THE COST OF COLLEGE & YOUR REAL FAMILY CONTRIBUTION

For the past decade, economists have debated why the cost of college continues to rise in this country. Some blame it on the regulators, the banks, the student loan providers or even the colleges themselves…  But, WHO ultimately pays for college? WHO makes the final decision? There is an underlying issue that continues to be overlooked in this country …  

WE, AS INDIVIDUALS, ARE RESPONSIBLE FOR THE COST OF COLLEGE! We live in a country that does NOT force us to do anything. We have the freedom to choose whatever we think is right and ultimately, what makes us sleep well at night. My suggestion is to take a step back and to REALLY look at why the cost of college continues to rise…. Do the regulators, the banks and the student loan providers have anything to do with it? – Yes, they play a part…. BUT, WE ARE THE ONES THAT PAY FOR COLLEGE! AND ULTIMATELY, WE ARE THE REASON COLLEGE IS SO EXPENSIVE.  

Elementary economics teaches that SUPPLY & DEMAND drive the PRICE for a particular service or product. When it comes to College, WE ARE THE DEMAND. WE ARE THE CONSUMER! AND IF WE CHANGE, THE PRICE OF COLLEGE WILL CHANGE! Said another way, if we stopped stretching to pay such high prices for college or borrowing at alarmingly high rates to pay for college, then the cost of college would have to change … because we changed! ---

If we knew what WE REALLY OWED for College, we would CHANGE OUR CHOICES. We would make choices that were REAL and actually MADE SENSE for our families.  

So, HOW DO WE CHANGE & MAKE BETTER CHOICES FOR OUR FAMILIES? The First Step is to understand WHAT WE REALLY OWE FOR COLLEGE. I am sure that you are familiar with the term Expected Family Contribution (EFC) … if not, this is a complicated formula whereby the government tells you how much you can borrow in federal loans for your child’s education. This is based on your combined family income and other financial metrics … Families everywhere use this formula to help them determine which colleges they can afford… but, ultimately, this concept is the very root of the problem – Why? Because it doesn’t talk about what YOU CAN AFFORD OR WHAT YOU OWE, it talks about WHAT YOU CAN BORROW!!!! IT PROMOTES OVER SPENDING.  

Just so everyone is aware, WHETHER YOU PAY FOR COLLEGE TODAY OR BORROW TO PAY FOR IT TOMORROW, YOU OWE IT! SO, FORGET THE EFC AND LOOK AT WHAT YOUR REAL FAMILY CONTRIBUTION (RFC) IS…. When you are deciding on a college for your child, follow this simple formula:  

Total 4 Year College Cost – Total 4 Year Scholarship = REAL FAMILY CONTRIBUTION  

Your RFC DOES NOT DIFFERENTIATE BETWEEN CASH AND DEBT – THEY ARE THE SAME BECAUSE YOU HAVE TO PAY THEM! You will have to pay them at some point … right? Your RFC will show you the TRUE expense of college and it will create a more REALISTIC approach to paying for college.  

if you follow this simple formula …   1.     You will focus on the REAL COST … 2.    You will make a Different Choice… 3.    You will find THE RIGHT FIT for your child… 4.    You will CREATE SOCIAL CHANGE!  

James Twellman The College Program www.thecollegeprogram.com