When it comes to paying for college, most parents are bringing a knife to a gunfight.
In our consumer culture, when we make large purchases (cars, houses, vacation homes, etc.) there is a built-in gatekeeper — a loan or mortgage company. They require us to jump through hoops and “qualify” for a predetermined amount of money they are confident we can pay back.
In some instances, the gatekeeper’s definitive decision on how much money we qualify to borrow will change the zip code we shop in for a home or alter the model of car we buy. The fact is, we’ve been conditioned to outsource the qualification process to a third-party that stands between us and those big purchase decisions.
We literally rely on the interested third-party — the lender — to make sure we don’t get ourselves in trouble by biting off more than we can chew.
Except when it comes to college
Families have been operating without any guardrails, gatekeepers or meaningful guidelines for college spending for far too long.
College is an emotional process, so parents often find themselves in over their heads and forced to accept the consequences of an unwise purchase. Many find themselves digging out of that hole at the expense of their current and future lifestyle (aka retirement).
But what if we could be better consumers of higher education?
What if there was a way to “qualify” families and help them “buy college” in a way that increases the likelihood of them being able to make all the payments, on time, on budget, in the context of all their other financial priorities?
The tool I use to answer these questions is the College Admissions Profile (CAP) Index. I haven’t found any other tool that answers these questions as effectively as this one.
The CAP Index has two unique features: a calculator to assess a student’s competitive position and a searchable database of colleges.
In my opinion, it’s comparable to using a FICO™ score to assess credit worthiness for mortgages and other loans.
To bring this analogy to life, see the comparison table below:
Finding and funding ‘right fit’ colleges
The CAP Index is not intended to pinpoint the “perfect” school; it’s more of a matching system or rangefinder that identifies institutions that are likely to meet their needs on all the success criteria associated with the college search. Focus on the right college zip code for the household, if you will.
More than 30 years ago, Todd Fothergill and Tom McGrath, founders of Strategies For College, asked this exact question. With the cost of college and student debt mounting, they began collecting data on how colleges balance cost of attendance (COA) and a student’s expected desirability.
Creating the initial college search list with this software is efficient, effective and accurate. It has been used by professional independent education consultants (IECs) in high schools and in private practice to generate college lists for over 10,000 students.
CAP Index integrates data from two critical sources: the student‘s academic profile, internally referred to as “the college FICO score.” and the parents’ expected family contribution (EFC — which will be converted to a student aid index or SAI in 2023 if Congress approves the change). Once the data is entered, the software instantly calculates a score for the student. This score is then compared to scores of the colleges.
Why is this important? Armed with this data, advisors can provide each student with an accurate assessment of their standing within the pool of typically admitted students at any college. Experience has shown that students who sit in the top 25% – 35% of typically admitted students have the best undergraduate experiences, graduate in four years, and receive preferred financial aid packages and merit scholarships.
With the input of a professional who understands the students’ academic and personal fit, this tool achieves statistics far above the national average in three key metrics: Acceptances, Retention and 4-year Graduation rate.
I haven’t found a college list builder that has the features in the CAP Index. What makes it unique is the way it integrates student profile, college profiles (based on the same metrics), advisor know-how, and the family’s financial profile to generate results.
I do keep my eyes open for competitors but have not found one yet that works as well. The key differentiator is CAP Index requires advisors to step in much earlier in the student’s timeline. The family’s ability to pay is considered right from the start in building a list of potential schools — when there’s still time to create the best financial approach. Concurrently, it integrates other needed professionals into the process, including an independent education consultant (IEC). It then produces a PDF report that is easy for the families to interpret and understand. This helps us manage expectations with the family and avoid disappointment for the student.
The recent loan forgiveness headlines highlight a fundamental flaw in our collective approach to “buying college” in America.
When the buyer (the family) is financing their purchase (education) through a lender that does not qualify them financially for likelihood of repayment (the department of education funded by all tax paying citizens) and the recipient of the money (colleges & universities) have no consequence for the outcome, the system is literally doomed for failure.
Until the colleges and universities “own” the outcome of the students — meaning they are on the hook for the lending and repayment of financing the education they deliver and the outcomes that creates for the students — this will not be resolved to anyone’s satisfaction. This whole situation is an opportunity and a very real teachable moment for us to rethink access and inclusion for all pursue higher education. In the meantime, the private sector can and should serve as the gatekeepers for families and protect them from making financial mistakes from which they are not likely to recover.
Beth V. Walker is a wealth advisor with Carson Wealth Management and founder of Center for College Solutions, which is based in Colorado Springs, Colo. She is also the author of the book “Never Pay Retail for College” Beth supports the SFC Consortium by collaborating with IECs, assessment coaches, and test prep coaches to provide services to families. She can be reached at [email protected] or 719-522-2278.