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Buying Down While Choosing a College

Mar 22, 2011

The recent economic collapse has caused a multitude of financial behavior changes in people. This new sensitivity to cost and incurring debt is now influencing students and their families as they decide upon a college. It's brought the idea of 'buying down' to the decision-making process.

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By Jeff Calareso

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The Buying Down Idea

Prior to the economic collapse, it was common for many students to pick colleges with a lack of focus on cost that may seem cavalier now. At the time, students were more casually taking out loans to pay tuition bills they couldn't otherwise afford. That attitude is starting to change. More students are rethinking their first choice institution and 'buying down,' or settling for a second favorite if the cost is better.

Buying down doesn't necessarily mean sacrificing quality of education. Instead, it may mean taking a hard look at where those tuition dollars going. Will they translate into better financial opportunities after graduation? Or are you paying for a level of prestige that won't guarantee a type of career success you couldn't necessarily get at your second choice?

For example, many students and families are recognizing that an institution that charges $10,000 less per year than another may provide a highly comparable education. Over four years, that $40,000 savings can loom large and influence a decision. Also important for this decision are loans and grants. While one college may offer loans to help cover tuition, the appeal of grants that don't need to be repaid is strong.

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Good for Higher Education

It may seem that students spending less on tuition will hurt colleges, especially when so much of their revenue is based on these dollars. Yet the buying down phenomenon may actually be a benefit to these institutions in the long run. It's an indicator of students making more financially sound decisions before they begin their studies. That can have long-term beneficial effects.

Ideally, students are choosing colleges and universities they're better able to afford. This can result in fewer students graduating in debt, or students graduating with less debt than if they'd gone with their more expensive top choice. This fiscal awareness might be indicative of students taking higher education more seriously. Students who make such calculated decisions before they begin college may be more likely to finish college. Fewer dropouts or transfers translates into more revenue for colleges and more successful students.

When deciding between various colleges and universities, comparing costs can require close analysis.

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