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

Careers and Colleges, Nov-Dec, 2004 by Tracey Randinelli

Deciding where to apply to college wasn't a hard decision for Kelly Kroslowitz. The native of 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 Kroslowitz realized is that a school's "sticker price" call 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, 75 percent of students at public four-year colleges actually pay less than $6,000 per year for tuition and fees, while 25 percent of students at private institutions pay less than $15,000, according to the latest statistics from the College Board. The average cost for tuition, fees, room and board for 2004-2005 was $11,354 at four-year public institutions, while the average annual cost at four-year private colleges and universities is now $27,516.

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 for 2004-2005, students paid $487 to $1,132 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 $122 billion was available in financial aid for 2004-2005, and federal grant aid grew by six percent, while loan aid rose by 13 percent. Although students have to rely more on loans than before, interest rates have remained low (see page 44).

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

THE COST OF ATTENDANCE--YOUR EXPECTED FAMILY CONTRIBUTION

= NEED

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

YOUR EXPECTED FAMILY CONTRIBUTION (ETC) 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)--see page 26. Your family contribution should be what you really pay for college (not including student loans).

NEED is the dollar amount you ideally should receive in financial aid. Your college will try to create a financial aid package of loans, scholarships, grants, and work-study to meet that need. Any private scholarships you win will be added into your aid package, but note that these awards will not reduce how much you are expected to contribute toward your college costs. More scholarships, however, will allow you to borrow less. (For a complete look at financial aid sources, see page 8.)

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.