Video: Bright Ideas' forum on financing college

In case you missed our coverage of the MPR Bright Ideas forum on how to get a good, affordable education, here's the video (above) and the transcript (below).

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Stephen Smith: This is "Bright Ideas: Fresh Thoughts on Big Issues" from Minnesota Public Radio News. I'm Stephen Smith. Each month we invite a guest to the forum here at NPR headquarters to talk about important issues and ideas and to take questions from a studio audience.

Our guest this time is Carol Stack. She was an admissions officer at Macalester and Augsburg Colleges. She now works for an enrollment consulting firm. And she is the coauthor of The Financial Aid Handbook: Getting the Education You Want for the Price You Can Afford.

We'll be talking with her today about new ways to view the college financing puzzle, some myths about paying for college, and how to navigate the complex, and sometimes intimidating, financial aid system. Please welcome Carol Stack.


Smith: Carol, there is an abundance of college advice books out there on the market. Why did you write yours? What was missing in the literature that you were filling in?

Carol Stack: Ruth and I wrote the book, because as we looked at the literature that was out there. As we talked with each other about the conversations we'd had with families over the years, we realized that there was no one book on the market that was conversational, that gave the same advice that we would if we were sitting around a table talking to a family. There was information out there, great, big books, directories of scholarships, long lists of things to weed through. There are books out there that are pretty doggone boring, written almost like the directions for completing your 1040 and there was nothing in between. There was nothing to engage students and parents. There was certainly nothing on the market that helped families understand that it is indeed a process over which they can have some control and they're not completely the pawns of higher ed. We decided that rather than just talking about it year after year, we would sit down and write the book. So that's what we did.

Smith: And who is Ruth?

Stack: Ruth Vedvik is my coauthor. She's also a principal with Hardwick Day.

Smith: Which is where you work?

Stack: That's where I work. She has financial aid and admission experience at Gustavus Adolphus College, Concordia College in Moorhead, Agnes Scott College, Ball State University. Her last position was as Director of Admissions for the University of Illinois at Urbana Champagne.

Smith: OK. Let's go down the list of myths, as you call them, about paying for college. You've got in your book, a series of myths that you try to take apart. The first one is, "You get what you pay for."

Stack: Exactly. For years I think there has been an assumption in higher ed, or maybe not so much in higher ed but in the greater public, that somehow paying more for a college education gives one a better education, that if it's more expensive somehow it's going to be better and more effective. That's simply not true. Higher ed, like many other nonprofits, as we sit here at one at Minnesota Public Radio, each individual college and university has its own mission. Has its own list of things it wants to accomplish for its stakeholders, and price doesn't necessarily guarantee that one is better or worse than another.

It's simply a function to some degree, of what the market will bear.

Smith: So more expensive is not necessarily better.

Stack: That's exactly right. Although there may be other kinds of consumer goods in which we can assume that more expensive is better, it's not necessarily true with higher education. That was the first myth that we spent some time talking about and saying, "Throw this out the window."

Smith: The second one is go to your reach school. What is a reach school?

Stack: A reach school. Students, and certainly in my generation we were told this, that you should apply for three to five colleges. One of which should be your safety school. The safety school is one to which you'll definitely be admitted. One of which should be your reach school. The school for which you would be lucky to be admitted, and then a couple others in between. And the advice was if you get into your reach school you should go there, it's the best school and it's always worth it for you. We argue that that's not necessarily the case because if you're looking at attending your reach school, it may be that it's also going to be a reach for you financially.

That as a student and his or her family sit around the kitchen table and talk about the college choice and consideration process, cost, investment, and what the family can afford have to be a part of the equation as well as location, academic program, extracurriculars, and the other things.

If going to your reach school means that you as a student or your parents and your family overall is going to have to incur unreasonable amounts of debt. No! Don't go to the reach school. Maybe instead look at a school that's reaching for you.

Smith: We'll get to that in a minute. Myth number three is, "I can wait to see where I get in before I figure out how I'm going to pay."

Stack: Yes, that's a very common one. Partially because as families, we don't necessarily like talking about money with our children. You can think of all the parenting books you've seen. They explain not only how to, for toddlers, toilet train and get them to eat politely, but how to talk to your teenager about sex, drugs, rock and roll, alcohol.

No one really says, "This is how you talk with your child about money and what you can afford for college and what you can't." Oftentimes families put off that somewhat uncomfortable, or very uncomfortable, conversation until all of a sudden it's April of Stephen's senior year and he's sitting there with three envelopes, three offers of admission and whoops! We haven't talked about how we're going to pay for it. Boy! It's a little late in the equation to have that surface on the table.

Smith: Why do you think it is so uncomfortable, if it is uncomfortable, for parents and children to talk about the cost of college? Is it implied that if you love me you'll go deep into debt to get me to the school that I want to go to?

Stack: You'll go into debt? Part of it is because many of us as parents, it's really hard to admit to your child that you can't do something for them that they want, whether it's sending them to soccer camp or an expensive piano or violin or harp. There's that. Secondly, we tend to as parents, be pretty private about our own financial situation and not really sit down and say, "Gosh, this is what we can do. How can we make this work for you for college?" There hasn't been much out there to help students understand how to talk to their parents about money. In fact, two of the things we included in the book are chapters specifically devoted one for students. A chapter entitled You, Your Parents, and Their Money. And a chapter for parents entitled You, Your Children, and Your Money.

Explaining just how to go about sitting down and having that conversation and also how to get some initial numbers together so that you have an idea of what the expectation is going to be when college rolls around.

Smith: Myth number four, and this one was a bit of a surprise to me that people even do this. But, "I'll get more financial aid if my parents say they won't pay."

Stack: Yes. It's a huge myth. [crosstalk]

Smith: There are a lot of people out there pretending to be deadbeat parents.

Stack: Not necessarily pretending to be deadbeat parents, but I had a conversation earlier this week with someone who explained to me that she and her husband. They're both professionals, have two young children and that their plan for paying for their children's college is that the kids will figure it out on their own, that she and her husband had put themselves through college by themselves and so their kids would.

Unfortunately, when parents say that it often means they don't want to participate in the process at all. By that, I mean they don't want to complete the FAFSA, which is the Free Application for Federal Student Aid. That's the basis for everything.

If your parents won't complete the FAFSA, you can't even get a federal student load. You can't get work study money. You can't get all kinds of things.

Smith: But you're say that there are people who actually could pay, but pretend that they won't in order to get the aid.

Stack: Exactly. Or pretend that they just don't want any part of the process.

Smith: But it's not going to work.

Stack: It's not going to work, no. It's certainly not going to do anything to help your student.

Smith: Myth number five, only poor kids get financial aid.

Stack: Yes. Part of the reason that that myth exists is because in the popular press there's so much focus on the Pell Grant program and to be eligible for a Pell, which is the largest federal grant program, most families. . . Students who are Pell eligible tend to come from families with annual incomes of $30,000 to $40,000 or less. Sometimes as high as $50,000, but that's very rare.

When the press talks a lot about the Pell Grant program and gives data about the income and the assets, or lack thereof, of the students who receive Pell Grants, the whole focus tends to be on financial aid is only for those who are in really reduced circumstances. That's certainly not the case.

There are grants and scholarships and loan and work programs available across a broad spectrum of family income and assets.

Smith: Myth number six. "I can hire someone to find scholarships for me."

Stack: Yes. And since you have a student in your home in high school you've maybe been the recipient of some of the emails purporting to say something, "Stephen, send us $99 and fill out this form and we'll help you find scholarships for your child."

Smith: Yeah, usually from someone in Nairobi.

Stack: Yes. Although they often want more than $99. I think it's $99 million is what they have to share. Those search services don't do anything that you can't do. They're not going to find anything that a student and his or her parents with an Internet connection at home or at the library can find. I would say you might as well stand on I-94 and throw $99 into the wind.

Smith: That could be a traffic hazard.

Stack: It could be, yes. [laughter]

Smith: This is myth number seven, "My state school is the best choice for me."

Stack: Yes. The reason that that's a myth, well there are a couple of them. The first is to keep in mind that the United States has in many ways, the most robust and interesting higher education system in the world. We not only have the public, the state schools, we have a huge variety of private colleges and universities, some of which serve particular curricular needs. I don't think there's another country in the world with an Institute of Marine Architecture to learn about designing and building boats.

Smith: Where's that?

Stack: It's the Webb School in Connecticut. Or New York. Those two states run together for me. But it's definitely in the east.

Smith: They all look alike.

Stack: They do. Yeah, they do.

Smith: Unlike flyover land here where we are. [laughter]

Stack: We're very different here in flyover land.

Smith: The Dakotas, you can just tell them apart.

Stack: You can. Yeah. Right now North Dakota's underwater. That's how you can tell them apart. [laughter]

Stack: There's a robust educational system here with many, many choices for students in terms of the kind of academic program and location and value system that they want. State universities, people often assume are the best because they maybe received the most press on Saturday afternoons if the football team is winning, or Saturday nights during March Madness.

But in fact, there are many different choices for students and the best can be a function of program. It can be a function of your ability to get the courses you need and graduate in four years, and a function of the scholarship or aid that you can receive. And all of those things have to go on the table to help a student make the choice of the best college or university.

Smith: Now, it's often said these days that the state schools, or many of them, are acting more and more like private institutions. It's harder to get in. They have restricted access in some ways, they're going for the same philanthropic support that the non profit schools are. And they're offering more competitive financial aid packages. In some ways the state schools, many people would think that the state schools would be among the most affordable, but in some cases it may not be, because you can't get in.

Stack: You can't get in, or if you do get in it may be that, dependent upon the state, and the system within the state, budgets have been so slashed that universities are unable to offer enough sections of a particular course to ensure that you can actually get the courses you need to graduate in four years. If that four year program becomes a five, six, or seven year plan, you've not only spent more in tuition but you've had opportunity costs as well.

Smith: The job that you're not working because you haven't graduated yet.

Stack: Exactly.

Smith: How does one decide for example, whether to go to a community college or a four year college? And how does paying for those? How does the financial aid picture, fit into that decision?

Stack: For many students cost and financial aid are a huge driver in the choices to whether or not to attend a community college or a private college, and all kinds of things enter into that decision. For many people location is a part of it. Dependent on where you live, there may or may not be a community college close by. Many community college systems are prohibited, dependent on the state, by statute, for having residential facilities. They're meant to serve a population within a particular driving distance. That's one of the things that can factor into it.

Another can be the program of study that you want. Again, dependent on the community college, many have a great track that a student who wants to transfer to a liberal arts college can go in and meet with an advisor and say, "I know in two years I intend to graduate to Carol Stack's Pretty Good Liberal Arts College when I finish here. Help me put together a course of study for courses that will transfer and will make that transition."

Smith: You get those general education courses out of the way, that you're required to, at a liberal arts college.

Stack: Absolutely. You can do things like English composition, and if you only got as far as college Algebra, it's your chance to get Calculus, or Statistics, General Biology, General Psychology, those courses.

Smith: But you said that you would go on to Carol Stack's Pretty Good Liberal Arts College.

Stack: All right, we'll make it Carol Stack's Really Good Liberal Arts College, is that better?

Smith: Yeah. How's the football team doing?

Stack: Yeah.

Smith: But the question I have is if you get those first two years at a community college, how likely is it that you'll get into a really competitive four year college?

Stack: If you do well, and if you've begun a conversation with that four year college early in the process, you certainly can move on to a competitive four year college. But what you don't want to do is show up a week before classes begin, for what would be your junior year and say, "Hi, I'm here. I did my first couple of years at a community college. Do you love me? Will you let me in?" That's not going to work. But even beginning a dialogue with a college like that as soon as your first year at a community college, and saying, "This is where I am. This is why I have to make this decision. This is when I'd like to join you. How can we make that happen?" That's the way to go about it.

Smith: That sounds like a pretty sophisticated thing for someone starting out college to know how to do. That's really working the system in a way that it would seem, only an insider would really understand.

Stack: Maybe, but as you think about it, particularly for students that have an interest in attending. Well, I was going to say smaller colleges and universities, but really of any size. Beginning the conversation, and expressing your interest, and finding if you will, an advocate at that. I'm going to use a dreaded higher ed word, institution, is just a good way to begin business. People who work in Admission, and Financial Aid, and Academic Advising, at colleges and universities, do so first and foremost, because they like working with students and because they believe in higher ed. They're there to work with students, to be helpful, to be an advocate. And to ignore their expertise and their willingness to help is just silly. So, there's no reason not to reach out.

Smith: Now, small, residential, liberal arts schools are the most expensive education, by and large, that we offer in the United States. I think on average it's something like around $30,000 a year for tuition, room and board, and all the expenses. Of course, the exclusive, the top schools can easily top $50,000 a year. How do you decide whether it's worth it to spend that money to go to an Amherst or a Carleton College for example?

Stack: Well first off, you have to factor in what you can afford, and the "worth it" part has to do with your ability as a student, and as a family, to make the investment in the student's education. If you're in a financial situation in which you can easily write the check, and your student has the academic qualifications, and has his or her heart set on a particular school, regardless of price, then that's a great decision for that family. But we're not all able to do that.

That's one of the reasons that we advocate students and parents having a real heartfelt conversation about how much of an investment a family can make. We don't want to see parents skipping on their retirement contributions, or cashing in their 401(k)s to pay for their child's education.

But we do want to see them have an understanding of what their estimated family contribution is going to be and factoring in where their child is going to have the best academic experience. That experience isn't just related to price. It's related to program. It's related to extra curricular activities. It might be related to location, far or near, depending on the student.

Smith: Proximity to ski slopes, for example.

Stack: Yes. That could be very important. It's also possible to do some sort of quick and dirty thinking about return on investment. I'd be the first to argue that college is certainly about more than getting a job, but we have to face facts. All of us, at some point as adults need to work. We need to get a roof over our head, food on the table. We want to be able to do some things that we enjoy, whether it's buying books or going to the movies, and that means getting a job.

That it's also possible to look at what you're thinking about as a major, what you're thinking about as a career, and to make some assumptions about what you might earn, and use that as a basis for what's going to be a reasonable investment, or debt load to take on in order to get there. That's true for both the student and the parent.

Smith: Do you have a rule of thumb that you offer people about how much debt to take on?

Stack: We do. We have a very simple rule of thumb, which is, we say to students, "Take on student loan debt that is no greater than the amount of money you expect to earn your first year out of college." That's a sliding scale. If I know for example, that the only thing that I've ever wanted to be is a petroleum engineer. This is my goal. This is what I'm going to do. I also know that I believe I could expect a starting salary between $90,000 and $100,000.

If that's the case, I could maybe take on a little more debt than if I knew that the one thing that I most likely wanted to do was to begin as an advocate for some small, non profit, arts organizations. Where as a liberal arts grad I could probably expect a salary of about $30,000 a year.

The simple rule is one to one ratio or less, of student debt and expected earnings the first year after college.

Smith: Obviously you're not paying it off with that first year of earnings.

Stack: No you're not.

Smith: How many years do you think that that then takes?

Stack: Well, it depends. There are all kinds of options for student loan payments now, that are relatively new, that have come online within the last year. Generally, most federal student loan programs are set up so that repayment is done within 10 years after graduation. Although there are extended and graduated payment plans that are now available, as well as some income based repayment plans.

What we really want to do is say to students, "When you graduate from college, we'd like to see you wind up in a situation where your student loan debt is a monthly payment you have to make. But it's not going to be a payment that's going to drive decision making about your passions. It's not going to be a payment that's so large that it keeps you from doing what's really important. It's not going to be a payment so large that years into the future you won't to be able to buy a house or have a family because you're making this giant, way too large, student loan payment."

Certainly it will influence your ability to make some choices about graduate or professional school, and that debt, in the future.

Smith: I'm going to get to graduate school in a minute, but I want to ask you. And this is just a hypothetical question. Let's say I had a son who was a junior in high school. Let's say we're all pretty intent that he's going to go on to college and all that. How do I go about starting my conversation with him about college finances? How much do I reveal about how much I make? Or what we can afford to put in?

Stack: Obviously, the answer to some degree is whatever you're comfortable with in revealing to him. But I think there's an easier way to approach it. The Federal Government, in all of it's wisdom, as I said earlier, the basic form for determining eligibility for financial aid is something called the FAFSA, Free Application for Federal Student Aid.

You would normally file that next year, when your son is a senior, but that doesn't mean that you have to be clueless until then. There is a form online called the that would allow you to sit down tonight, when you go home, and plug in some numbers and begin to get an idea of what your family contribution would be. That you could actually begin the conversation with your son by saying, "I've looked at the FAFSA4caster, I know that the expectation is going to be that as a family we contribute $24,000 a year, or whatever amount it might be, towards your education.

That's the point at which we'll begin our discussion, and this is how we think we can achieve that with your help. Let's talk about the options from that point onward." Also your son's likelihood of earning any merit or other scholarship aid.

Smith: Do you think it's important for kids to contribute to their college education financially?

Stack: I do. The students are the beneficiaries of that education, and whether that contribution is because they work a summer job and are able to fund all of their own spending money and books, or personal expenses during the year. It seems like pretty much every college student these days has an automobile.

Student loans can be another way of having students take on some responsibility for their own education. As long as there a reasonable amount of debt.

Smith: Why is college so expensive, and why has tuition increased so much greater than the cost of living or people's wages?

Stack: That's a very good question, and there's certainly been a fair amount of research on that very topic. People have a variety of answers. For years what we heard was, "Well, colleges have to invest in a lot of technology. Colleges have to invest in new buildings. Colleges that have put off maintenance maybe for years had to put money into their physical plant." There's some other answers there. Last January, a book came out that's called, "Why Does College Cost So Much?" The authors are two economists at the College of William and Mary, and I think you've talked to them in the past.

Smith: On the American Radio Works Podcast. Yes.

Stack: They do a wonderful job of looking at the price of a college education in relationship to other goods and services that are provided by highly educated professionals. When they look at it over a 60 year time period they say, "Wow, look at this! College has become more expensive, so have legal services, so have dental services, so have all things that rely on a highly educated workforce."

But with that in mind, when we think about educational costs within the last 10 years, that slope is an ugly one. They've gone up very fast. I'll tell you, if I knew the exact answer to that question. And if I could do something about it, I probably wouldn't be sitting here. I'd be out doing those things.

Smith: What, you don't like being here?

Stack: No! I very much like being here.

Smith: You'd probably be writing a book about it.

Stack: I probably would be, yeah.

Smith: You have a list of "Best Bet Colleges" you call them, that include here in Minnesota Augsburg, Gustavus Adolphus, Saint Olaf, and the University of Minnesota Morris, but not Macalester College, Carlton College, Hamline University, Saint Catherine's University, University of Saint Thomas. What were your criteria? How did you figure out what was a good bet? I assume you're not saying that these others are bad bets.

Stack: No, we're not saying that the others are bad bets at all. As I'm sure you can understand, we had a space constraint in terms of the number of colleges and universities that we could mention. Ruth graduated as an undergraduate from Augsburg College in Minneapolis.

Smith: So that was it! Your co author, so that one was in.

Stack: No, and I graduated from Macalester, so we already had a predisposition towards Minnesota colleges and universities. We set up a series of criteria for the schools that we selected, and in a nutshell what we wanted as our best bets were schools that we saw as meeting their mission, and funding their favorites. We said, "Well OK, how do we determine that?"

In the first place, we eliminated colleges and universities that were too highly selective. If they admitted fewer than 40 percent of their applicant pool, we didn't include them on the list, only because that means six out of ten of every student that applies are not being admitted. There went Macalester and there went Carlton.

We then looked at some other criteria, and one of the biggest things that we looked at was the average annual student loan debt. As you'll recall, earlier I said we had a general rule of thumb, one to one liberal arts salary to student loan debt. To make that a little easier to remember, we actually call it the 8K debt challenge. For undergraduate students, no more than $8,000 per year in student loan debt, so a total of $32,000. We have a little wiggle room there.

We also looked at that list of colleges and universities to make sure that on average, their students had an annual loan debt of less than $8,000. That was another factor. We wanted to make sure that the average grant that was awarded exceeded loan. We really did have some concrete kinds of things.

Most importantly, what we wanted to do with the list of 60 best bets colleges was to put together a list of schools that in many ways are very different. They have different missions, they appeal to different populations. They offer different programs. As a way to demonstrate not only the richness and variety of American higher education, but the fact that there really is a good option for every student, dependant on what he or she is bringing to the college or university.

Smith: You write that parents and students who are looking at colleges should approach the college decision in the same way that a college graduate approaches graduate school. I want you to explain that.

Stack: Yes. We call it the funded versus unfunded approach. I'm sure that there are many people in this room tonight who, as they thought about their own education after college whether they were looking at graduate or professional school, really did a basic return on investment strategy. If I go spend $50,000 a year on this MBA for two or three years, what is that going to mean to me in terms of my career, in terms of future earnings, how am I going to be able to pay it back?

If I look at two programs and in one program they want to fund me by giving me scholarship aid and another they don't, what's the trade off for me in terms of the educational program? Where's the better match?

We really think that, to the degree possible, if undergraduate students can make a good match and be funded, then things are going to work out quite well for them. Both in terms of the educational program, because you receive scholarship funding when you bring to a college or university skills, abilities, values, and talents that are important to them. If you can reduce the price by doing so, so much the better.

Smith: Should parents start saving for college when a baby is born? There is perhaps another one of those myths out there that I actually shouldn't save money so that I don't have too much saved up so that my child will get more financial aid.

Stack: Yes, and as it currently stands, that is most definitely another one of those myths. Our problem in the myth chapter is we had to stop somewhere. We could have gone on forever. There is a myth out there that if you save money for your child's education, you will be unreasonably penalized in the aid process. Your neighbor down the street who never saved a penny and bought four boats and 18 snowmobiles, and went to Europe all of the time is going to receive all of this financial aid, because he or she didn't save. It's not true.

In the first case, for all parents who apply for aid, retirement savings are protected. You definitely want to save for retirement. For many places, home equity is protected and not expected as part of the contribution. If we just look at Steven Smith has socked away in stocks and bonds and money markets and cash...

Smith: A vast amount, by the way.

Stack: A vast amount of money, OK. So we take that vast amount of money and the first thing we do. The aid formula, the processor, the federal system, takes a look at Steven Smith's age and says, "This guy's 58 years old, we've got to protect some of these because he's an old guy." Off the top, let's say you had $100,000. Off the top of that, and I'm trying to do this from memory, so don't hold me to it, but based on your age might come say, 45 or $50,000 as an asset protection allowance. So then the remaining 50, $60,000, the system doesn't assume that all of that is available for your child's education. The effective rate on it is a little less than six percent.

Are you really penalized? No. You save the money for your child's education, and really, have you ever actually heard someone say, "I made a huge mistake by saving for my child's education"? No, it's like no one ever says, "I made a huge mistake because I saved for retirement." It just doesn't happen.

Smith: Yeah, most people say, "I just wish I'd worked a lot harder."

Stack: Yeah, right. [laughter]

Smith: How many colleges and universities offer aid on the basis of need as opposed to merit? What's the structure out there? It seems like the need based and the merit based has been shifting around.

Stack: Need based and merit based have been shifting around, and in fact, there are quite a number of times in which merit based aid actually winds up meeting need, if that makes any sense at all. There are a relatively limited number of colleges and universities that offer only need based aid, probably the most famous group as a clump of that would be the Ivy League.

To give you an idea of how tiny in some ways their actual impact is on the number of college goers, there are probably 1.7 or 1.8 million students who will go on to college this fall. Of those, about 13,000 of them will be first year students in the Ivy League. We're talking a drop in the bucket.

Other than that, you will find merit and need based aid offered at a whole wide variety of places. Most likely not at community colleges, but certainly at private colleges and universities, certainly at many state universities, including public flagships and some of the large land grant universities. Often what happens is if a student does a good job in her college consideration and selection process, merit aid might be offered along with the offer of admission.

Then later on, once the family's completed the FAFSA and the other kinds of actual aid applications have come in, the college's financial aid office will look at need. The merit and the need based aid will blend together.

Smith: Now, we've been talking about this almost exclusively from the student or the consumer's point of view, let's turn it around for a moment and put on your former admissions officer hat. Tell me how a college or a university makes sure it has the right students going to its school, both from a financial picture and from an academic picture.

Stack: First off, the most important thing is that particular college or university has to be able to very clearly articulate what its mission is and what's important to that school. If it's a school that's affiliated with a particular church and wants to make sure that the bulk of its students subscribe to a series of faith and value statements. If it's a school that has a commitment to experiential education and knows it needs students who will be comfortable and successful doing internship and co op ed work. There are a whole variety of things that any given college or university you have to know about yourself first before you can start admitting that class.

Then the most important thing to do is to make sure that not only do you know those things about your school, but that you have clear and compelling ways of sending those messages out to potential students, so that they can understand that this is what you value. More importantly, this is what's going to be their experience once they're on campus. There shouldn't be any surprises, at least not bad surprises. Some good surprises are always fine.

As an admissions person, what you have to do is a juggling act. You have to balance whatever goals your college or university might have for an academic profile; where do they want to see GPA and test scores on the incoming class.

At the same time, if it's a school committed to access for a particular part of the population, racially, ethnically, in terms of gender, you have to pay attention to that. You have to make sure that the students who are coming in have a good match with the academic program that you want or that you offer.

When I say that, it really has to do with in terms of the teaching and learning situation. The evaluative tools that are used; the expectations for the way students behave and participate in the classroom. Also at the same time expectations for the way that they'll behave after they graduate, as they continue to essentially be a stakeholder for your particular college or university.

You have those, and at the same time, unless you're one of the few colleges and universities that has an endowment the size of the GDP of a small country. You have to be paying attention to money as well. You know that you have a certain budget to spend, and what you want to try and do is spend that money, in terms of scholarship dollars, in a way that's the most effective for your particular college or university.

Smith: We've been talking up until now exclusively about the public and nonprofit sectors in higher education, but there's been a boom in the for profit sector in higher education, which is itself driven very heavily by federal loans and et cetera. What advice do you have for students who are thinking about attending a for profit, in terms of how to know what to spend and how to know if it's a good investment?

Stack: My advice, in terms of students looking at for profits, is to tread very carefully. The largest college or university in the United States is actually the University of Phoenix, with 450,000 students across the United States. They do some really good teaching, undoubtedly. But dependent on the program that a student is looking at, he or she should be sure that they're looking at the best possible match between skills and experience, and their timetable and time frame, and what the for profit has to offer.

The reason I say this is because if you think about it, a for profit college or university has a really clear cut primary mission, just like any other for profit business, they have to answer first to their shareholders.

Smith: If it's a publicly traded. Some of them are family owned or privately owned.

Stack: That was the other thing I was going to say is there are some family owned and very small for profits that do a fabulous service. There's a small barber school in Minneapolis that primary serves veterans, has maybe only 10 to 15 students per year. That's a great service, and it's a different thing.

But as a student, I think oftentimes you want to have as your first concern, or as the colleges' and universities' first concern, is maintaining not necessarily return to shareholders financially, but instead maintaining return to students and to other stakeholders, in terms of the value of the educational product.

Smith: And the for profits are serving primarily an adult population to begin with? They're not really either marketing to or bringing in 18 year old's who are just out of high school.

Stack: No, they really are primarily looking for adult students, and for those who didn't complete a first degree, or who are looking for graduate or professional or certification studies.

Smith: What does the future hold for financial aid? What changes are you expecting or worrying about coming down the pike, in terms of both government support and what the colleges and universities can afford to do themselves?

Stack: A couple of things. This past year, in fact, has seen some pretty remarkable changes. As of October 29, 2011, every college or university that participates in any of the Federal student aid programs has to have on its website something called a net price calculator. That allows anyone who wants to go in, and dependent upon the sophistication of the calculator on a particular site. Plug in information about the student and the family's finances and get an idea of what net price that student might actually have if he or she went to whatever the college is. That's been a sea change.

The issue right now and the reason that it's going to hang out there going forward is that the Federal regulations establishing the net price calculator are vague enough, that if we sat right now and booted up and looked at 10 different calculators, we'd find 10 completely different approaches and varying greatly in their sophistication.

But there's certainly more concern about transparency in college pricing and helping families to understand early on and often what pricing might be. That's definitely going to go forward.

Just last weekend I was in New Orleans for the National Association of College Admission Officers annual meeting, and one of the things that was released there was a survey done by inside higher ed of admission directors, and regardless of the school they were associated with; community college, private college.

About 80 percent of them have as their biggest concern the issue of rising prices and affordability for students and parents going forward. When we essentially see an economy that's flat and median family earnings that have dropped in the last year by about a 1000 or so, there's huge concern about pricing. There are also new federal regulations that have changed things around, in terms of more options for different ways to pay off federal student loans, a change in the verification process. The federal regulation fun just never ends.

Smith: The verification of what?

Stack: Oh, verification is a process that is required by the federal government of a selected group of students who apply for financial aid every year. Every college or university will have a group of students that are selected for verification. What that means is that they say to students, "You filled out the FAFSA and you told us these things were true. Now we have a few elements that we just want you to prove to us."

Smith: They're selected randomly, like the extra screening at the airport or something?

Stack: Yeah, I don't think that's random.

Smith: Or they're profiled.

Stack: Do you think that's random? I don't think so, no. There will be some changes in that process coming forward as well. Things are changing constantly, so it would be very difficult right now to say to the parents of a second or third grader, this is what you should plan on. This is what's going to happen, because we just don't know. But the same is true of tax law, we don't know that either so...

Smith: It's good for consultants, isn't it?

Stack: It is. It's very good for consultants.

Smith: Let's take time now to take some questions from the audience.

Rick Amley: I'm Rick Amley and I'm from Minneapolis, and unfortunately, I'm not from Lake Wobegon, and my challenge is not above average. And aside from the...

Smith: And your child's listening too, right?

Amley: Let's say that it's a B or maybe a solid C+ student, and he is looking at making the best academic record to present. He has two choices, as near as I can see; one is to take some advance placement courses and impress you with the sophistication of the courses he's chosen to take. And the other is to come up with some scheme and raise his SAT and ACT. Can you talk a little about those two maneuvers and how you would weigh one versus the other?

Stack: Sure. The first thing I would tell you is that raising his ACT or SAT score is going to be pretty tightly tied to doing well in those better, stronger, more advanced courses. The ACT, in particular, is a test that is known for being very tied to the curriculum and a very strong reflection of what a student has done in high school. The SAT, if all of us in this own room think about our scores or scores of people we've know, people who are really good readers tend to do well on the ACT, but you've got to have some basically math skills as well.

If I'm sitting there as an admission director and trying to make a decision, I have to tell you that I have a predisposition towards seeing a stronger high school transcript. The reason for that is for me it's a better predictor of what someone actually can and will do.

Test scores are nice, but particularly in boys, it's quite often that you see over the top, really high test scores, and pretty miserable performance in high school. Well, since the best predictor of future success is often past behavior, that transcript is going to trump.

I would say the answer to this young man would be to say buckle down, choose some good hard courses, work hard at them, achieve, and the test score improvement will flow from that.

Smith: Is every application read by a human being and judged by a human being, or is more of this increasingly driven by algorithms and data processing?

Stack: That completely depends on the college or university. If you have a large place, I think UCLA or USC, one of the two, had the largest applicant pool in the country this past year, with about 38,000 students vying for admission. In that case, the first slice is not done by readers. It's just not possible. You cannot hire enough people to sit down and read those applications to do it.

But if we think about most places in the state of Minnesota, those applications are going to be read by people, and they're going to think pretty carefully about what they know about students who have been successful in the past at their college or university.

Peter Taldorf: Peter Taldorf, I'm from Eagan, Minnesota. I have a question regarding the net price calculator. Since the government has mandated this, what is the minimum that the colleges are expected to reveal to people that go through those net price calculators? Therefore, you also had mentioned in a follow up to that, that if you go visit 10 sites you'll get 10 different type of net price calculators. How is somebody to compare apples and oranges?

Stack: It's a very good question. The first thing you're going to have to do is actually create a spreadsheet for yourself that will allow you to understand costs, so you're only comparing maybe direct costs. The minimal requirements for the calculator are pretty simple. The Feds basically say to colleges, "Use the information from last year's class to show on average what a student would get in these income bands in the way of aid." That's pretty vague.

Some places have developed calculators that are much more sophisticated and allow a student or parent to go in and not only give information about the family's financial situation, but the students academic and other interests as well, so that the calculator actually gives an estimate about both merit and need based aid.

But, the calculator is only an estimator. It's only a best guess. It's not a firm commitment from the college or university going into the future. It's not even a commitment of an offer of admission, much less a commitment of an exact offer of aid.

That said, it will give you a really good idea. Is this a place where my child might be in the top quarter of the class and be funded? Or is this a place in which my student is going to be in the weakest portion of the class, and the expectation will be that he or she is full pay or is going to receive need based aid only?

If I were right now sitting at home and had a student in junior high or in their early years of high school, I would be going to the FAFSA forecaster and running some basic numbers to get a sense of what the expectation would be for my family's contribution and beginning the process from there. Depending on how old the student is, net price calculators will evolve over the next couple of years and become more standardized.

It's like comparing a price for anything else in this country. There's a little bit, I don't want to say "buyer beware," because that makes colleges and universities sound evil. And they aren't inherently evil. They simply have different ways of choosing to present the information.

It does mean that families need to understand what exact costs they're comparing so that they really are sitting down and looking at tuition, fees, room and board, the things that will be directly charged to them. Knowing full well that the other expenses, books, personal supplies, transportation, are areas of expense over which a student actually does have a fair amount of control.

Smith: Given the complexity of just the financial aid part, let alone the stakes and the difficulty of preparing the application and figuring out where to go, I don't know if more and more, but families have been turning to consultants, basically college prep coaches to help them figure this stuff out. What's your opinion on them and what's your advice about whether or not they're worth the money?

Stack: I think there are some excellent college prep consultants, college application consultants out there. Dependent on a particular family's situation, using one can make great sense. I also know that in the state of Minnesota, in particular in Minneapolis, St. Paul, we have a series of secondary schools, both private and public, with very able and professionally knowledgeable guidance counselors who can help with that same thing. Dependent on the family's situation, it might make sense to go to someone in the outside, an independent consultant.

Smith: Is there a rule of thumb of when it makes sense? Yeah. Everything depends on the family situation.

Stack: I know. No, I don't have a rule of thumb for it. Don't put yourself fin debt to do that.

Smith: How much does it cost?

Stack: It can cost anywhere from a minimum of about $500 to there are some that charge as much as $30,000 or $40,000, for advice and walking students through the entire application process.

Smith: I take it there's probably not a financial aid system for that.

Stack: No, there isn't.

Bonnie: I'm Bonnie from St. Louis Park. I'm wondering, does the FAFSA account for fluctuations in a family's income over time? For example, if there had been a period of long term unemployment just prior to applying to colleges?

Stack: That's a very good question. The FAFSA actually uses only prior year data. For example, you have a student who is a senior in high school right now applying for college and for financial aid for next fall. You will complete the FAFSA after January 1, 2012. It will be based on your family's financial information from 2011. In the last, three to four years, in particular, financial aid officers have seen families go through a fair amount of financial turmoil, along with the rest of the economy.

If something were to happen after you filed the FAFSA so that you believe that the 2011 data is not particularly representative of your family's financial situation. That's when you call the college up and say, "I need to apply for special circumstances. What documentation would you like to see how things have changed?"

For understandable reasons, they can't just take your word that someone is unemployed or something has dramatically changed, but they will take documentation.

Smith: By and large, how are divorced or blended families, however you want to call them, how are those handled in the college financial aid picture?

Stack: In terms of the FAFSA and federal money, the parent who has custody of the child is the parent who would file the FAFSA. We actually devote some time in the book to talking about ways to approach the family contribution from divorced families. I'm going to go back to what you hate to hear me say. A lot of it depends on the family's situation. If it's a case where the family, the parents are divorced but still have a relatively good relationship with one another and live in close proximity, it may actually make sense for the student to move in with the parent who would generate the lowest EFC off the result of the FAFSA.

Smith: That's just for the year prior to filing this?

Stack: For the year prior to filing. However, there's always a however. There are colleges and universities that in addition to the FAFSA require another form called the PROFILE and even require a non custodial parent to complete a particular form as well. It's a case where in each situation students and their parents need to do a little investigation as to the process. One thing that is important to keep in mind, if I were to have divorced my husband when our children were in high school and remarried, their stepfather would have to complete the FAFSA with me. His information would be considered in terms of aid.

Even though we may say, "Gosh, we're going to get married and my money has nothing to do with putting your kids through college," or vice versa, the long and the short of it is that two people can't make an agreement that binds a third party. In this case, the third party would be the federal government, so a big elephant in the room. That's something to think about if you're in a situation with high schoolers. If you're divorced or a single parent and thinking about remarrying, you need to have a real conversation with your potential spouse about the college financing implications of that decision as well.

Smith: You're endorsing people living together but not getting married. [laughter]

Stack: As we said in our book,we put it quite nicely by saying, "These are modern times."

Carrie Winters: Hi, Carrie Winters, St. Paul, Minnesota. And I would be interested to hear your thoughts about how or when tuition might stop rising or at least match the cost of living?

Stack: I wish I had some thoughts on that that are worth sharing. What we're going to see is private colleges and universities holding price increases to between one and five percent. The big price increases that we're going to see in the next two, to six, to eight years are going to be on the public side.

Some of them have already been announced. The University of California has talked about the increases up to 18 percent, year after year after year. We've heard the same news from other kinds of state systems. When they're going to stop, I don't know. I wish I did know.

Kristin: Hi, Kristin, Minneapolis. If a student is deciding between a more selective and expensive college versus a less selective college that would offer merit aid, couldn't a student believe that the more selective college would offer greater opportunity, professionally, after graduation, and perhaps even greater salary opportunities? How do you decide if the extra cost is a worthy investment?

Stack: Of course the student can believe that if he or she wants to. As to whether or not, how you make that decision, there used to be a litmus test when I was in college admissions. We could look at students and parents when they came on campus for the admitted student day. We could watch the way they moved across campus and almost see whether or not that student was a match. There was something about the culture. There was something about the ambience that he or she just seemed to feel good about it.

Really, if the more expensive college is not an issue for the family financially and that's where the student really wants to be, then I think it's well worth it. If the more expensive college means that this student is going to wind up $40,00, $50,000, $60,000, $80,000 in student loan debt after that first degree. I just don't know that there are promises out there, unless you're in one of a very few professional fields that the return is going to be there.

Above all, students need to feel that the college they're choosing is a place at which they will be intellectually challenged, at which they will learn. They will learn to communicate. They will learn how to learn, because that's the most important thing about our careers is we've all been continuing learning.

I don't know that you can put a dollars and cents thing on it, other than to stick with our $8k debt challenge, to try to keep the student debt down. To understand that really for many of us, I'm guessing that much after that first job, no one really asked us where we went to college.

Joe Sharon: I'm Joe Sharon from White Bear Lake and I worked 32 years in the Minnesota community college system, primarily as a counselor. I'd just like to put in a pitch. I would highly recommend people to check that out. A very conscientious student can end up with zero debt after two years and be in an excellent position to go on. At every college fair they have where I work, just about every four year school in Minnesota is there, recruiting the two year students. There's a reason for this.

There's an attrition in four year schools. Every class gets smaller. You lose some of your freshmen. You lose some of your sophomores. So by the time you get to the junior or senior year, four year schools often like to replenish those classes, because professors prefer teaching juniors and seniors many times, as to freshmen and sophomores.

I'll just throw in one other thing. I would highly recommend people look at the high school options programs. For the juniors and seniors in high school in Minnesota, I've seen and heard of cases where people during their junior and senior year accumulated two full years of college.

So at age 18, the most extreme case I ever saw was a woman who had a 4.0, with two years of calculus, all the sciences, 18 years old, she gets a high school diploma, two-year arts degree and she can name her game as far as going on.

Stack: One thing I'd add about community college is I think a very important thing. That is in Minnesota and in many other states, community colleges have a commitment to providing some of the lowest student to faculty ratios, so that you might find 15 to 20 students in a classroom.

There is most definitely a focus on good teaching. Faculty don't elect to go to become an employee at a community college because they want to have a career as a basic researcher in physics. They choose to go to a community college because they want to teach and interact with students.

The only piece of advice I have about Minnesota's Post Secondary Enrollment Options Act is that yes, it's possible.

Smith: That is where you can take college classes...

Stack: You can take college classes as a high school student. There are colleges and universities who will say to a student, "You can choose to have had this as high school credit or college credit, but you can't have both." You can't double count it.

And so although there are students who are able to do two full years and get credit for it at some places, it's not a universal truth. And so students do need to be careful if that is how they are planning on financing their education.

Smith: Carol Stack, thank you very much.



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