What To Expect When Expecting, College Admissions Edition

I have a few clients right now with rising high school seniors, facing the unthinkable1 next year.

Since patterns emerge across families, I thought a few universal words of advice about what to expect when you’re expecting (massive college expenses) could be helpful.

The big topics on this list of universal words of advice are as follows:

I. 529 Accounts

II. The most affordable path to a 4 year degree

III. Creating a competitive market for your child’s tuition dollars

IV. Understand rules on Federal student loans

V. Protect your own - and your child’s - financial future from the destructive power of The Collegiate Financial/Industrial Complex

VI. Understand the limits of “Scholarships”

VII. Understand the limits of “Need-based financial aid”

VII. Understand the opportunity of “Merit-based financial aid”

IX. Being clear-eyed and financially rational during the decision about where your child will attend

I. 529 Accounts

For years 1 through 15 of a kids’ life, the best financial planning you can do is to open up a 529 Account with the child as beneficiary. Even small amounts - contributed early in a child’s life - can help defray the extraordinary cost of higher education. At the end of this post I list a bunch of Truths and Myths about 529 Accounts in a kind of Appendix.

Until the child is approaching Sophomore or Junior year of high school, financially what you can do to prepare is make contributions - in whatever amounts are affordable to you - to a 529 Account.

The rest of the college finance topics are things you should work toward in the final year or two of high school. So the following topics are really the substance of the “What You Should Expect When You Are Expecting - College Admissions Edition.”

II. The most affordable path to a 4 year college degree

This is not where many families focus their attention, but the honest truth is the following:

The most cost-effective path to a 4 year college degree is either to

1. Enlist/join the US military, and tap into their generous educational benefits after service, or

2. Work toward a 2-year Associates’ Degree program at your local community college, get all As, and transfer to a 4 year college for your final two years of a Bachelor’s Degree. Your child’s degree will be from a prestigious 4-year program and it will be obtained at approximately half the cost. Also, their grades will probably be better (because of the getting-all-As part prior to transferring, as well as the fact that they are more mature and focused by the time they do upper-level college work.)

This lesson in college finance and college success is not usually described in the glossy brochures with the tremendously beautiful foliage. It is, however, the optimal plan for many families and many students. And that’s why its first on the list after 529s, because it should be an option much closer to the top for many families.

III. Creating a competitive market for your child’s tuition dollars

In the year approaching senior year of high school, perhaps the highest-yielding financial choice parents can make is to approach college as a financial beauty contest, with the parents as the judge. Ideally, you get 3 candidates (colleges) each with plausible advantages2 to choose from. Ideally, neither the parents nor the student is in love with any one choice in particular. If you can set up those conditions, then the financial beauty contest can begin in the Spring of senior year.

The big thing to understand for this setup is that even under ordinary circumstances, most colleges and universities are in a highly-competitive tuition-revenue maximizing game. Outside of the very richest and most competitive schools (Let’s say the top 15-20 nationally, all famous brand names) every other college is anxious to yield the most tuition (and room and board) dollars at the highest average grades-and-scores optimization point they can manage, to keep up their rankings. They are willing to “pay up” in terms of merit scholarships to boost their incoming classes grades and scores, again for rankings. Despite what they say, the colleges are also willing to be more flexible for full-tuition pay students, when it comes to admissions.

What does this mean? It means that if your student is potentially in the top, lets say, 25% of any specific college’s incoming class, the school is probably quite willing to increase their merit package. If asked. And especially if they know they are in competition with another school. On the other hand, if your student is in the bottom 50% of the incoming class in terms of grades and scores, then the college will be less flexible, since they derive less benefit in their tuition-maximizing-while-also-optimizing-competitive-rankings game.

Creating a beauty contest means including in the mix one or two schools that will be significantly cheaper than your highest-priced option. That means your in-state public university. Or that means a private college for whom your student is in the top 25% of incoming freshmen, grades-and-scores-wise

The next thing to understand is that these are not ordinary circumstances. Colleges and universities are facing a very tough demographic situation which makes their competition for your tuition dollars that much more intense. An alarming report from the Western Interstate Commission on Higher Education projects that the pool of graduating high school seniors will decline dramatically between now and 2041. A more optimistic report from the National Center for Education Statistics says enrollment will flatline from now to 2030, and then decline after that. In any case this is bad news for colleges but good news for parents who can navigate the financial beauty contest, pitting colleges against one another for their scarce tuition dollars.

All of this combined means that the key to households savings tens of thousands of dollars for college is to:

1. Not get wedded to any particular outcome, but generate multiple plausible options among schools that will compete with one another on “merit aid,” aka tuition-cost reduction.

2. Use those plausible options to create an authentic marketplace for your tuition dollars.

3. Be willing to bring schools in direct competition with one another between April and May of your student’s senior year. That means letting the financial aid office of schools know what your best offer is somewhere else and asking if they can improve their overall financial package.

4. Voila. They will be flexible and you will save many tens of thousands of dollars over 4 years. YOU ARE WELCOME.

**Important note: This method doesn’t work with the 15-20 most highly competitive colleges, as they have unlimited demand for their spots and can fulfill their tuition-maximizing financial goals through reputation and high demand alone. Those schools do not generally offer “merit scholarships.”3

All that means however is that if Princeton or Georgetown isn’t offering merit aid, your family should try to generate two other plausible options for colleges at lower cost, that do offer merit aid. If you decide to pay up the approximately $400K to attend those high-prestige schools, at least you know you chose it for important reasons that were “worth the money.” At least to you.

IV. Understand rules on Federal Student Loans

Some good news: Federal loans do not require a credit score.

Federal loans do require parents to fill out a FAFSA form, although that has gotten easier with a linkage to your IRS household data.

Under current rules, following changes in July 2026, the basic amount of student borrowing allowed by Federal student loans is $5,500, $6,500, and $7,500 in years 1 through 3 and beyond, for a total of not more than $31,000 maximum for an undergraduate degree per student. Parents can borrow up to $20,000 per year as well.

Federal students loans are medium cost. They charge higher interest than a prime car loan or prime mortgage, but much lower than a credit card. Each year there there is a single rate applied to all federal loans, regardless of qualifying credit or assets or income.4

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V. Protect your own - and your child’s - financial future from the destructive power of The Collegiate Financial Industrial Complex

The game of the Collegiate Financial Industrial Complex is to convince you and your child that there is a “perfect fit” college for 4 years, and that happiness and fulfillment will flow if the child’s “dream school” can achieved (and paid for, at whatever cost). And so logically how could a parent ever put a limit on something so priceless as a child’s happiness and fulfillment? That’s the game the Collegiate Financial Industrial Complex is playing and wants you to play.

Protection of your own and your child’s financial future derives from understanding that

• Every college is also a (big) business.

• They are in the dreams-marketing business.

• Reasonable limits on the cost of the 4 years college experience can, and should, be set.

• An undergraduate degree is not particularly marketable or financially justifiable on its own.

• Happiness, success, and personal fulfillment can likely be found at dozens if not hundreds of institutions of higher education, at all different levels of cost.

• If this is actually the “best 4 years of your (child’s) life,” then that’s probably not a great life.

Protecting yourself from the Collegiate Financial Industrial Complex means understanding and believing each bullet point above.

VI. Understand the limits of “Scholarships”

In general, chasing well-known national scholarships are a fool’s errand. The types of scholarships that your student will actually win are local, extremely specific, and worth small dollars. It may still be worth it for your student to attempt to collect $500 at a time from a variety of local and highly specific scholarship entities. But that’s the scale you should expect. You should not expect $10,000 per year (or more) scholarships to be available. Obviously it can happen, but you need exceptional qualifications and luck to make that happen.

“My child will just get a scholarship” is a statement based on magical thinking, which is the opposite of a real plan.

VII. Understand the limits of “Need-based financial aid”

Colleges - especially very rich colleges - authentically offer huge discounts to their sticker prices to students based on demonstrated family need. If your family has a relatively modest income, the rich colleges can be very generous. If you are in the $200K household income or above bracket, however, there are only a handful of schools that are very generous. The best advice for sorting out how your family will be viewed as eligible for need-based financial aid is to navigate to the Net Price Calculator5 for any college and spend 3 minutes inputting your specific financial information. That link allows you to input any college and be brought to that college’s net price calculator.

Alert: This is possibly the most important note of this whole document:

EVERY SINGLE COLLEGE has a net price calculator on their website. Colleges have different resources for offering need-based financial aid so you can check out how your household specifically matches up with the generosity of any school you are targeting.

If your child is already in high school, heading to college soon, and you haven’t spent some time checking out the net price calculator of plausible schools, this could be the most important 10 minutes of financial reality you can engage in right now.

Most private institutions require - in addition to FAFSA financial disclosures - that every household provide additional financial information via the CSS Profile run by College Board. This helps them round out the information they need, in addition to the FAFSA form, for determining need-based financial aid to your family.

VIII. Understand the opportunity of “merit-based financial aid”

Most private colleges want to, and will, offer your student “merit aid.”6

The best way to understand this is to not focus on the stated dollar amount of merit aid, but rather on the all-in price remaining for a year, or four, of that college.

If you receive $40 thousand dollars in merit aid from a private university, but the original prices is $90 thousand per year, you still owe $50 thousand per year. That $50 thousand may still be much more expensive than the $25 thousand per year for an in-state college. In this example, even after receiving extraordinarily generous merit aid ($40K per year!) you are still paying twice the amount ($100K extra over 4 years) for the privilege of the private university.

Is that worth it? Don’t fall into the behavioral financial trap - known as price anchoring - that would lead you to think “Wow, my kid can get a $90K education for just $50K per year? What a bargain!” That’s the same trap as paying $800 a year for a dress that’s on sale down from $2,500, when you could have just bought the $400 dress, or whatever.

The point is not the merit aid. The point is the all-in cost.

Conversely, some well-endowed private universities may offer your family a $70 thousand price reduction due to a combination merit-aid and need-based aid, bringing the cost below the public university. That situation is much closer to a bargain.

In other words, merit aid is like a coupon offered to reduce the price, but the point is still to focus on the total price you owe, not the coupon. And they are all offering coupons as part of their revenue-optimization strategy.

The key to understand about merit aid is that it’s less about your darling student’s accomplishments and more about the private college engaging in a tuition-optimization game. Even if their stated “sticker price” is $90 thousand per year, they really, really need to attract a large number of households that can afford to pay $70 thousand, and $60 thousand, and $50 thousand, and $40 thousand a year, to make their entire tuition and room-and-board targets per year. They are in stiff competition for families who can pay those very hefty amounts. Those prices - despite the merit aid - may still be higher than in-state prices, which means there are market forces that limit their ability to yield as many full-pay students as they would like.

It is your job and opportunity as a parent to use market forces and the power of competition to extract even bigger discounts than the colleges initially offer.

IX. Be clear-eyed and financially rational during the decision about where your child will attend

All of this can be summed up as: Be clear-eyed and ruthless about your interactions with the College Financial Industrial Complex, as they are being clear-eyed and ruthless about maximizing revenue while still maintaining their precious rankings.

Create a financial beauty contest (maybe 3 legit contenders in April of senior year) which can be pitted against one another to compete for your tuition dollars. The result of this clear-eyed approach will be savings of tens of thousands of dollars over 4 years. Pretty much guaranteed.

Appendix - Truths and Myths of 529 Accounts

Truths about 529 Accounts

Unlike custodian trust accounts or straight-up bank accounts in the child’s name, a 529 Account will always be controlled by the parent (or person) who opened the account. That has some long-term advantages over trust/custodial accounts, which would revert to the child’s control when they come of age.

The 529 accounts are only medium-good at tax efficiency. You might get a state income-tax break.7

You will get a dividends, capital gains, and interest-income tax break for investments inside a 529 account, which is good.

It does not matter which state you open up the 529 in, if the state you live in does not levy income tax.8

Overaccumulation of funds inside a 529 account has become less of a risk in recent years, both because you can use up $35 thousand to fund a beneficiary’s Roth IRA and because the definition of educational expenditure has expanded quite a bit.

The single best purpose of a 529 account may be to attract funds from grandparents or other people interested in your kids’ education.

Myths about 529 Accounts

Myth: You are limited to $19,000 per year in annual contributions per beneficiary.

Actually, if you have the available funds you can “super-size” your funding of these accounts by combining 5 years’ worth of contributions in one year.

Myth: I only have $50 per month to contribute to a 529, so what is the point?

In that case the point is that if you have 15 or 18 years to plan, you can double or even quadruple your money. Even if its a relatively small amount, that’s still a good thing. Also, even modest 529 accounts are a useful starter amount for a discussion within the household - or with your child - about the extraordinarily high costs that may be involved as compared to the modest sums available to cover the costs. Put some money aside now and then be ruthlessly willing to make hard choices when the time comes.

Myth: These should be aggressively funded before funding your retirement accounts Nope. No way. Retirement accounts for yourself are typically more powerful than a 529 account in terms of improving your household net worth. If choosing between buckets for your scarce dollars, aggressively fund your retirement accounts first, and then only after that, modestly fund your 529 accounts.

Myth: You have to open up a 529 in your state, or a particular state. Nope! I recommend the New York 529 Account because I am familiar with it and many products offered there are low-cost Vanguard funds. Vanguard also offers a Nevada 529 on their platform for anyone, and that also seems like a fine deal. Some states have sort-of-crappy 529 account offerings9, and you don’t need to be limited by your states’ menu of options.

Myth: You will be penalized by a college financial aid department for saving money in a 529 account, so the best strategy would be to not save money.

This is analogous to the mistake people make in saying “I don’t want to earn more money because I’ll be taxed on my additional earnings.” Additional money and savings is a good thing, not a thing to be avoided. This is one of the most common 529 myths and it’s a huge disservice to the parental higher-education planning process. Having more money at your disposal is not a disadvantage. Basically, ever. Don’t use this excuse to avoid saving in a 529 account.

Myth: The student’s grandparents can “hide” their savings or 529 accounts for the student, so that the student can qualify for need-based financial aid.

Not likely. The private-college disclosure form CSS requires disclosing funds for the student set up by a grandparent.

Also, like, don’t try to hide stuff. Just pay your taxes, disclose truthfully, and be grateful if you have resources available for your child. You, and they, are lucky.