How to Determine the Real Cost of College for Your Child?
Key Takeaways:
-The average total cost of college in 2022 was $27,940 for a four-year on-campus public university in-state tuition
-Use the College Scorecard to determine the real price of college and potential earnings by major
-Use a step-by-step approach to calculate the real cost of college
Many online sources provide information on the real total cost of attending college. But beyond understanding cost, what are other factors that a parent should consider for a college education, such as potential earnings, graduate rates, and so forth? This blog post provides the real cost of college education and finding reliable sources of information to compare potential colleges to send your child to for the second biggest expense besides your mortgage.
The Statistics
The College Board Publishes Trends in College Pricing is by far the most cited and reliable source to determine how much the real cost of college will be for your child in today’s dollars.
In 2020-21, average budgets for full-time undergraduate students ranged from $18,550 for public two-year in-district students and $26,820 for public four-year in-state students to $43,280 for public four-year out-of-state students and $54,880 for private nonprofit four-year students. This is the actual expense, not including any financial aid or scholarships you could potentially get to defer costs.
For instance, if you look at a 4-year in-state on-campus, the average tuition and fees for the year are $10,560, room and board is $11,620, and books and supplies are $1,240, transportation is $1,230, and finally, other expenses is $2,170. This is a sizable amount of money and could bust a family’s budget. But, as you can see, room and board are significant expenses, second to tuition and fees.
But what is the real cost of attending college? If you go to another authoritative source created during the Obama Administration called the College Scorecard, we can learn more about the true costs of earning potential of the institutions we want our child to attend. The College Scorecard online tool displays five areas: cost, graduation rate, employment rate, average amount borrowed, and loan default rate. This is the go-to source to compare colleges to learn more about the cost and other factors to help student success.
For instance, if you type in the University of Texas at Austin or UT, you learn all about this university. In addition, it provides statistics on the graduation rate of 80%. However, we notice here that the average annual cost of attendance, including tuition, living costs, books and supplies, and fees minus the average grants and scholarships for federal financial aid recipients, is $18,023. This is actually $8,797 less expensive than the full price of attending college, as noted by the College Board.
Therefore, the message that you see on the college website and read online may not be the true cost of what you will pay for your child's attendance. In addition, other factors go into play for the true cost of colleges, such as merit aid and financial aid packages, which can significantly lower the cost of attendance.
With the College Scorecard, you can also lookup major fields of study and determine the average salary after your child graduates. For example, at UT, we have history majors getting an average salary of $28,598, while chemical engineers make $82,830. What a difference!
I encourage you to look at both the College Board data to figure out how much the maximum you will be paying per year, and then check out the College Scorecard to see the potential earnings you will get from the college education and the average price your student will actually pay.
Calculate your Cost of College
Determining your child's real cost of college can be a complex task, as it involves considering various factors beyond just tuition fees. Here's a step-by-step guide to help you calculate the actual cost of a college education:
1. Tuition and Fees: Start with the obvious costs - the tuition fees and any additional fees required by the college.
2. Room and Board: Consider the cost of housing and meals if your child will be living on campus. This cost can vary significantly depending on the location and the type of housing.
3. Books and Supplies: Estimate the cost of books, supplies, and other academic materials needed for classes. Consider both print and digital resources.
4. Transportation: If your child will be commuting, calculate transportation costs. This includes gas, public transport, or even a vehicle if needed.
5. Personal Expenses: Factor in personal expenses such as clothing, toiletries, entertainment, and other miscellaneous costs.
6. Technology Needs: Consider the cost of a computer, software, and internet access, which are essential for academic purposes.
7. Financial Aid and Scholarships: Subtract any scholarships, grants, or financial aid your child receives. This could significantly reduce the overall cost.
8. Work-Study or Part-Time Job: If your child plans to work part-time or participate in a work-study program, consider the potential income to offset expenses.
9. Inflation and Future Increases: Project future increases in tuition fees and other expenses. Many colleges increase their fees annually.
10. Plan for Contingencies: Have an emergency fund or contingency plan in case unexpected expenses arise.
By considering all these factors, you can get a more accurate picture of the real cost of college for your child. Remember that it's essential to plan early, apply for scholarships, and explore financial aid options to make higher education more affordable.
As a parent, you have to be serious about whether the Return On Investment or ROI for college for your child is worth the actual price you will pay. So, use both of these sources to arm yourself with as much information as possible to make the best choice financially and in your child's best interest. Then, contact me below, and we can discuss the real cost of college for your child and work on strategies on how to pay for college.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on to avoid any Federal Government tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.
