Season 4: Episode 9 Transcript
College Affordability? Ignore the Sticker Price!
Lee Coffin:
From Hanover, New Hampshire, I'm Lee Coffin, Dartmouth's Dean of Admissions and Financial Aid, and this is the Admissions Beat.
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The first several episodes of this season have focused on the admissions part of a college search, and it's time to pause that conversation about how to get in and have a conversation about affordability and, more specifically, financial aid, as families sit down with prospective applicants and ask a really important question: "What's the list looking like and can we afford it?" The answer to that question can be poignant in many instances, but what we thought we'd do is have a conversation today that equips parents, especially, with the information you need to assess this really important question about affordability so that you can give a green light—or a blinking yellow, hopefully not red— to your child's college aspirations as we move deeper into the fall and the deadlines await.
So today, we will welcome my colleague, Dino Koff, the Director of Financial Aid at Dartmouth, returning for his annual visit to the Admission Beat, and an expert in the field, Phil Levine, the Hepburn Professor of Economics at Wellesley College, whose specialty is all things affordability in the college space. When we come back, we'll meet Dino and Phil.
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Phil, thank you so much for joining Admissions Beat and for the conversation we're about to have and, Dino, welcome back.
Dino Koff:
Thank you again for having me.
Phil Levine:
I'm looking forward to the conversation.
Lee Coffin:
Thank you. Well, and for listeners, I gave a quick intro to Phil, but Phil Levine is the Katharine Coman and A. Barton Hepburn Professor of Economics at Wellesley College. He's a research associate at the National Bureau of Economic Research and a non-resident fellow at the Brookings Institute. He's also served as a senior economist at the White House Council of Economic Advisors, and he's been on the faculty at Wellesley since 1991, and his most recent book, "A Problem of Fit: How the Complexity of College Pricing Hurts Students and Universities," published by the University of Chicago Press, analyzes the system of pricing and higher education and ways that we can change it to improve access.
Very importantly for the topic we're about to have, Phil is also the founder and CEO of MyIntuition Corp, a nonprofit organization that supplies a vastly simplified financial aid calculator to dozens of colleges and universities—and truth in advertising, Dartmouth is one of those places.
Dino, you don't get a long intro like that other than to say you are my colleague in the Dartmouth Admissions and Financial Aid Office. So Phil, I thought we'd start with you first. I always love to invite guests to share their own admissions origin stories. So let's move you back to your high school senior self. How did you move from high school to college?
Phil Levine:
The world was a very different place back then. I grew up in a suburb of Syracuse, New York, upstate New York. At the time, I was a very good student, but I was told pretty explicitly that, basically, I came from a very middle class family and my parents were very clear that you had to go to a public institution. So the college search for me was limited to public institutions in the state of New York.
The other thing, which is, well, different relative to today's world is I applied to three colleges, not 20. I applied to what was then called SUNY Binghamton, what was then called SUNY Albany, and Cornell University, which has an unusual feature that parts of the institution or state supported. I couldn't have gone without financial aid. I got into Cornell and I went to Cornell. I received financial aid even in the state-supported part, which, by the way, I now know in hindsight means that I could have gone to a much broader array of institutions for no more money. So the advice that I was given that I had to apply to a public school turned out to have been not great advice, not to diminish the quality of those institutions, they're all good schools, but having options are always good.
I remember explicitly the process, the financial aid process. I remember my father sitting at the dining room table with papers all over the place for multiple weekends. There were definitely bad words coming out of his mouth. He finally completed all the forms, submitted them. I had no idea what he was doing except for the fact that I knew it was painful. He submitted the forms. The forms came back. I got the financial aid package that I got that enabled me to attend Cornell University.
This is a long time ago, so when I graduated from Cornell, I had $10,000 worth of student debt, which in today's dollars is, I don't know, I can calculate it, $30,000, $40,000, something like that, a lot, and that contributed a lot to how I paid for my college education.
Lee Coffin:
Thank you for sharing that. It resonates fully with me. We are the same class. I'm also college '85, and the story you just told also occurred in the kitchen of my family home in suburban Connecticut with similarly salty words coming out of my dad's mouth, but I asked you to start there because it informs clearly your perspective on this topic as it does mine as a dean of admission. The other interesting thing that you didn't even realize you were doing, is Dino is also a son of Syracuse. So when you shared that, that was his wiggle dance. So we have two fellow financial aid middle class kiddos, and two Syracuseans in the Zoom and Phil, you are the overlap in that Venn diagram.
So my next question was going to be tell us about your interest in college pricing and affordability, but I think you just gave us a preview of how your research is now you've got there. Can you speak to that?
Phil Levine:
That's actually not really not how I got into it. So just to give you a very brief life history, so after Cornell, I went to Princeton, I got my PhD in economics from Princeton. Ever since I was young, I was interested in social policy questions. I think growing up in the '70s certainly contributed to that, studying things like income distribution and poverty, teen fertility, welfare, unemployment insurance. Actually, unemployment insurance was directly a result of my family background because my father, every recession, my father lost his job and collected unemployment insurance. I spent 20 years of my career studying all those sorts of issues, and by this point I was old.
Then my kids got to be approaching college age, and I'm a professor, I make a good living, but professors don't make a million dollars a year. I just was curious, "Am I eligible for any financial aid at all?" That's how I got involved in this whole process in my adult life is by realizing, "Wow, this is really hard to figure out." I have a PhD in economics, I'm really good with numbers, and if it was hard for me, that seems like it would be a problem for other people as well.
That's what spurred my curiosity about, "What is going on with the system? Why does it work the way that it does? How does it work? Why does it work the way that it does? What can we do better? There's clearly something wrong." I don't think there's any argument about that, but how do you navigate the process, how do we simplify it, how do we make it better, and then that was, I don't know, 10 or 15 years ago, and I wouldn't say that that's the only thing I've worked on since then, but it's occupied a lot of my time since then.
Lee Coffin:
Dino, as you're listening to Phil share his journey as a dad who has a deeper background than many but still in the dad mode, that's what you see as director of financial aid. You go in and out of this cycle every year and similar conversations happen around the admission process as we meet each class.
Dino Koff:
Absolutely. When I was sitting here listening to Phil, and I've heard the story before, but there is a higher ed language that we're always trying to humanize for people, especially to families going through this process for the first time. We do try to put up glossaries and we're always trying to say, "Okay. This is higher ed. This is what it actually means," so that we can get the point across, so people can understand, because when you're going through this for the first time, first child, you've never done this before or your parents always did it for you and now you're going through it, it's a whole new world. That's why we're very lucky to have Phil and we're going to talk about how he has helped schools, but it's so important that we're able to take it out of higher ed speak. That's really important.
Lee Coffin:
So let's pick that thread up. So one of the ways we help families understand Phil's question, "What's this going to cost?" is the requirement that we have a net price calculator on our websites that a family can plug stats into and come up with some projections. So assuming no knowledge for some listeners, let's just break that down. So Phil, what's net price?
Phil Levine:
Here's problem number one, is that nobody knows what that means. So the federal government requires us to report a net price. There's only one thing that you want to know, "What is this going to cost me?" So what does that mean, "What is it going to cost me?" Well, it turns out the way the financial aid system works, there's actually three things you need to know in English that regular people can understand, not financial aid professionals. At some point, I'm going to have to write a check to somebody, although I don't know if people actually still write checks or however you actually send payments. I don't think ... Does Dartmouth take Venmo?
Dino Koff:
We don't take Venmo, but ACH transfers. We do transfers.
Phil Levine:
So there's a direct payment. That people understand, direct payments. You write a check, you use Venmo, ACH Transfer I guess is the technical term, whatever. That's the cash component of what you're paying. Then maybe there's a loan component. So at many institutions, you're expected to borrow hopefully a small amount of money. People understand loans. Then at many institutions, you're also asked to take a job and pay for a little piece of your education, a few thousand dollars a year through paid employments.
All three of those things are concepts people can understand. It's how they live their lives. They have jobs, they can understand the concept of earnings, they understand debt, and they understand how to write a check. Those are the three things that people care about. It turns out that if you sum all three of those things, that's the net price, but when you say to somebody, "Your net price is $10,000," $50,000, whatever, they have no idea what that means. It's so much better to tell them.
So what is it really that I want? So let's pick a number, a round number, $50,000, which is a lot, but if it's $50,000 and I expect you to write a check for $45,000, I'm going to give you a loan and you're going to have to pay $2,500 that way, and I want you to get a job and you're going to pay $2,500 that way. That people can understand, but then net price is $50,000.
Dino Koff:
If I can follow up on that, what makes it even more ... You're absolutely correct, "What is it going to cost me?" What makes it even more complicated sometimes is we have this term called direct costs and non-direct costs, and I see Phil shaking his head, where a college may bill you for tuition, room, and food, so housing, food, and fees. You get billed from a college for that. As Phil just said, you write a check as he wants to Venmo or whatever it is, maybe take a loan out, but we also have these non-direct costs where the college isn't billing you, but if you're from Boston and you go to school in Florida, you have to get to Florida. So that's what makes this truly complicated is, "I didn't get a bill for transportation, but I need to cover transportation because I have to get to Florida."
Lee Coffin:
That, Dino, I've heard you say, this all adds up to the cost of attendance, which is a more all-in figure that people often overlook.
Phil Levine:
So again, in the language of financial aid, that isn't the same. It's not exactly English. The cost of attendance is another term that the federal government mandates that we use. Everybody uses exactly the same term. It's all of the stated costs that are involved. Then there's an "if" in here that nobody ever really pays attention to. The "if" is that if you're not getting any financial aid. So basically, if you are paying full price, you have to pay all of these things and they sum to the cost of attendance. So if you're a very high income family and you're not eligible for financial aid, you are paying the cost of attendance.
I rarely use the term cost of attendance despite the fact that that's a technical term. Usually, I use the word sticker price because, basically, that's exactly the same thing as a sticker price. It's the number on the car that it says you're going to have to pay that nobody really pays. The cost of attendance at college actually is a number that a good number of people pay, but you have to be pretty high income to pay that number.
Every other person, everybody from middle and lower income families is not paying the sticker price. They're paying less than the cost of attendance. What really matters is after financial aid, what's left? What do you have to pay? What do you owe? That's not the cost of attendance. So if you were to ask most people how much does college cost, how much does Dartmouth cost, they're going to know one number, and the one number is the sticker price, the cost of attendance because not only does the federal government require us to use that number, but they also require us ... That's the only number that the government requires us to post on our webpages. So if you go to every school's webpage, you will find the cost of attendance posted there.
If it just said the maximum cost of attendance as opposed to the cost of attendance, that would actually be accurate. The cost of attendance sounds like this is what it's going to cost you, and for most people, that's not true. So actually, the statistic is that nationwide, one in six students pay the cost of attendance. Everybody else is paying less than that. I can tell you for a fact that one in six people pay the cost of attendance and five out of six think that they have to pay the cost of attendance.
Lee Coffin:
Do you think that phrase cost of attendance for those five has a chilling effect on their interest or their understanding of being able to afford it?
Phil Levine:
Yeah, absolutely. Elite institutions have sticker prices these days, $85,000, $90,000. That is a scary number. So just to put it into perspective, median income in the United States is a number something like $80,000 a year. So basically, you're making your middle income, typical household, $80,000 a year, and you're asking me to pay $90,000 to send my kid to college for one year. That's ludicrous. That's not even close to feasible.
So you hear that number and you're like, "Well, I guess my kid's not going to college," and if that's all you know, that's a problem because that family isn't going to pay $90,000, they're going to pay a lot less depending on the type of institution you're talking about, and to be quite honest, mostly it's about the level of their endowments. That family could be paying anywhere from under $10,000 to maybe $20,000, which still, I'm not going on record saying like, "Oh, yeah, if you're making $80,000, coming up with $10,000 is easy." That's not true, but it's not impossible. Whereas if you're making 80,000 and you think you have to pay 90,000, well, that requires a half a second of thought.
I think it's important to take a step back and say, "What is it that we really want to happen?" and to say, "What's the ultimate goal?" You've got all these kids, millions of kids every year graduating from college, from high school. Now, the first thing to recognize is, well, not everybody is actually ... Not everyone's meant to go to college. There's plenty of other things that you can do that are very valuable and productive and people can legitimately choose not to go to college. If that's who you are, that's great. You should do what's best for you.
For those who go to college, there's this enormous range of colleges with different levels of academic ability, different levels of commitment, different levels of four years versus two years, vocational school. There's a whole range of educational opportunities out there for you. Whatever your attributes are and whatever your preferences are, you should be able to go to the school that is the best fit for you. That's why I got to the title of my book, "A Problem of Fit," because in some sense, our system does not work that way. Our system is set up in a way that often leads people not to do that.
So the concept of understanding cost clearly is one of them. If that family has a student who has the ability to attend an elite institution that charges, quote, unquote, "$80,000 or $90,000 a year," and they're only making, forget about $80,000 median income, $30,000 or $40,000 of income, it's a mistake if we lose that student. That is a social loss. That is a cost to society if that does not happen.
Part of the problem is that people don't really understand the pricing system because we make it incredibly hard for people to understand the pricing system, but I will say that for large segments of the higher education market, even for many of those families, it's still too expensive even if you knew all the right answers. Those are the sorts of things that we need to fix partly as institutions and partly as a society more broadly.
Dino Koff:
So Phil, one of the things that I saw or that I continue to see is more and more states saying to graduate high school, you have to do a FAFSA, free application for federal student aid. Exactly what you were just talking about, I've always thought instead of a FAFSA or maybe along with a FAFSA, I know we're going to get into calculators, but wouldn't it be better to say you have to do some calculators so people could see what the cost could be for them?
Phil Levine:
It's exactly right. What you need to know is that, "Well, gee, these schools say they're charging $80,000 and it looks more to me like maybe 10, 15, even 20." Just give that kid a little nugget. Throw them a bone just to give them a sense like, "What are we talking about here?" When I want to go buy a car, I don't know how much the car is going to cost me exactly, but I know roughly what it's going to cost me. So maybe I don't go into the Mercedes dealer. You just need, at an early stage in the process, you really just need a ballpark number and we should find ways to be able to give them that.
Lee Coffin:
So let's go back to this. So net price, and you say, "Okay. Problem number one, net price." We are required by the feds to have a net price calculator on our website. What does that do? Does it answer the question that you're posing? Does it help a family say, "What does college cost me?"
Phil Levine:
So you have to take a step back. So this was in 2008, 15 years ago. A law was passed that was very well-intentioned, and you have to give legislators credit when they at least get the ideas right. So the idea in 2008 was exactly the discussion we are currently having right now. It's like, "Gee, it's a shame that people don't have a sense in advance of what college is going to cost them." Let's provide them with tools that they can use, and not only let's provide them with these tools, let's mandate these tools, and we're going to require every institution in the country to post this thing called a net price calculator. The intention is 100% correct.
As soon as you start to get into the government and mandating though, you need to worry about execution. It turned out that execution didn't quite work out as well as I would have liked to have seen. It's often the case that net price calculators are still complicated themselves. They still use terminology that people don't understand. It's vitally important to satisfy the law that they provide estimates for every possible category of student, and that's great that it's universal, but universal means complicated.
So you end up with tools that are extremely well-intentioned going exactly after the right idea that don't accomplish the goal. So they ask you, so there's terminology that gets used. Some are very complicated and ask you hard questions. They tell you to take out your tax forms. As soon as you tell someone to take out your tax form, you are done. People don't do their taxes themselves anyways because they hate doing taxes. They don't understand taxes.
So now you're going to say, "Go pull out your tax form, and on line 8, subsection C, paragraph E, what's the number that's listed there?" Then basically, the person breaks out in hives and then they click out of the website because they don't know what they're talking about. That is, I believe, what is referred to as a normal human reaction.
Others try to simplify, and so they say, "Well, state your assets." "Huh, what are assets?" Then you have to think about, "Well ..." So first, there's the question of like, "Well, what do I know what my assets are?" and then they're like, "What's an asset and what assets count?" Then you're in a whole different world of like, "Well, what do they want?"
So you put in all these numbers, which are either complicated numbers and you're not even necessarily sure if you're putting in the right ones, and as Dino will confirm, a lot of people don't put in the right ones through no fault of their own, and you get a result and the result says you owe $22,367. Well, of course, you don't owe $22,367. That number's not determined until you actually apply for financial aid. So then you go to apply, and when you put in the real numbers, where unfortunately at that point you really do need to take out your tax forms, and that's where the bad language comes about.
When you're done, it's like, "Well, I owe $35,472," and then you'll map, and it's because you got a bad estimate in the first place. The tool is an imperfect tool and you may have entered incorrect information. So did you just simplify the process or did you just introduce more confusion?
Lee Coffin:
So is that where your net price calculator was born?
Phil Levine:
For me, I got to the point where I wanted to know how much college was, whether I was eligible for financial aid for my kids, realizing how hard it was, and having some casual conversation with college administrators at Wellesley College, which is where I work, and I've worked there my entire career. It's a very small institution. One of the things that's nice about a very small institution is that you know everybody. Literally, it was completely casual conversation like, "What did you do over your weekend?" and I'm like, "Well, I couldn't figure out how much financial aid was going to cost my kid, how much college was going to cost my kid."
The president of the college said to me that, "If you want to do some work on it and see if you can figure out a way to improve the process, you can have whatever resources you need from the college." So at that point, I literally knew nothing about financial aid. That was my problem. So I had access to the director of financial aid, Dino's equivalent at Wellesley at the time, the admissions director, all of the staffs in both departments, and I got taught lessons on how the financial aid system works.
Now, granted there were some scary moments where I'm like, "You've got to be kidding me. You do what? You want how much information from these people?" So my eyes were exposed. So Dino, you'll excuse me for stating this, but people in the financial aid world don't speak English.
Lee Coffin:
It's true.
Dino Koff:
You're excused. You're excused. Well-intentioned multi-linguists.
Phil Levine:
Their dialect is not English. So this is something I'm used to because, basically, now I speak multiple dialects of non-English. So I can speak economics, I can speak math. Now, I can speak financial aid, but I also teach. I teach freshmen at Wellesley College. Right now, I'm teaching two sections of Econ 101, and for them I have to speak English. So I have to be able to, through my training, be able to take very complicated ideas and turn them into English. So I wanted to see if I could do that in the financial aid world. So the first thing that I needed to do is, is there a way to simplify the 3,600 questions that you get asked on a financial aid form and break it down to just-
Lee Coffin:
Let me just say, is that quite literal? Is it 3,600 questions, literally, you're going to see? Just I don't want some parent to fall off a chair as they listen to that.
Phil Levine:
They're going to fall off the chair anyways at some point. It's a scary process, but it's not really 3,600 questions.
Lee Coffin:
Listeners, I'm just trying to save you from fainting.
Phil Levine:
Most people's finances aren't that complicated, and if I were to ask you, "Where is your money? You have a job that pays you most of what you use to live. I know that all of you are going to have retirement accounts," and it turns out that retirement accounts in the financial aid system are not counted, but that is an important asset that people have. Maybe you own a home and then maybe you have some other money, like a little bit of money in liquid funds. That's probably not if you're investing. Well, most of your money should be in your retirement account and the rest. You have a little bit extra like what if your car breaks down or something. You need money, cash.
To be quite honest, those are my finances and I would bet those are probably your finances too. So maybe you don't even have the house or the retirement. Maybe you don't even have those things. Those things or less characterizes probably 80% or 90% of the population. So what I wanted to know was suppose I asked you just those questions and I wanted to be able to say, "Suppose I ask you a question that you can answer off the top of your head." I don't know exactly what my house is worth, but I know what my house is worth, and I certainly know my mortgage balance because I get a statement all the time.
It turns out retirement savings—I'm an economist so actually do know my retirement savings, but it doesn't matter if you don't know that. What we learned through test marketing, this tool, was that what does matter is your other savings, and we learned that we couldn't get good answers for what your other savings are unless we also ask people what their retirement savings are. We need to get people to put it into piles.
So we asked people, "What are your retirement savings?" just to separate it out. Doesn't matter if it's a dollar or a hundred million dollars, irrelevant, but I want to know how much money do you have in the bank. So I want to know, just given those pieces of information, how good a job can we do at estimating the financial aid award? It turned out the answer is not perfect, but not bad either. You can get a pretty good ballpark estimate. So using my tools as an economist, I'm very good with numbers and have a lot of statistical training, I can not only predict for you what college is going to cost, but I can also give you a ballpark range.
So most people with your basic financial characteristics are going to pay between, maybe the best estimate for you is $20,000 and it may be as low as 15,000 or as high as 25,000. Most people will pay within that range. You might be outside that range. So for instance, if you're self-employed, there's a good chance you're going to be outside that range. Those are the hard cases.
This is my earlier argument. That's all people need. Start off simple. Basically, you take a kid at an early stage in the process, it doesn't matter the exact amount. You need to get them off of the sticker price. The sticker price is, again, one in six people pay the sticker price in the country. You need to get them off of the sticker price. Certainly at some point when you're going to write your check, obviously, you need to know exactly how much you're going to owe, but in an early stage in the process, just giving an idea. Where we're going with all this is ... So I developed this tool, it turned out that it worked.
Dino Koff:
Can I break in just for one second? I think this tool is better than sliced bread. I say that because I just wanted to break in because when I'm giving talks all the time, I'm saying this is three minutes and 27 seconds to fill out, and you have multiple languages, which is wonderful, but how many schools? So I know we were an early adopter. I think we were in the second cohort or third cohort that went live, but how many schools are using my intuition because this honestly is something that really breaks it down?
Phil Levine:
So at the moment, 72 schools are using it and growing. We are providing estimates. We're providing about 700,000 estimates a year. So in the last five years we've been growing. So in the last five years, we've provided three and a half million estimates.
Dino Koff:
I know that we have the calculator on our website. We see our number of hits. For people out there, I know that myintuition.org has, not to turn this into an infomercial, but I think it's really important that people know they can go to myintuition.org and see a number of schools and not going to everybody's individual website to figure it out.
Phil, real quick, can you talk about the many schools have like Dartmouth and some peer schools were 100% need-based, but are schools that have merit money on My intuition? Is that baked into the formulas that you're using?
Phil Levine:
So in the development, perhaps not surprisingly, we've started with Wellesley College and then we started expanding the schools that were a lot like Wellesley College in terms of the way they operate the financial aid system. Dartmouth would be included in that group. As we've been growing, we've been expanding our offerings and what we're capable of doing. So at this point, we are now able to incorporate schools. We've had to expand a lot for a variety of reasons.
So first, we are able to incorporate schools that use merit awards in their formulas that don't necessarily meet full need. For those schools, that has become a bigger issue in the very recent past that it has to allow for test optional admissions. We continue to develop the tool as the market evolves.
Dino Koff:
Some of my counseling with families is after you do MyIntuition, that really helps to tackle the federal requirement and using the net price calculator, which you have talked about slogging through. It does take 20 to 25 minutes on a good day if you're able to identify the boxes that you need to and on your tax form and everything, but once you do MyIntuition, I'm hoping for families that if it does excite you, it is worth the phone call to the financial aid office to say, "Help me fill out this net price calculator," so that we can walk a family through, and you mentioned this earlier. It's only as good as the information being put in it.
So if we can help a family out knowing ahead of time, for instance, early decision is coming up with ... At many schools, there's deadlines and some of these decisions are binding. We want families to know and how do you do that is working through these calculators. MyIntuition is a great start, but if you truly want to get into the weeds, schools will help. I think that's really important walk you through knowing, "I have confidence. I'm applying to the school. It is binding, and I know if I get in early decision, I can afford this because I've done the net price calculator."
Lee Coffin:
Dino, can I ask a question on behalf of the applicants and parents? So financial aid officers will do that even pre-admission?
Dino Koff:
Definitely the answer is yes. When you have 28,000, 30,000 applicants, it's difficult if everybody calls it once. Let me first say that. Second of all, we're going to know when somebody is having to make a commitment. I think it's really important that we do offer this and we do walk families. Zoom has been wonderful for that, where we can share screens. We can tell usually fairly quickly an aid range when we get all the information, but the start is with MyIntuition. I just want to say that that has opened so many doors because, as Phil had said, not everybody's paying 85,000 and the average scholarship at Dartmouth is 68,000. So we have people at 80,000, we have people at 10,000 and, obviously, people are paying full freight. So we want people to know with confidence, "I can do this," especially when it's binding.
Lee Coffin:
Now is the moment to have this conversation, right? I think a lot of families think, "Well, we'll wait until we get in and we'll talk about this in April." It's really a conversation for the fall of senior year, if not earlier, certainly, but seniors' parents sit down and do this. This is the moment to get some clarity around what's the ballpark we're discussing. I'm going to adopt the sentence, "What does college cost me?" What does this college cost me is the key question as you're sorting through all the vibey parts of the application process. This one matters and shouldn't be delayed.
Phil Levine:
That's why it's called MyIntuition. Basically, it's all about me. Just to follow up on that, again, in terms of broader, what is it we're actually trying to accomplish here? It's like the last thing that we want is for people to be closing doors that they shouldn't be closing because they have incorrect information.
Lee Coffin:
So this year, the free application for federal student aid, FAFSA, is delayed. Normally, it goes live October 1st. We're now weeks past that. We don't have it yet. Does that factor into, not a calculator, but how does the delayed FAFSA matter to the high school class of '24?
Phil Levine:
Well, I think a lot of that will depend on the specific institution. There's two categories of institutions in the world. One set relies explicitly on the FAFSA and everything that it does, and almost all public institutions, for instance, would be in that category and many private institutions as well, but there's a couple hundred institutions that also require you to fill out this other form called the CSS profile that the college board produces.
If you are applying to a school that uses the CSS profile, the fact that the FAFSA is being revised causes headaches for the people in the financial aid offices at those institutions, but it will be very unlikely to affect you. So you should definitely just go fill out the CSS profile and everything will proceed very nicely for you.
The schools that rely exclusively on the FAFSA, they have their work cut out for them, and it's very difficult to know exactly. I don't have a crystal ball to figure out when the form is going to be released, how well the system is going to work because there's always potential for technical flaws. I think financial aid decisions of those schools will be much more difficult to come by in an early stage.
Lee Coffin:
Dino, what are you hearing about FAFSA and what's new about it? What's this delay?
Dino Koff:
So the delay, it's reworking the whole form and it's taking it from ... It's trying to make it easier for families, limiting the number of questions. So it's a full redesign and there hasn't been a ton of time from when the change came out publicly and it takes the Department of Ed. This is a big turning of a cruise ship, essentially, because it's such a major change. You have to change the form, and then technology-wise, you have to figure it out, and then you have to get all of the details to schools in terms of how all of our software are working on it.
Phil talked about CSS profile schools. We're going to have data to be able to figure things out. This is just probably I think it was 2015 when the FAFSA always came out January 1st, and it's been a luxury for families to be able to fill it out October 1, and fingers crossed, there's a lot of competing forces to getting this done. A government shutdown is always a little scary. So we averted one, which was great, and that kept the Department of Ed still working on this. So let's keep our fingers crossed that we can deliver to families in December, but as Phil said, there's a rollout, there's going to be a lot of families that are going to be using this form. It may tax the system. We're going to have to see how this plays out, but I think the schools are going to be accommodating and do our best to be able to help families to fill things out because we know there's a moving target right now.
Lee Coffin:
Well, Dino, I think that little historical reminder that not that long ago, the deadline was January 1st, is a reassurance for parents who may not have had children going to college 10 years ago to know that we've been here before and it's workable.
Wanted to spend some time talking with both of you about the middle class broadly defined and the worries of that broad population around affordability, the tension between private and state, like in Phil's family, tugged between, "You must do this. This is the perception of where we can go," but the middle feels to me like the cohort where this conversation is the most poignant, where they qualify for some aid but not usually all where there's a bit of pain point in terms of personal investment. The question, "Is this worth it?" I think bubbles up more often than not in this group. What reassurance or guidance can we give to our listeners who see themselves in this middle group?
Phil Levine:
First of all, I think it's important to recognize that when we talk about middle class in this context, mostly we're talking about upper middle class. So the $75,000 of income, which truly is middle class, that's not really where this issue that you're raising is relevant. It's more in the $150,000 to $250,000 upper middle class category. So at that income level, the first thing that I would say is we have these financial aid formulas, which alleged to determine how much you can afford to pay.
Now, how much a family can afford to pay clearly is a nebulous concept. My father always taught me never count on other people's money, but the financial aid system does that for sure, and there's a formula that determines how much you can afford, quote, unquote, "to pay". Whether that's right or wrong, that's what gets used.
So for families in that income range, you're talking about maybe a number like $50,000, $60,000 a year or something to attend a elite private school, and that's with the financial aid that they're eligible to get. So the first thing I would say is you need to make sure that you understand if you're in that income range, that you're not paying the five or $90,000. It is a lot less than that.
Dino Koff:
Hey, Phil, can I just also just chime in? You're absolutely right, where people in that upper middle class that you're talking about think there's a cutoff and they're like, "Well, I can't afford this," as we said earlier, the sticker price, but they don't realize that there isn't a cutoff. It's a formula. In your example, you just said someone paying 50,000 or 60,000, but they don't know that. So they sometimes just cross the school out.
Phil Levine:
The one lesson which I think is the most useful for anyone to get out of a conversation about financial aid and college pricing, it's ignore the sticker price. The sticker price is rarely the right number. Do your work. Figure out what this is actually going to cost you, and then go from there. Assuming you do that and you get to the point where you are the supplemental class family and the affordability number that comes out of the calculator, the tool or the form, I guess, is $50,000 or $60,000 a year, well, then you have a decision to make because for you at a public institution, you're over the ... Those students will pay full price at a public institution that's charging maybe $30,000, $35,000 a year sticker price at those institutions. You're not eligible for financial aid there.
So at many institutions like ours, we have this problem of attracting those students because assuming we can get them past the sticker price issue, there's still a disparity that we expect them to pay 50,000 or 60,000. The public institution is maxed out at 30,000 to 35,000 and it's much cheaper to go to a public institution because the financial aid system is structured in such a way that it's hard for them to choose our institutions.
I think the problem that we're discussing is an important one, but I think a bigger part of the problem is lower income students who can't afford to go to college at all, and taking money away from that part of the distribution to reallocate it to the $150,000 to $250,000 families, not that I don't recognize the issues that those families face, they definitely face issues, but if you're trading off one problem for another, that seems not an acceptable trade-off to me. So if you have the funding to be able to keep prices low for the low income people and to be able to institute middle class initiatives, that's fantastic, and you should go down that path, but it's the trade-off that bothers me.
Lee Coffin:
So two more topics I want to make sure we cover. Debt. Is that a four-letter word?
Phil Levine:
Well, so in the public discussions regarding debt, it clearly is. The question becomes ... Underlying that question is a much more sophisticated question, is you need to know who's the student, what's the circumstances, and what's the debt. You hear stories about people with $100,000 worth of debt. That's a problem. If you're at Harvard Business School and you have $100,000 worth of debt, that's not a problem. So what's the situation in which the student is in? What's the nature of the academic program in which you're applying to? Is there any chance you have the ability to repay large amounts of debt? That's definitely a problem, but for most traditional age students attending typical four-year higher educational institutions, you might see people ... A much more common number is $20,000 worth of debt, $25,000 worth of debt, and that would exhaust all of the federal borrowing that you can do in whatever that range.
As an economist, what I can tell you is that what we know on average is that a college graduate is going to make hundreds of thousands of dollars in their lifetime more than a high school graduate. If you graduate with $20,000 in debt, you very likely will be able to pay that off. That's not necessarily true for everybody, and I'm not indicating that this is something we shouldn't worry about at all, but for the typical student, that's less of a problem.
So the other place where we see significant problems with debt is for students who enter college, borrow let's say $5,000 to attend a community college. They still don't have enough financial aid, so they have to work 20 or 30 hours a week or whatever in their job and their car breaks down or something happens to them, and for whatever reason, they find themselves unable to continue their studies, and now they have a $5,000 loan to repay and they didn't receive an education to help pay that back. That's another problem.
A large share of the increase in the debt burden came from when we started allowing more borrowing of for-profit institutions that, again, provided an education that didn't provide tremendous returns but also generated debt. That's a problem, but for a traditional age student, again, attending a typical four-year college education, a modest amount of debt is not something that people should fear.
Lee Coffin:
How about the word "free"? That's another four-letter word; I hear more and more of my peer institutions using "free" as a way of describing affordability and financial aid. Is that a wise way for colleges to be framing this conversation or should families be expecting it to be free?
Phil Levine:
"Free" is a tough word because "free" actually means "free."
Lee Coffin:
No free lunches.
Phil Levine:
You have to be very careful when you hear "free." It's marketing. People like the word "free." So what does free mean? Free often means free tuition. So if you're attending an institution that has free tuition, that's great, except there's probably another $15,000 or $20,000 worth of expenses that aren't free.
Lee Coffin:
"Free" being a wink that isn't necessarily true. I think for listeners, I raised this as a financial aid student myself once upon a time to say, just perceive with your eyes wide open. Free things are rare, and everything that's free isn't always a good thing. Sometimes you want to put a little personal investment into it, but I add this cautionary tale of the word "free" as it starts to pop more and more around the higher ed landscape.
Dino Koff:
I do think "free" is becoming a higher ed word that it's not defined. Every institution has their own definition of what is included in free. Phil gave an example, a perfect example you and I have talked about before. If somebody has to work, they may get a "free" cost of attendance, which we talked about earlier, but they have to come up with $4,000 in work. Well, that's not free, totally. So I think it's, look, as you just said, cautionary, looking at what is actually covered and being able to see what is the definition of this word.
Can I add just one thing on transparency just so families know that there are new rules to help families on websites to see total costs? I know that's still sticker price, but the government is mandating that schools come up with the full cost and being transparent on their website, and also requirements for award letters or award offers so students truly get the full picture of what it could possibly cost them after the offer, knowing that they can appeal and talk with the school. Full transparency is making sure that all students and families have the information they need to pick the college or university that's going to be the best fit for them, both academically, socially, and financially.
Lee Coffin:
So Phil and Dino, thank you so much for joining me on Admissions Beat for this really informative conversation about affordability and how to know what does college cost me. I think that's the tattoo I am going to carry forward as a really practical proof point to say "declutter the conversation," focus on yourself and the institutions on your list, and what will it cost at those places. People often ask about my title. So I'm Dean of Admission and Financial Aid, and my response is one can't exist without the other. For so much of our pool, two-thirds or more of the applicants last year applied for admission and financial aid. To me, financial aid is an investment in people and an opportunity and helping families like mine understand what the opportunity costs is a really important part of the work we do. So I really appreciate this conversation.
Next week, we will be back with another episode of Admissions Beat. For now, I'm Lee Coffin from Dartmouth College. Thank you so much for listening.