College Costs: Private Colleges vs. State Universities

One of the more provocative things parents learn at my workshops are how expensive, private colleges can actually cost less out of pocket than a “cheaper” state university.

Although this is counter-intuitive, the reason why this is true is makes sense to most:  private colleges have endowment scholarships to give, while state universities do not.

In other words, private colleges will use their warchest to “bribe” desireable students to attend, in effect discounting their published cost to attend to levels rivaling, or, in some cased, less than public colleges.

Another area where this can be true is for need-based financial aid for middle-class families.  Let’s take the example of a family who earnd $120,000 per year.

According to the financial aid formulas, this family has an Expected Family Contribution of $30,000.  (This is a simpliefied example, if you want more details how this all works, I wrote a book on this topic.)

At a local state university, the family gets no assistance.  They’ll pay full price, somewhere around $23,000 per year, including tuitoin, room and board, etc.

At a private college, the cost could be $55,000 per year.  If it’s a generous private college, it could meet 90% of financial need. (About 50 colleges meet 100%, but let’s use 90% for this example.

Here’s how to calculate need:

Cost of Attendance

– Expected Family Contribution

= Need

Plugging in the numbers:

$55,000 (COA)

– $30,000 (EFC)

= $25,000 (Need)

The college meets 90% of need, or $23,500.  (The unmet need is $2,500.)

The family pays its EFC plus the unmet need, or $32,500 ($30,000 + $2,500), for a $55,000 per year school.

Yes, 32K is more than the local state university, if you’re comparing apples to apples.

But there’s one additional factor:  graduation rates.

Care to guess the percentage of kids who graduate from a public school in four years?

Less than 50%.

Why?  They can’t get classes in their majors because of over-enrollment.

The four-year graduation percentage at private schools is in the mid-80% range.

So if you consider that it’s likely to take more than four years to graduate a public school, the differential between private and public schools gets much more narrow.

For more information, see our schedule of upcoming financial aid workshops.

PS.  Other sources to get a feel for your EFC and school out-of-pocket costs:  the FAFSA4caster tool from the Department of Education, and the College Board.

Andrew Lockwood
Lockwood College Consulting
497 South Oyster Bay Road
Plainview, NY 11803