The 3 Step College Planning Process

The college planning process can be overwhelming and sometimes complicated. These 3-steps will help you demystify the process and better plan for future college costs. How do you become a smart consumer in this process? You have to make sure that the commodity you are purchasing (an education) is at its lowest price, you have to calculate how much you can afford, and finally evaluate your options and make a smart buying decision.

Step 1: Lower the cost of the college.

There are three uniquely different types of financial aid: Private scholarships, Merit Aid, and need-Based Aid. Private scholarships are the awards handed out by businesses, churches and temples, chambers of commerce, rotary clubs, and other organizations. Typically these awards are around $500, but can be in the thousands. Two of your best resources to find these scholarships are: 1), a free internet site that allows students to explore scholarships from all over the country, and 2) your local high school’s guidance department. Typically, guidance will have a file cabinet with all the local scholarships that a student can apply for. However, only the proactive students will snatch up these awards as they are typically not advertised (which can work to your advantage).

The second type of financial aid is Merit Aid, which is when a college allocates its own money to attract students whose talents are desired by that institution. This can be for anything from athletic or artistic talents, high SAT scores, class rank, or GPA, etc. As long as the student meets the college’s criteria they can win the award. Unlike private scholarships, these awards are typically in the thousands. Not every college offers these awards, for example Ivy League colleges, but many do and can be researched at

The third type of financial aid is Need-Based aid, which is the largest funding source of the three. This is obtained when the cost of a college (tuition + room and board + books + fees) is more than what is expected from your family as a contribution (EFC = Expected Family Contribution, based on household income and assets). For example, if The University of America costs $45,000 and what is expected from your family as a contribution (your family’s EFC) is $30,000, then you can safely assume that The University will base their financial aid package on the $15,000 of need that you are showing. Knowing that this is how colleges award most of their aid, would it not be useful to know now what your family’s EFC is? You can actually calculate an estimate by going to and running their EFC calculator. Moreover, you can also estimate what a colleges’ typical financial aid package looks like (grants vs. loans), by going to Simply by utilizing these two resources you (unlike many of your peers) can have a real good idea what your financial aid awards will look like even before they arrive.

Step 2: Calculate how much your family can afford.

If you were to go shopping for a new home, would you consider how much you want to pay and how much you can realistically afford? Well considering that many private colleges now cost $50,000/year, and if you have two children (without factoring in inflation) facing a total cost of $400,000 is very much like buying a home. I recommend you take a step back as a family and calculate how much you can realistically afford, and also how much you are willing to contribute to these costs.

Fill in the blanks for how much will come from each resource:

Student Income: $______

Student Savings: $______

Student Loans: $______

Parent Income: $______

Parent Savings: $______

Parent Loans: $______

Total: $______

Add up all your numbers. This is your family’s annual college budget. If that amount is still short of college costs, then either apply to colleges that offer healthy financial aid packages that may make up the difference, or consider less expensive (typically local) college options.

Another key to this process is that now parents can tell their children, “Mom and

Dad can afford $X on an annual basis.” Any college that costs more than $X means you either need to get financial aid or you will be taking on student loans to meet the difference.” Good conversation starter!

Step 3: Shop for the right college “fit” at the right price.

After exploring what you can afford and what colleges fall within your price range, then you should consider the options that will best meet your child’s educational needs. What do I mean by this? Well if we can figure out your student’s interests and strengths are, we can then match those up with potential future careers that the student would enjoy and excel at. Therefore, we can pair up careers with majors the student should study in college, and finally match those up those majors with colleges that provide courses that offer those programs.

If you can combine a few schools that would be a good “fit” for the student, that are within your budget, then you can shop your options and make a smart buying decision. This is prudent college planning.


Tim Higgins, CFP®, ChFC®, Author of Pay for College Without Sacrificing Your Retirement (June, 2008) Appeared in Money Magazine, SmartMoney Magazine, new York Daily news, Entrepreneur Magazine, U.S. News & World Report, and on,, The Lou Dobbs Show, Money Matters Radio, nECn, and WBZ-TV President of 3MERITUS Wealth Management.