Understanding college costs

Knowing how much to save to cover college costs requires knowing how much it costs to attend a college. If you (or your children) are starting college now, it’s just matter of a few clicks to find how much the college bills will be. If college attendance is many years away (if, for example, you are planning for a youngster), knowing exactly the future college costs is difficult. College tuitions are subject to change and vary considerably due to these and other important factors time, location and type of school.

In respect to college costs, we make the following general observations based on my research:

  • private school costs more than public schools
  • tuition is likely the biggest expense among all other college expenditures
  • in-state tuition is less than (half or even more) out-of-state tuition
  • elite colleges (such as Princeton , Harvard, Yale, and Stanford) cost more than an average college or university
  • living at home is less than living on campus

See College Board’s (a non-profit organization made of colleges, universities, and other educational institutions) website for specifics on a particular college’s tuition.

In figuring total college bill, it is helpful to understand college costs beyond just tuition fees. An annual tuition fee is just part of the total college bill for a year. Don’t forget consideration of college costs such as room and board, books, travel, and personal expenses (such as meals, laundry, soap, even entertainment costs, etc.). The following lists type of expenses involves in attending a college:

A pile of books
A pile of books
  • tuition and fees
  • room and board
  • books and supplies
  • transportation
  • personal expenses

As hinted to this earlier, total bill based on these categories is higher for private colleges than public colleges.

So how can you use this information to guide yourself in determining future total college costs? Now, you have general understanding of type of typical college costs. Based on this and your own needs, you can estimate how much it will cost today in the future. Keep in mind the following calculations are not specific to your situation and are used for illustration purposes.

If you want to know how much will it cost 10 years from now to attend a particular college? The following discussion can help you guide determine that value. First, find the current total college cost of the year of the college that will be attended. Based on research and historical college cost data suggests average increase in college costs is around 6% per year. Using historical college costs rates as a guide, you can anticipate how much it will cost to attend a particular college in the years to come.

Let’s work with an example to express college costs for this and coming years. Assume the following costs information for attending a college for one year:

Hypothetical college cost for one academic year
Type of school Tuition and fees Room and board Books and supplies Transportation Personal expenses Total costs
Private 26,255 9,970 1,172 920 1,770 40,087
Public 5,636 7,964 1,130 1,032 2,442 18,204

The below tables shows projected costs for private and public colleges (using the total cost figures from above) if annual average college costs increase is 3% or 5%:

  Projected for ____ year(s) from now
Type of school Present total cost Perctange increase 1 2 3 4 5
Private 40,087 3% 41,289 42,492 43,694 44,897 46,100
5% 42,091 44,095 46,100 48,104 50,108
Public 18,204 3% 18,750 19,296 19,842 20,388 20,934
5% 19114 20,024 20,934 21,844 22,755

Predicting future college costs many years from now is less precise. The further away you go into predicting future from now, tougher it becomes to predict. As mentioned earlier, there are many variables that influence the actual college costs. A college with dropped attendance rates may quickly increase college costs for all students for all the extra empty seats. A healthier college may absorb any such short-term financial hardships without changing college tuitions. These specific situations are not part of consideration in computing these projected costs.

This is how to use the above chart. If you are or your child is attending school in two years, see the figures for that column. If you want to predict annual college costs for an infant, use the following formula to estimate the cost:

Formula for projecting college costs

So 18 years from now, attending a public college can cost annually:

(18,204 * 18 * .05) + 18,204 = 34587.6

Remember these calculations are provided just for illustration purposes only. In practice, you may actually have to use the actual numbers, when they are known to get a better picture of future college costs.

Posted on 12/21/2006
by Raj Singh