners who have access to extraordinary wealth via various tax avoidance/generation skipping estate planning techniques executed by their forebears. I don’t think this is unfair at all.

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Big picture I agree. It’s the colleges’ money, they can choose to calculate need how they want and to invest in the students they most want. Even though there’s a certain ick factor to that, and one reason why many meet full need schools have a disproportionate number of full pay families.

But, some schools do hit these assets hard. Emergency savings assessed at 5.64% isn’t too much of an SAI hit for many. But uncapped home equity can be a painful financial aid hit for some families in HCOL areas.

IME some colleges are also trying to avoid giving FA to families where both parents are retired, but have enough investments to comfortably live out their lives. I’ve had any number of parents say something like “I’ll just retire so I’ll get full need based aid because I’ll have no earned income” and will thus be under the $200K income hurdle. Then I mention the FA prior prior year issue, with the kicker question of how much investment income is your portfolio throwing off each year? Parents: Oh, right.

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Are they “avoiding” giving financial aid to people who have retired? No. They have a formula and a rubric- and being asset heavy and income light is just not going to cut it. Who has more financial flexibility- the retired couple who are living off:

Social security (each qualifiying independently)

An IRA or two, or 401K, or company pension or civil service pension

Mutual funds/other investments which they consider “my kids inheritance”

Vs. the single mom who drives a school bus and takes night shifts at CVS stocking shelves who has managed to save up an emergency fund to help cover the inevitable increase in health insurance costs that are coming this year.

I know a lot of the retirees. They are LIVID that colleges expect them to “liquidate our savings”. I bite my tongue.

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Whitman’s 10% promise clearly benefits high asset families, as well as high income families. A $600k income family with millions in non retirement/non-primary home assets is expected to get some financial aid at Whitman. Compared to many other full need colleges, it doesn’t sound as great for typical middle class families. For example, a family with $101k income and low assets is expected to contribute $28k per year at Whitman ($10k tuition + $16 room & board + $2k books & supplies) . At typical Ivy+ type colleges, that same family is likely to have ~$0 cost to parents.

I’m unclear about listing colleges that set assets at a level where there’s enough assets for a suitable emergency fund, equity in a median-priced home? At highly selective private colleges that claim to meet full need, FA formulas typically are in the form of parents need to contribute a low % of non-retirement (often non-primary home as well) assets beyond a threshold, such as $200k. So a family that had $500k in non-retirement / non-primary home assets might need to pay an extra ($500k - $200k) * 5% = $15k beyond a family with similar income family with $200k assets. Do you mean colleges that set the beyond x assets threshold at a value where x is more than an emergency fund?

In the federal sample (includes students receiving federal FA such as Pell or loans), the academic colleges with <40% admit rate that had the lowest average net cost were:

$75k to $110k Income
1 . Williams – $2k
2. Princeton – $3k
3. Ozarks – $6k
4. Berea – $7k
5. Washington & Lee – $8k
6. Dartmouth – $8k
7. Rust – $9k
8. Brescia – $9k
9. Northeastern Oakland – $10k
10. Harvard – $10k

$110k+ Income
1 . Ozarks – $10k
2. Allen – $13k
3. Berea – $14k
4. U Florida – $17k
5. GeorgiaTech – $17k
6. Alcorn State – $18k
7. U Georgia – $18k
8. Rust – $18k
9. U South Florida – $18k
10. Florida State – $19k
…
Princeton – $36k (lowest among extremely selective private colleges)
Pomona – $38k

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Note the 10% tuition promise is that the family pays 10% MAX of their income in tuition…they may receive more financial aid than that (Whitman offers both need based and merit based financial aid.)

I ran Whitman’s NPC for a family with $101k in income and low assets, and it showed a net COA of $21K in direct costs (tuition/fees/room/board) at Whitman, not $28K. I would not recommend using Whitman’s 10% tuition sliding calculator.

I agree this $21K is still higher than this family would pay at highly rejective meet full need schools. But those schools don’t accept a high proportion of students with that financial profile (middle class/non-Pell qualifying).

The good news is that Whitman gives financial aid pre-reads so a family could use that to gauge affordability before applying. Big picture, talking about middle class families, Whitman will only be an option for those middle class families who have been saving for college for years.

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It sets cap on tuition, room and board based on family income.

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Do you think that there are families that decide to have one of the parents become a “stay at home parent” in order to qualify for more aid? This scenario seems even less likely to me than parents choosing to retire early. As discussed in an earlier thread on daycare costs, they can be substantial enough that some families may already be weighing whether or not it makes sense for both parents to be employed.

In general, I am under the impression that college financial aid offices just look at total household income and not at whether one or both parents are employed. However, I recall that when one of my kids was applying to independent schools, at least one school (maybe more) explicitly stated that for 2 parent families with school aged children, their aid decisions might take into account whether or not both parents were employed. I don’t remember the details or the wording since my kids did not end up at that school but there was definitely some statement about that on the admissions/aid pages of the school’s website.

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Probably? People can make surprising decisions, even decisions that aren’t in their best financial interests, when it comes to positioning themselves for financial aid. In terms of this particular decision, the prior prior rule will delay any potential financial aid benefit if they quit close to college/during college.

Some schools definitely look at whether both parents are employed, or not…and sounds like you saw that too at one school. Some NPCs ask how much of the income comes from each parent. I don’t know whether/to what degree having one working parent could result in a lower financial aid award though.

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In my time on CC, I have read lots about “donut hole” families, those who make too much to qualify for much, if any, financial aid, but for whom the sticker price of many private colleges is out of reach. Depending on the generosity of the institution of higher ed, that hole can be bigger of smaller, but it’s an issue for many. And these are not families with millions in trust funds but lower-paid careers or folks who did FIRE and have millions in retirement assets that are outside of traditional retirement vehicles. I will link my rant again, but families whose incomes are in the top 10-15% nationally who have an appropriately-sized emergency fund, plus potential savings for healthcare deductibles and/or replacement of modest cars will often be considered not to have “typical” assets by some of the schools who advertise “free tuition” or similar deals for people with incomes below $200k.

So nobody is going to cry a river for families with $190k in annual income and their financial constraints, but a large percentage of those families are sending their kids to college, and having schools that are sharing what kind of cost they can expect to pay in a more transparent fashion is helpful for those families

I think of such policies less as financial aid and more as financial transparency. For a number of years, colleges have focused on the discounting model, whether providing need-based aid to families or offering “scholarships” to students. At some schools it really is a meritorious award for a small percentage of students, while at many others nearly everybody receives a “merit” award because many families prefer the idea of paying $60k for a $90k education, than paying $60k for a school that charges $60k, even if the outlay of funds is the same.

As St. Lawrence put it (emphasis added), “The Affordability Compass is our commitment to helping families navigate the cost of a St. Lawrence University education with confidence and clarity.” For families that don’t know about NPCs or think they make too much money or whatever, these schools are trying to show how they can be more affordable than their sticker prices indicate.

Most college students do not attend highly-selective private colleges. Most highly-selective private colleges reject over 90% of their applicants, even though a significant chunk of that 90% are likely to be highly-qualified applicants. So what happens to the rest of college students that don’t attend colleges with 10-figure endowments?

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I get that “millions in trust funds” are people who did not work for their millions… but honestly, what’s the difference between those millions and the FIRE people who have “millions in retirement assets”? Do those folks truly expect to be getting significant financial aid for their kids- people who amassed millions, are sitting on it, and don’t want to liquidate their Microsoft stock? Millions are millions. And someone smart enough to retire early with millions- but too dumb to at least have funded their IRA’s and 401K with the max contributions???

I don’t know if these early retirees are pulling our legs or not. But some of the “if I sell my mutual funds we’ll be broke” stories are just too hard to believe.