For many affluent families, the college financial planning conversation starts with a familiar assumption: “We make too much money to qualify for financial aid.” They may be right about traditional need-based aid. But that doesn’t necessarily mean they should expect to pay full price for college.
One of the most overlooked opportunities in college planning – particularly for higher-income families – is institutional merit aid. And capturing it often has less to do with finding outside scholarships and more to do with building the right college list in the first place. For financial advisors working with families of high school students, that’s an important distinction.
Merit Aid Isn’t Necessarily About Financial Need
Need-based financial aid and merit aid operate very differently. Need-based aid considers a family’s financial circumstances. Merit aid generally does not – colleges may award institutional scholarships based on academic achievement, talents, or other characteristics they want in their incoming class.
But there is another way financial advisors should think about merit aid: it is also a pricing and enrollment strategy. Colleges compete for students. When an institution particularly wants a student to enroll, it may be willing to reduce the price through institutional grants and scholarships.
NACUBO’s latest Tuition Discounting Study estimates that private nonprofit colleges discounted tuition and fees by an average of 57.1% for first-time, full-time undergraduates in 2025-26. Nine out of ten first-time undergraduates at participating institutions received institutional grant aid. That’s why we encourage families to stop thinking about college as having one price. The better question is: What will this college cost this particular student?
The College List Can Become a Financial Strategy
Consider a hypothetical student with a strong GPA, rigorous coursework, and a solid extracurricular record. That student could apply to three different categories of colleges.
At College A, the student is similar to almost every other applicant – admission is highly competitive, and the institution offers little or no merit aid. At College B, the student is a strong candidate and may receive some institutional scholarship money. At College C, the student’s academic profile is well above that of the typical incoming student, and the college is actively trying to attract students with that profile – making it likely to offer a significant merit scholarship.
Same student. Same family balance sheet. Three very different potential college prices. This is why selecting colleges solely by reputation, ranking, or sticker price can lead families to miss significant financial opportunities.
A $25,000 Scholarship Isn’t a $25,000 Decision
Financial advisors naturally think long term. Families often don’t when evaluating college offers. Suppose a student receives a renewable $25,000 annual merit scholarship. That’s potentially $100,000 over four years.
Now put that amount back into the family’s broader financial plan. What could $100,000 mean if it remained invested for retirement? Could it fund graduate school? Could parents avoid tapping home equity? Could the student graduate without private loans? Could unused 529 assets eventually be redirected to another beneficiary or moved into a Roth IRA (subject to applicable rules and limits)?
Suddenly, merit aid isn’t simply an admissions issue. It’s a wealth-planning issue.
The Most Prestigious School May Offer the Least Merit Aid
There is an important paradox for high-achieving students. The colleges families perceive as the biggest “prizes” may have the least incentive to discount their price. Some highly selective institutions provide generous need-based aid but little or no institutional merit aid – they don’t need merit scholarships to persuade highly qualified students to attend.
Other excellent institutions compete aggressively for those same students. An analysis of Common Data Set information from more than 350 institutions illustrates how dramatically merit practices can vary: some institutions provide no merit aid to students without financial need, while others use significant awards to recruit students they particularly want.
For a family capable of paying full tuition, this creates a meaningful strategic question: How much additional value are we receiving for the additional dollars we’re spending?
Merit Aid Changes the Meaning of “Affordable”
Imagine a family creates a college budget of $50,000 per year. They might immediately eliminate a private college with an $80,000+ total cost of attendance. But suppose that institution commonly awards substantial merit scholarships to students with their child’s academic profile. Meanwhile, another school with a lower published price may offer that student very little institutional aid. The supposedly “expensive” school could ultimately cost less.
That’s why sticker price should rarely be the first filter used to build a college list. Net price is what matters.
The Advisor’s Opportunity Starts Before Senior Year
By the time acceptance letters and financial aid offers arrive, much of the strategy has already been determined – the student has chosen where to apply. That’s why financial advisors can add enormous value by introducing the college affordability conversation before the college list is finalized, ideally during sophomore or junior year.
Here are five questions worth asking clients with college-bound children:
- What are you willing to invest in undergraduate education? Not what could you technically afford – what amount fits comfortably within the family’s broader financial plan?
- Are you expecting to qualify for need-based aid? If the answer is no, merit strategy becomes even more important.
- Is graduate or professional school likely? A family considering medicine, law, or another advanced-degree career should evaluate undergraduate spending as one part of a much larger education investment.
- Does your child’s college list include schools likely to value their particular academic profile? This is where admissions strategy and financial strategy intersect.
- Are you comparing colleges based on four-year net cost rather than sticker price? A $20,000 difference doesn’t sound as consequential when viewed as a single year’s tuition. Over four years, it’s an $80,000 decision.
College Planning Is Becoming Investment Planning
Families understandably want their children to attend great colleges. But the objective shouldn’t simply be admission. The objective should be finding an institution where the student can thrive academically, move toward a meaningful career, graduate successfully – and where the family’s investment makes financial sense.
That requires families to evaluate career fit, college fit, admissions probability, and financial fit together. For financial advisors, this creates an opportunity to expand the college conversation beyond the 529 balance.
Instead of asking only “Do we have enough saved for college?” consider asking “Are we making sure this family pays the right price for college?” That question could ultimately be worth tens of thousands of dollars – or more.
A Resource for Your Clients
At Pathfinders College & Career Advisors, we help families connect career planning, college selection, and education investment decisions so students can choose their path with greater clarity – and parents can make those decisions with greater confidence. Schedule a complimentary strategy call to explore how a career-first college strategy can complement the financial planning work you’re already doing with your clients’ families.
Career First. College Second. Join the movement to help families make smarter education investments.
