Kids & Money: What Will College REALLY Cost You?

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graduationWhen it comes to the cost of college, many parents and students consider only what they will pay for tuition. The listed tuition price is often the price that is considered the most important; it is usually the highest single cost.

However, it is important to look at more than just tuition costs when making a plan to pay the college education bill. There are numerous other expenses involved with attending college, and in some cases those costs can add up to rival the cost of tuition at the more moderately-priced schools.

What Costs Come with College?

Your first task is to determine how much college will cost by having an understanding of some of the terms used to describe higher education costs. Here are some of the terms to watch out for:

  • Tuition: This is how much it costs to attend college. Tuition might be listed as a price you pay semester, as a full-time student, or it might be expressed as a per-credit cost.
  • Fees: These are add-ons that are mandatory for students to pay each year, or each term. Some courses come with additional fees attached, and all students usually have to pay athletic fees and academic fees, on top of tuition. Double check the fees so you have a good idea of what you’ll actually be paying.
  • Direct costs: At some universities, you pay direct costs to the university. This can include the cost of meal plans, and housing. Find out the requirements at the university. In some cases, students are required to live on campus freshman year, and buy a meal plan.
  • Indirect costs: These are costs of going to college, but they aren’t paid directly to the school. Some of these costs include transportation, books, food, off-campus housing, laundry, and other expenses that often crop up.

The good news is that federal law requires schools to disclose an estimate of how much it costs to attend school. This includes an estimate of living expenses as well as tuition and fees. The bad news is that many schools obey this law by not providing the information in a way that is readily accessible. You might have to hunt for it, or even call the school and ask for the information. In any case, do your best to estimate the total yearly cost of attendance, and don’t rely only on tuition figures.

Paying for College

Having an idea of how much college will cost can be helpful, but you also need to factor in inflation. Tuition rises at a faster pace than inflation. One rule of thumb is to factor in a 8% yearly increase to tuition. And remember that other costs, such as food and transportation, are also subject to inflation. Once you have done that, you can start looking for options to help you pay for college, including:

  • College savings plans (529s, Coverdells, etc.)
  • Scholarships
  • Student loans

You really do need some sort of plan if you want to afford the rising cost of tuition and other expenses. And that starts with understanding just what you’ll be paying for.

(Photo: Sean MacEntee)

{ 9 comments, please add your thoughts now! }

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9 Responses to “Kids & Money: What Will College REALLY Cost You?”

  1. The cost of college is outrageous these days. Not only do I have one kid in college (and two more on the way) I also work at a college for my “day job”. If you can save up enough to pay for college, god bless you! But if not, you’ll end up like the rest of us who take out loans…

  2. Matt says:

    Getting a job helps a lot and going to an instate school will keep cost reasonable. I’m lucky that I live in VA which is loaded with good state colleges.

  3. Scott says:

    “federal law requires schools to disclose an estimate of how much it costs to attend school” – is this just for public schools or is it really ALL schools?

    With the economic downswing, rising student fees are getting called in question. Many colleges are facing a lot of backlash over increasing fees for things like athletics, which not all students care about. In the basic scenario, the university lets students come to games for free or reduced prices but then charges the entire student body enough fees to cover the difference. It’s borderline fraud. Hopefully they will sort out this mess and make it more transparent before my kid goes to college. (For the record, I do personally love college athletics, but I think students should have a choice to support them or not.)

    • Matt says:

      That’s something that would happen at a D-2, D-3, or D-1 school that can’t sell out football stadiums. Most D-1 colleges make a lot of money on football.

    • Educate4Less says:

      Net Price Calculators are notoriously inaccurate. Better to manually do the EFC calculator – good one at collegeboard dot com – and then arrive at approx net cost.

      For a $100k income family, an elite private college will almost certainly be cheaper than an average state college.

  4. Matt says:

    For colleges that are football or basketball powerhouses athletics are one of the biggest money makers, they support other sports and all women’s sports which all lose money for colleges. Also boosters donate huge amounts of money to colleges with good football teams for all sorts of things, not just athletics.
    Perhaps the solution would be only sports that make money can stay, other teams could reduce costs by getting a cheap coach or would be canceled.

  5. Kenny says:

    Loyola is $47K in 2012-13;
    Univ of IL is $33K in 2012-13;
    Northwestern is $58K in 2012-13;
    Univ of Chicago is $63K in 2012-13;

    All of the numbers above includes everything in it, including food, tuition, transportation, books, misc expenses, differential fee for science, lab fees etc.

    Without a 529 plan setup by age 10, kids will be a graduate with lots of loans.

    Loans from govt are hard to come by, but, if you get it, then it is 5% and 7.5% right now (Sub and Unsub).

    BEST BET is to buy a Condo near the Univ and send you kid, if you can pull that off with the LOW Real Estate pricing.

    I am going through it right now, and it is money pouring out from a big-fat-hose, instead of a little faucet. Payments are made twice a year, and they are 1/2 of the above numbers, so just imagine.

    Also, inflation rate is around 11% to 14%.


    • Educate4Less says:

      Good points Kenny but you’re a bit off on a few numbers:

      Subsidized Stafford (student) loans cost 3.4% until July 1st of this year, at which point the cost (rate) DOUBLES. Unsubsidized Staffords are 6.8%. Parents loans (PLUS) are 7.9% with 2 1/2 points (would you pay 2 1/2 points to get a 7.9% mortgage right now?!).

      One finance solution may be for parents who can, to be the “family bank” and lend money to their kids at 3% (below all other loan options but well above CD rates) and with a real payment schedule. For parents with home equity, they could cash-out re-fi to lock in a 4% loan rate and then accelerate the repayment – assuming they have sufficient cash flow – to reduce the effective loan rate to ~2% and pocket the difference on the 3% “family bank student loan.”

      Increases vary all over the place; some colleges are 4%, some are 8% and some are 11 or 14%. Virginia Commonwealth tuition rose 24% in 2010! VCU graduates only 23% of students in 4 years; UVA and William & Mary (>82% grad rates) are much better values for only about $3k more per year in tuition. If your student is bright and studied hard.

      I agree with you about a 529 Plan by age 10 with one twist: To “save” enough for future college costs, a 10 year-old should have a 529 Plan set up – for his/her own future kids!

  6. Educate4Less says:

    Subsidized Student loans are 3.4% for need-based aid families but that rate DOUBLES on July 1st. Unsubsidized student loans are 6.8%. Parent loans (PLUS) are 7.9% with 2.5 point origination fees.

    Other relevant stats for analysis are 4-year grad rates and financial aid:

    Loyola 48%, Illinois 67%, Northwestern & Chicago 86%.

    For aid-eligible families, colleges meet a percentage of “Need” and of the potential aid package, some percentage is free money:
    Loy 69%/48% free, IL 82%/64%, NW 100%/80%, Chicago 100%/88%.

    For a family with $100k income (median income in zip 60606), it will probably cost less – net of aid – to attend $60k Chicago than to attend $30k Illinois.

    I agree on the 529s – every 10 year-old should start one for his/her future children! 🙂

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