College Early Decision Agreements: Binding or Not?

Colleges should be sending out their Early Decision notifications this week.  It’s one of the times of the year when I have my fingers and toes crossed very hard for my students who have applied early.
But applying early decision (ED) is not a good idea for every college applicant.  For some, sending out a single application could be financially foolish because it carries a binding agreement to attend that school no matter what.
My colleague Zac Bissonnette at Daily Finance, quoted me in a recent article in which he argued that families should ditch their college early decision agreements and save their financial health.
As usual, Zac is provocative.  The fundamental thesis underlying all of his writing is that most people are generally too willing to drive themselves to financial ruin in order to invest in a college education.  I agree with this fundamental notion, and one of the most satisfying aspects of my work is when I am able to save families tens of thousands of dollars–or more–by simply rethinking their  priorities.
As Zac points out, Early Decision agreements can be ruinous for the family that will struggle to pay for college.  I have written at length about how these ED agreements work.
But let me clarify my position:  I don’t advocate that students and their families renege on the binding ED agreement.  The only justifiable grounds for getting out of this agreement is insufficient financial aid.  As I told Zac, if financial situations are such that parents simply cannot (or will not) be able to pay for a college, then the family (along with the student’s high school counselor) should communicate with the financial aid office and ask to be released from the agreement.
But it’s MUCH better to never get yourself into this sort of pickle in the first place.  Again, if you go back and read my full article explaining how ED works, you’ll understand that colleges have less incentive to offer the best financial aid packages to early applicants.  Of course, colleges will say that they offer equivalent packages to ED and regular applicants.  But there is no way of proving or disproving their claim; they do not divulge all their records and offers publicly.  The logic of the situation (plus long talks with admissions officers off-the-record over beers) indicates that this is how colleges do business.
Therefore, if ever a family comes to me with any indication that financial aid awards will be central to the decision about where their kid goes to college, we shun Early Decision agreements so that students can do some comparison shopping later in the spring.  (It’s okay to apply Early Action,  however, as these admissions programs carry no binding agreement).
Zac’s point is that everyone should put the college price tag as Criterion #1 in choosing a college.  For most people, he’s probably right. But there are other considerations involved, too, and it’s hard to make a general rule when each family’s financial circumstances are different.
My point is that no student should ever renege on their ED agreement, because if they are informed and thoughtful, they will  never get in the situation in which reneging is essential to maintain a family’s financial health.
Mark Montgomery
Educational Consultant