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College sticker shock: $40K and rising
The total cost at many private schools now tops $40,000, but most students don't pay that price.
May 4, 2005: 8:25 AM EDT
By Sarah Max, CNN/Money senior writer

BEND, Ore. (CNN/Money) - Remember the good old days when private college was "only" $20,000 a year? Tuition and room and board at many private schools will likely be twice that in the coming academic year.

The total cost at George Washington University, Sarah Lawrence College and Tufts University, to name a few, has already broken the $40,000 barrier, according to Thomson Peterson's most recent data.

Here's the upshot: At many of these schools, few students will ever pay that price.

"The published price bears so little relationship to the price you're going to pay," said Sandy Baum, senior policy analyst for the College Board and professor of economics at Skidmore College. "The schools that have the highest prices often have the most financial aid available."

In fact, some schools inflate their prices in order to raise their cache and attract more students.

"Some institutions have used high tuition policies to make themselves look high quality," said Ronald Ehrenberg, director of the Cornell Higher Education Research Institute. Those schools then give back substantial shares of their tuition in the form of merit aid for higher quality students.

For parents and their college-bound students, the key to getting the best deal is knowing what schools dole out what kind of aid.

What will it really cost?

The total cost for a four-year private school averaged about $26,000 in the 2004/2005 school year, according to the College Board.

The most recent financial aid stats, which are a year behind, suggest that the average student received close to $10,000 in annual grant money from the schools -- bringing the real cost down to about $16,000 a year. Grants represent close to half of all aid, the rest being loans, work programs and education tax benefits.

But schools have different policies regarding how much of their aid money is distributed based on academic merit or financial need.

The average need-based gift award at Trinity College in Connecticut, for example, is a little under $22,000, according to Thomson Peterson's. The average non-need award is more than $23,000. At Georgetown University, the average need-based award is about $18,000 but non-need grants average only $3,000.

To further confuse matters, private schools have their own formulas for calculating financial need. Many hand out need-based aid with "preferential packaging" for the best students.

"Most schools don't have enough grant dollars to meet the full needs of their students, so they have to decided whom to give it to," said Baum. "There is merit component to need-based aid. There also are schools that award merit-based aid but only to students with need."

What's your best guess?

There's no way to be sure exactly how much a school will actually cost until financial aid packages are sent out in April -- typically just one month before students need to make their choice. But there are ways to get a ballpark estimate of what you'll be expected to pay.

"A lot of these families don't do any homework until their kids are seniors in high school," said Carl Buck vice president of college funding solutions for Thomson Peterson's. "The learning curve of understanding aid needs to start sooner."

Schools award need-based using a calculation known as the expected family contribution (EFC), which is the amount they think a family can pay each year. Buck recommends parents estimate their EFC during their kids' junior year of high school, which they can do for free at Thomson Peterson's and other sites.

Keep in mind that individual schools may have their own formula for determining need and generally give more aid to better students. "You may have two students with the same EFC but the student with the higher grades gets more aid," said Buck.

Stats on how much need and merit aid individual schools give out may give you some idea of what you can expect from a school. Another key measure is the average student and family debt burden.

Much of this information is available on a subscription basis at the "Best College Deals" section of Thomson Peterson's online.

Any bargaining power?

Questions about how much leverage you have are common this time of year, said Buck, who frequently hears from parents who can't understand how financial aid packages can vary so much from one school to the next.

"To a certain degree, yes you can bargain," said Buck, who recommends scheduling an in-person visit with a financial aid director. "The real key is how much value the institution places on the individual applicant."

The best approach: Don't demand more financial aid. Instead ask for an explanation for why school A's package is so different than school B's. Indicate that school A is your student's first choice academically but that school B is the first choice financially.

Depending on how much the school wants your student, it may match a competing school's offer.

"Some schools will bargain freely," said Baum. Others may not be so quick to negotiate.

Click here for four tips for the college search.

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