The real cost of college: don't let a schools sticker price shock you into not applying

Careers and Colleges, Nov-Dec, 2003 by Tracey Randinelli

Deciding where to apply to college wasn't a hard decision for Kelly Kroslowitz. The 20-year-old from Putnam Valley, New York, knew where she wanted to go: Saint Joseph's University, a small private school in Philadelphia. "I liked the campus and the emphasis on community service. Plus, it has a great elementary education program," she says. There was just one problem: the whopping price tag. Tuition and room and board added up to almost $27,000 per year.

A bill like that is enough to send anyone into sticker shock, but Kroslowitz didn't panic. "I applied anyway," she says. "And I was surprised to see that my most expensive college choice gave me the best financial aid package."

What Kroslowirz realized is that a school's "sticker price" can be misleading. The reality is that when it comes to college costs, the price you see listed is often more than what you pay.

DON'T BE FOOLED

Most people have an inflated perception of how much college costs. One reason, says Irvin Bodofsky, former chair of the National Association of Student Financial Aid Administrators, is that those "college-costs-will-break-your-bank" stories in the media tend to focus on the country's highest-priced schools. "Those schools represent a very small percentage of where students are actually going to college," Bodofsky says. In reality, 29 percent of students at four-year colleges actually pay less than $4,000 per year for tuition and fees--which translates into less than $450 per month, according to the College Board.

Also intimidating, says Patty Little, director of student retention at Malone College in Canton, Ohio, are media reports that show how college costs add up over time. "You see it as the whole four-year investment, and it's overwhelming," she says. Families need to remember that they are not going to be forced to lay out the cash for all four years at once.

Another myth is that college costs are rising exponentially each year. In fact, the College Board reports that last year students paid $231 to $1,114 more than the prior year in tuition and fees, depending on the type of institution. That's hardly the "huge" increase that people often talk about.

THE REAL DEAL

About two-thirds of students don't actually pay the full sticker price, according to Stephen Kramer, president and founder of College Coach, a college advisory service (www.getintocollege.com). In fact, the College Board reports that a record $105 billion was available in financial aid in 2002-2003--and grant aid outpaced loan aid for the second consecutive year.

How much of that aid you receive is based on this basic formula:

THE COST OF ATTENDANCE - YOUR FAMILY CONTRIBUTION - OUTSIDE AID = NEED

THE COST OF ATTENDANCE is the actual price tag that you will see listed in college guides.

YOUR FAMILY CONTRIBUTION is the amount your family can afford to chip in based on financial data you provide on the Free Application for Federal Student Aid (FAFSA)--sec page 25. Your family contribution should be what you really pay for college (not including student loans).

OUTSIDE AID is money from private scholarships that you win. NEED is the dollar amount you should receive in financial aid. Your college will create a financial aid package of loans, grants, and work-study to meet your need. (For a complete look at financial aid sources, see page 18.)

Because each student's need is different, financial aid packages vary--and so does the amount that each student contributes toward college.

Kramer compares the phenomenon to airline pricing. It's possible, he says, that the guy sitting in the next row in Psych 101 could be paying thousands of dollars less than you. "You can be getting the same classes," he says, "but you're paying a different amount."

What all this means is that when it comes to determining a school's price tag, the question is not "how much does the college cost," but "how much will this school cost ME?"

KNOW ALL THE COSTS

To get a clear picture of college costs, Jack Joyce, director of guidance services at the College Board, advises families to divide expenses into several general categories:

TUITION AND FEES. Don't forget to include items like deposits or application fees.

BOOKS AND SUPPLIES. Buying used books is a great strategy for saving money, but you can't always count on being able to find cheaper tomes. Computers are another item to include in this category. "A lot of colleges require freshmen to have a laptop computer," says Little. That can tack another few thousand dollars onto the budget as can supplies or equipment needed for specialized majors.

ROOM AND BOARD. Most colleges spell out die basic costs pretty dearly. In addition, you need to budget for special furniture or supplies you might need (e.g., refrigerator rental). And if you plan on daily three-hour long distance calls to your significant other, you'd better add a few hundred dollars to the phone bill budget.

TRANSPORTATION. This category is often underestimated by students, particularly those who attend schools far from home. "They may assume they'll take one or two trips home during the semester," says Bodofsky, "but if a student begins to be homesick or there are other problems, the costs may climb." Commuter students aren't exempt front these costs either--gas, tolls, and parking fees can add up.