Don’t wait for the acceptance letter to consider the cost. iStockphoto By Susannah Snider, Staff Writer Update January 2015 Editor's note: This article originally appeared in the April 2014 issue of Kiplinger's Personal Finance. Typical scenario for parents of a high school senior: Your student identifies a half-dozen colleges he’d like to go to. He spends long nights and fraught weekends filling out applications. The whole family waits anxiously for the acceptance letters. In the spring, he gets accepted to the school he likes most. Then you realize you’ll have to scrounge to afford the price of admission, if you can afford it at all.Take Our Quiz: Test Your Financial Aid Knowledge Maybe you need to turn the process around. To give yourself the best chance of covering college costs and avoiding debt, weigh the financial fit of a school at the same time you consider the intellectual fit and feel—say, six months to a year before your student applies. Wait too long and you could find yourself agreeing to your kid’s college choice when your pocketbook says no. “It’s not helpful for families to think about cost in March or April of senior year, when they have to make a May 1 decision,” says Frank Palmasani, author of Right College, Right Price (Sourcebooks Inc.). The question of college affordability arose early for University of Rochester student Charlotte Humes of Bardstown, Ky. “I started thinking about cost before I even started the college search,” she says. Her stellar academic record, including a 4.0 grade point average and a perfect score of 36 on the ACT, meant she could expect generous merit awards from a number of schools, including public universities in her home state. But Humes had her sights set on the University of Rochester, a private school in upstate New York. After applying, she received an offer to interview for the university’s merit-based Renaissance & Global Scholarship, which covers tuition for four years. She landed the scholarship. Advertisement Humes knew she had a good shot at earning merit-based aid at the University of Rochester. She was clearly a competitive applicant—University of Rochester freshmen score between 29 and 32 on the ACT, on average, and have a 3.83 GPA—and the school awards non-need-based aid to 68% of incoming freshmen. A top-tier school might have met her full need (the difference between what the financial aid formula said her family could pay and the total cost of attendance), but because most of those schools don’t offer merit aid, she wouldn’t have been able to count on a full-tuition scholarship. The state school she applied to, Western Kentucky University, would have guaranteed a full ride based on merit. But it was not the intellectual fit that Rochester is. Estimate your aid As you start your search for colleges you can afford, you’ll need to know the types of financial aid available to you and how colleges and the federal government calculate it. Merit-based aid—typically grants you don’t have to pay back—is designed to reward students for their academic and personal achievements. It can come from state governments to encourage students to attend school in-state (Florida’s Bright Futures program and Georgia’s Hope Scholarship are examples), from outside scholarships or from colleges themselves. Schools typically use merit aid as a recruiting tool and often list scholarships and their criteria on their Web sites. Need-based aid in the form of grants and loans comes from the federal and state governments as well as from colleges. Federal need-based aid includes Pell grants for low-income students, subsidized Stafford loans and Perkins loans, as well as work-study, a guaranteed on-campus job. To get in on this aid, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA). Colleges use the FAFSA to determine your eligibility for federal need-based aid, and most public colleges and many private schools also use it to dispense their own financial aid dollars. The FAFSA uses a family’s financial information, such as income and assets, to determine “expected family contribution”—the amount of money your family is expected to pay for college each year. Family size and the number of family members who will attend college during the year also matter. You’ll be responsible for contributing about the same total amount whether you have one or four children enrolled. Advertisement Income counts most heavily in the federal need equation (with an allowance for living expenses), whereas savings get off relatively lightly. Parents can expect to contribute no more than 5.6% of their assets toward college costs, after an allowance; retirement accounts and home equity are excluded altogether. Students must contribute up to 20% of their savings. Your financial need is the difference between your expected family contribution and the cost of attendance. Schools with generous financial aid policies meet 100% of need in their awards, usually with a mix of loans, grants and work-study. Other schools leave a gap between your financial aid award and the cost of attendance; it’s up to you to cover the difference. The most generous colleges meet full need with grants rather than loans. Many private colleges use an additional application, called the CSS Profile, to determine how much institutional aid they will award. This application expands on the financial information required by the FAFSA, but it also differs from the FAFSA in certain ways—for instance, by including home equity in parents’ assets. Knowing which application the college uses to dispense its own money can be helpful in figuring out how much need-based aid you’ll qualify for. For instance, if you have a lot of equity in your home, you might get a better deal from a college that uses the FAFSA to determine need-based aid. You can also get an idea of your chances for aid by plugging your information into each college’s net price calculator, available on its Web site. The calculator will estimate your family’s need and the types of aid the college provides; some also have a section that estimates merit aid. Advertisement Make the match If you’re a megastar high school athlete, an outstanding scholar from a low-income background or a trust-fund baby, a whole range of colleges is financially feasible. But most high school students are somewhere in the middle. “When you can’t write the check and your child is not brilliant, you’ve got to go through certain processes to get the right match,” says Palmasani. Advice for students: Investigate at least a few private schools, your state’s flagship university and an out-of-state public college. You may be surprised to discover that, based on your income and academics, your state school isn’t the cheapest option, or that a private school—even an Ivy—is surprisingly affordable. Most top-tier schools don’t offer merit-based aid but will meet full need, and they define need generously. Public schools cost less upfront but may be stingier with scholarships or not meet full need. Second- and third-tier private schools tend to be generous with merit aid in order to fill seats and attract a high-achieving freshman class. (You can see how colleges stack up in terms of academics and financial aid in our College Rankings special report.) Say you’ve run the FAFSA numbers (use the “FAFSA4caster” at www.fafsa.ed.gov to estimate your EFC) and decided your family probably won’t qualify for much need-based aid, but you hope to get merit aid. Look at smaller, non-Ivy private colleges and non-flagship state institutions outside your home state. Identify those for which you’re in the top quarter of the applicant pool. You can see how you measure up by looking at the school’s incoming class on its Web site. Stats such as average test scores, GPA and admission rate will tell you how competitive the institution is and how likely you are to rank in the top quarter of applicants. Remember that just as you’re looking for a school that will help you grow and learn, colleges are looking for students to help them grow as well. You might find that you’ll get more merit aid if you’re a would-be chemistry major applying to a school that’s developing a chemistry program, or an out-of-stater applying to a regional, non-flagship public school. Colleges want well-rounded, diverse classes and might sweeten the pot with need or merit aid to entice you. Advertisement Some schools guarantee scholarships based on your test scores or state of residence. “Because the colleges that offer guaranteed scholarships are using them as a recruiting tool, they are quite open about the availability,” says Mark Kantrowitz, senior vice-president and publisher of Edvisors.com. For example, Grinnell College, a small liberal arts school in Iowa, grants $10,000 to every Iowan admitted. If you expect to qualify for need-based aid, apply to a school that meets as much need as possible, preferably with grants. That’s what Pomona College student Brenda Iglesias learned when she began her college search. She applied to Ivy League, private and in-state public schools. As a student from a low-income family, she knew that she qualified for need-based aid. She now has all but about $5,000 covered by financial aid at Pomona, which meets 100% of need. “I chose to apply to private schools because I knew they’d be more generous,” says Iglesias.