You just opened your college acceptance letter. You’re not only accepted, but you received a scholarship! Is it time to break out in a celebratory dance? No, not quite yet, because you need to consider the bottom line.
What’s the bottom line?
The bottom line in the context of admission offer letters is what you have to pay out of pocket or with student loans for your education. How do you get to that number? Start with the “sticker” price, the price listed before any scholarships or discounts. When calculating this sticker price, include all of your costs – tuition, required fees, room, and board. Now, determine all of the aid you received that you do not have to pay back (grants, scholarships etc.) Call this non-loan aid. Subtract the non-loan aid from the sticker price and you are then left with your bottom line – what has to be paid out of pocket or with student loans.
To give a simple example, let’s say we have two schools – School A and School B. Now, let’s say School A and School B are identical in all the factors that matter to you. The next comparison to make naturally is price. Let’s say School A costs $10,000 and offers you $0 in scholarships. School B costs $25,000 and offers you a $5,000 scholarship. After looking at the bottom line price, School A is less expensive. Even though School A gave $0 in scholarships, School A costs $10,000 versus $20,000 that School B costs after scholarships. To give another example, let’s say School C is $20,000 and School D is $15,000, and, again, both schools are equal in terms of all other factors that are important to you. School C offers you a $10,000 scholarship and School D offers you $0 in scholarships. If you just looked at sticker price, School D appears to be the less expensive option, however, that’s not the case here. School D costs $15,000, while School C, with a higher sticker price of $20,000, actually is only $10,000 after the scholarship is considered. It’s not a complex calculation, but it’s important to take into account the bottom line, not just sticker price or scholarship amount alone, to get a clear comparison of what your options are from a financial standpoint.
Other important questions to ask that impact the bottom line are: How many years of schooling are required? If you do receive a scholarship, is it renewable? If the scholarship is renewable, what (if any) are the requirements to renew the scholarship? What is your cost of living expense throughout the duration of the program? Will there be any travel expenses associated with schools that are farther away? The answers to these questions will impact your bottom line calculation and your finances over the course of your schooling, and, potentially, after graduation during loan repayment, if you pay with student loans. Many students are shocked at the differences in school affordability once they compare bottom line prices side by side over the entire length of schooling. It pays (literally) to do these calculations!
Why does the bottom line matter?
The bottom line matters because school is a big investment for students (and their families) in both time and money. What can be tricky is loan “aid” (yes, it’s referred to as aid) sometimes is mistakenly interpreted as aid that doesn’t have to be repaid. However, loan aid will have to be paid back with interest. It’s important for students to understand the bottom line price for all of their options so they can accurately compare schools as well as distinguish loan aid from non-loan aid. In doing so, students will better understand their out of pocket costs. From there, students can determine how they are going to pay for their out of pocket costs during school (through savings, working, student loans, other means or a combination of resources) as well as after school. Students should think about their job prospects/plans post graduation and if their desired path will allow them to earn enough income to not only cover everyday living expenses, but also loan payments if they paid for school with student loans.
Some programs do require more of an investment than others. Students may need to make a larger investment due to program type and duration, such as medical school. For certain types of programs, the earning potential after graduation is significant. You want to consider both sides – money spent initially (what’s the bottom line price) as well as job prospects after graduation to justify your investment.
Is money all that matters?
The short answer is no. Students should absolutely pursue what interests them at a school that is a good fit. But, practicality matters. Unless you are independently wealthy, the reality is you have to think about the financial impact of your decision to attend a particular school. Your debt load has to be considered, because it can affect your direction and decisions after graduation and could potentially prevent you from pursuing what you love. I’ve seen firsthand people who stay in jobs they don’t like, because their jobs pay enough to afford the loans they took out. Now, everyone’s situation is different and no one has a crystal ball to know exactly what will happen during and after school. But the good news is there are elements you can control.
These elements include:
- Shopping around to price compare programs (do not underestimate this approach – it can save you thousands)
- Applying to multiple schools to see what kind of non-loan aid you qualify for or are offered on a competitive basis
- Conducting due diligence to see what job prospects look like to help justify the amount of debt (if any) you are willing to take on
- Working while in school to help offset some of your expenses
- Living modestly while in school to cut expenses from the start
In some cases, student loan debt may be the only option left to help pay for your education. And that’s okay, as long as the debt helps you achieve your goals and doesn’t hinder them.
The Bottom Line
While you are getting wooed by schools and offers, remember to ask yourself, what’s my bottom line? While the initial offers may feel exhilarating and look great on paper, think long and hard about what you want. Is this program what you want to study, not what your fill-in-the-blank relative wants you to study? What is this program ultimately going to cost? And will you be able to pull this off financially once school is done and you are in the job market? The purpose of these questions is not to spoil your excitement, instead, use them to make the best decision possible.
Now that you know our bottom line philosophy, decide what your bottom line is. What do you want in a program and what works for your situation financially? Determine a school’s bottom-line price and cost-compare among other schools so you can make an informed decision. Use your investment in education in both time and money to propel you towards your goals. We are rooting for you!
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