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A College Investment Strategy

Everyone in the business world is familiar with the concept of ROI, or "return on investment": Basically, you want something to show for what you've put in. That's one reason why choosing a college is such an important decision -- the investment is significant, so you want to be sure you'll get the greatest return possible.

Based on his extensive analysis of research on tuition, rankings, and admissions, Malcolm Getz, professor of economics at Vanderbilt University (Nashville, TN) and author of "Investing in College: A Guide for the Perplexed" (Harvard University Press, 2007), offers insight into getting the most bang for your college buck.

College Investment Fact: The price of tuition is not clearly associated with quality of education, since a percentage of student costs may be covered by the state government for public schools, and endowments for private schools, notes Getz. "What high price really buys is prestige."
Investment Strategy: Don't assume you can only get a high-quality education at a school with a high sticker price. Broaden the scope of your search to include colleges at various tuition levels.

College Investment Fact: Less than 5 percent of the population can afford to pay full tuition prices at the most selective colleges.
Investment Strategy: Don't be scared away by a school's sticker price. In fact, the most selective colleges offer the most financial help, reports Getz. You can also search for private universities that offer need-blind admission, since these schools promise to help meet the financial need of every student they admit.

College Investment Fact: Schools with high tuition prices may be more affordable than those with lower tuition prices, says Getz. Grants, scholarships, tax breaks, and subsidized loans can all lower the final college cost.
Investment Strategy: Compare financial aid offers -- schools may be willing to negotiate if you're offered a better package from a competing school.

College Investment Fact: However, "states with low in-state tuition are better bargains for higher-income students because states with low tuition tend to provide subsidies to all students, regardless of income," explains Getz.
Investment Strategy: Don't be led by tuition prices alone. Understand your final sticker price before making any college decisions.

College Investment Fact: Sixty percent of all undergraduates attend more than one college before graduating. Of those students, 35 percent transfer to a school in a different state than the first one.
Investment Strategy: Don't worry if you don't get into your top school, but don't put all your college eggs in one basket, either. Switching schools does not always translate into a loss of investment. Many students are able to save money by attending a community college their first two years and transferring to a four-year university to finish their degree.