Parents Finances

The Cost Breakdown

When comparing the costs of different schools, make sure you know what is included in the cost estimate that you are given. Different schools include different costs in their estimates. It is always a good idea to get the actual breakdown of all costs whenever possible.

The basic components of a college-cost estimate are: tuition and fees, room and board, and books. College-cost estimates differ tremendously, as there are almost an unlimited number of variations on these basic components. An example is tuition and fees. Some schools charge a flat rate. You pay the same amount regardless of the credit hours attempted. For flat-rate schools you normally have an upper limit of 18 credit hours and some lower limit, at which point you pay by the hour. So if your child attempts 18 hours, the tuition will be the same as someone who may only take 15 or 12. Obviously, the best economic deal is to take the maximum number of hours allowed, although this may not be a good idea for some students. Other schools charge only for the credit hours attempted. So if your child registers for 18 hours, the overall cost will be more than for someone who only takes 15 hours. Both of these tuition models have their proponents and opponents. Neither is right nor wrong, although comparing the actual costs of one type versus the other can be difficult. For example, do you assume that your child will take the maximum number of credit hours per term allowed at a flat-rate school, and compare that with the cost of 18 credit hours per term at the per credit hour school? Or do you assume your child will take an average full-time load of 15 credit hours per term at the flat-rate school, and compare that cost with 15 credit hours per term at the per credit hour school?

Room and board is yet another example. At one school your child may be required to live on campus and participate in the meal plan. Another school may say where students live and what they eat is their choice. Even when the decision is made to live on campus, the costs can vary widely depending upon the type of residence hall and meal plan selected. Comparisons really get complicated if you consider off-campus venues and preparing your own meals. Eating macaroni, peanut butter, and Ramen noodles can be very inexpensive although I doubt you want your child on such a stark subsistence!

The estimate for the cost of books might vary somewhat from school to school but, quite honestly, the cost of books should be practically the same wherever your child enrolls. It is not unusual for students to purchase textbooks online from national distributors which charge the same rate regardless of the college attended. About the biggest variable for books is whether new or used books are purchased. As you might imagine, new books can be very expensive, and used books are only inexpensive when compared to the cost of new books. If this is your first child to go to college, the cost of books will surprise you.

In addition to the basic components of college-cost estimates, you may also wish to consider additional costs in your comparison that may or may not be included in the estimate that colleges provide you. These additional costs can vary a great deal based upon distance and personal preference. Possible additional expenses consist of transportation, health insurance, computer, and lifestyle costs. Transportation costs include getting to and from your child's chosen school, and how many times your child will come home during the year. Some schools require health insurance if the student is not already covered, and some HMO's require additional fees to treat students outside of their normal service area. Some schools require a computer; others may only recommend one. Lifestyle costs refer to the luxuries that can add up quickly: eating out with friends (even when on a meal plan), gas, new clothes, music downloads, movies, cell phones, etc.

The Biggest Hidden Cost of College

We have tried to identify many of the common components of college costs, but the cost with absolutely the biggest economic impact on you is hidden and controlled entirely by your child. How long will it take your child to graduate? Too often, students take more than four years to graduate even when their programs are designed to be completed in four years. To compare four-year graduation rates and many other interesting statistics, you may wish to visit the College Portrait of Undergraduate Education website, created by The Voluntary System of Accountability (VSA) initiative of public 4-year universities to supply basic, comparable information on the undergraduate student experience.

Financial Assistance

All schools will provide financial assistance to students in need. Need is determined in a number of different ways, but the most common is with the federal government's need analysis form, known as the Free Application for Federal Student Aid or FAFSA. All colleges require the FAFSA, and a few may require additional forms as well. The FAFSA analysis determines how much money you are expected to contribute to your child's education. This amount is known as the Expected Family Contribution (EFC). Your child's financial need is determined by subtracting the EFC from the cost of the college. For example, if your EFC is $2,000 and your child chooses a school with costs of $20,000, he or she will have $18,000 of financial need.

The amount of financial need is what is used by the college to create a financial aid package to enable your son or daughter to enroll at the institution. In theory, the amount of money you spend out of pocket on college (the EFC) will be the same, regardless of the cost of the college your child attends. In reality, financial aid packages vary tremendously, and many include loans that must be repaid at a later date, meaning your ultimate out-of-pocket costs may be higher at one school than another.

Much like our discussion of basic costs, it is important to compare financial aid packages very carefully. Don't be fooled by the package offering the most overall dollars. Instead, figure out your total out-of-pocket cost, including future loan repayments.

How Do We Pay

Different schools will have different policies when it comes to paying college costs. Some schools will give you the opportunity to begin paying for expenses immediately upon your child's acceptance. Others will wait until after the first or second week of classes before requiring payment. Most schools offer payment plans, and most will accept credit cards. Generally speaking, you can think of your child's financial aid package as being placed into an account to be used to pay expenses. Your child will be expected to pay whatever balance remains after his or her financial aid package has been applied.

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