The True Cost of College: 5 Things to Consider

The True Cost of College: 5 Things to Consider

You’d be hard pressed to find a day where student loans don’t factor into the news cycle. From the debate over forgiveness, the exorbitant cost of higher education, or stories about students still struggling to pay back debt, it is easy to come to the conclusion that many students do not consider their financial future after college, and instead pick the school or loan option that seems easiest or most appealing at the time.

We don’t want to scare anyone, but choosing a school and deciding how to pay for it will often be the first financial step many young adults take. It’s an exciting one for sure, but not one that should be considered lightly. Here are five things to consider when tallying up the true cost of college.

Tuition: Public vs. Private

Tuition can vary widely between public institutions and private, and in-state and out-of-state. In this Nerd Wallet piece, four years at a private non-profit school could cost $168,000 (with room and board, and incidentals included). This does not factor in financial aid or scholarships, but that is a very intimidating figure! Thankfully, the average student only pays for about half of a college’s sticker price, but if students have to take out loans to cover the cost, the debt burden quickly adds up.

What if your dream school is a private institution? Is the money worth it when you could attend a state school at half the price?

Room and Board

The average yearly cost for room and board between public and private schools varies between $8-10k each year. While the cost of room and board rarely impacts a school decision, this cost does need to be accounted for when tallying up what you’ll need to be responsible for paying each year. Typically this decreases each year as students (often) move off campus and get off the university meal plan.

Loan Interest Rate

Repeat after me: Shopping interest rates is one of the most important ways I can save money. Don’t believe me? Consider this: The average student takes out nearly $30,000 in student loans over four years. With an interest rate of 9% annually, the student can expect to pay nearly $15,700 in interest alone over ten years, if it took them ten years to pay off the loan.

By shopping for interest rates, you could get a much lower rate. Say the same borrower above who shopped interest rates took out $30,000 at 7% interest instead. That same student would pay $11,800 in interest over ten years, a difference of almost 4,000 over the lifetime of the loan.

But, you wouldn't know unless you shopped.

Many are put off from interest rate shopping because of the time involved and hassle, but new tools like Achieve Lending’s student loan search engine allows users to find multiple offers and compare them in as little as 30 seconds.

Financial Aid

FACT: You will not get the same financial aid package at every school. Depending upon the competition for admission, your own academic record, and any specialized programs you’re applying for, you may receive a generous package at one school, and only a fraction of the tuition price at another.

While your first choice school may not offer you a generous package, do not discount the tempting offer from another school. On the popular personal finance site, Broke Millennial, blogger Erin Lowry detailed her decision to switch from Wake Forest to a smaller, private school in upstate New York because she’d be able to graduate debt free instead of $80,000 in debt.

We suggest taking a look at what your college education will cost you for all four years before you make the decision.

Incidentals

In addition to room and board, you’ll need to consider the price of books and transportation. Will you need a car to get around? Eventually you’ll want to come home to visit or for the holidays, but will you be able to afford to fly a few times each year to visit family? CNN Money offers a great college costs calculator that can help you see how much you’d pay to attend.

While the exact amount you should take out in student loans varies widely (depending upon which sites you read) we encourage students to consider their adult life before they sign on for a large amount of student loans. A general rule is to not take out more than your first year’s salary in student loans. With that in mind, and using the five factors above, you should be able to create a picture of the true cost of your college education, and how it will impact your financial future.