Adjusting Your Financial Plan When College Tuition Rates Reset

College tuition rate resets can impact parents' college planning.

Adjusting Your Financial Plan When College Tuition Rates Reset
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Next to buying a home, paying for your child's college education may be one of the largest investments you ever make. For the 2017-18 academic year, the average cost of tuition, fees and room and board at four-year public universities totaled $36,420 for out of state students. The average cost rose to $46,950 for students attending private colleges and universities.

As the price tag for attending college continues to grow, some schools are responding with college tuition rate resets. This strategy is designed in part to make college more affordable for students and parents. If your child is planning to attend a school that's adjusting tuition rates, it's important to know how that could impact your financial plan.

How Resetting College Tuition Rates Works

Tuition rate resets occur when colleges and universities reduce their published tuition prices, before scholarships and financial aid packages are awarded to students. The result can be a deep discount for students; LaSalle University, for instance, reduced tuition prices by 28.7 percent for the 2017-18 school year.

There are several reasons why schools may pursue lower college tuition rates. In addition to benefiting students and their families, tuition resets can help spur higher enrollment numbers and make it easier for colleges to control student costs. Effectively, universities can make up for the discount in volume if more students take advantage of rate resets because they're less susceptible to sticker shock.

Both private and public universities can utilize the rate reset strategy. In addition to LaSalle, schools such as Drew University, the University of Virginia, the College of William and Mary and Utica College have reduced college tuition rates.

What Lower College Tuition Rates Mean for Parents

If you're actively planning and saving for college in a 529 account, Coverdell ESA or another savings vehicle, tuition rate resets could reduce the amount you need to save. This could in turn free up money that you could use for other purposes -- such as funding your retirement accounts or reducing debt.

Additionally, when college tuition rates drop due to resets a side effect may be more transparency in college pricing. It may be easier to determine exactly what a school charges and where your money goes. There are, however, some potential downsides that could affect how you plan for college savings.

First, tuition rate resets often apply only to undergraduate students. If you're helping your child pay for graduate school, you may not see any noticeable difference in tuition rates. The same may be true for students enrolled in online-only degree programs.

A second possible hitch is that lower college tuition rates could reduce your student's financial aid package, including scholarship and grant awards. If you're counting on those to help supplement what you've saved to pay for college, the end result could be a larger gap that you have to make up out of pocket.

A third possibility is that schools may find that tuition rate resets aren't sustainable for the long-term. In that scenario, they could opt to increase rates to the previous levels. That could be problematic if your student enrolled in a specific school on the premise of locking in lower college tuition rates. If you can't fund the difference with savings and scholarships or grants are unavailable, they may have to rely on student loans to continue their education.

Focus on Value When Choosing a College or University

While lower college tuition rates can be tempting, cost isn't the only factor to consider as you help your child select a school. Instead, think carefully about the value they're getting for the money you're spending.

For instance, they may learn better in a smaller classroom environment. Or, they may thrive when they have the opportunity to work in larger groups. If ensuring that they get the best education possible is a priority, cost is a secondary concern.

Remember also that cost can be deceiving in terms of perceived value. Just because a school is more expensive doesn't necessarily make it better. And a school that offers a discounted rate doesn't mean the equality of the education offered is less.

When considering a school that has lowered, or plans to lower, college tuition rates, take into account its motivations for doing so and the long-term impacts. Specifically, consider the benefits a rate reset is likely to yield for the school, whether it's a policy the school can realistically adopt and how it directly influences your total costs.

Some schools, for instance, may apply resets only to tuition while others may also reduce fees and room and board costs. Consider whether reducing tuition may impact the quality of student programs or services offered on-campus, such as student health care or extracurricular activities. Reviewing the big picture on resets can help you determine whether lower college tuition rates offer any significant financial advantages.