The Real Cost of College and How to Pay It

College costs are often not what they seem up front. Here's how families can understand how much it will actually cost, plus tips for the financial aid process.

Twins Mica and Maya Caine received acceptance letters from 10 of the 11 colleges they applied to in 2014, along with scholarship offers totaling more than $1 million. They ended up taking the full ride they were given to Indiana University’s Kelley School of Business. But those victories were a long time coming. Their hard work and financial planning began in middle school when their mother, Kim, started taking them on college visits and helping them look for scholarships. Diving into the college and financial aid search that far in advance is generally the exception, not the rule. Many families take a crash course in college expenses just months before students head off to campus. But they can reduce their learning curve for one of the biggest financial decisions they will ever make with preparation, patience, and a list of key questions regarding financial aid packages.

Getting over sticker shock

The process often begins with shock at a school’s sticker price. This tally, also known as the cost of attendance (COA), includes tuition and fees, room and board, books and supplies, and transportation. The average published tuition, fees, room, and board for in-state students enrolled full time at public four-year colleges and universities in 2014–2015 was $18,943, according to the College Board. (Keep in mind that at many public schools “tuition” remains low, while “fees” can skyrocket.) The COA jumps to $32,762 for out-of-state students at public four-year institutions and $42,419 for private schools.

At the most expensive private colleges and universities, the annual tuition, fees, room, and board costs top $60,000, an amount that may not only shock families but steer them away. But that’s a mistake, experts say. Schools with high prices often give generous discounts in the form of financial aid, which is good news for low- and middle-income families. Financial aid makes college more affordable—often more affordable than students realize. Two out of three full-time students pay for college with the help of grant aid, which reduces the cost. Many more receive federal tax credits and deductions to help cover expenses.

Related: How to Figure Out Your College Costs

Understanding your contribution

So how much will college cost you? “The financial equation is the cost of attendance minus expected family contribution (EFC) equals your financial need,” says Lynell Engelmyer, a nationally recognized expert in college planning, admission, and financial aid. “The problem is that equation looks fairly simple and it’s very basic math’s very complex. If you ask somebody to define cost of attendance, they will say tuition and room and board. But then also each school builds in other ‘soft costs’ such as transportation, supplies, and personal expenses.”

It’s critical that families understand the EFC, which is “tough because it’s not what you think you can pay; it’s what the government thinks you can pay,” Engelmyer says. That number is calculated using the FAFSA (Free Application for Federal Student Aid). Making the issue more challenging are all the schools that also use the CSS Profile, a financial aid application used mainly by private colleges who give out millions of dollars of their own grants. “So by the time you get around to need, there are a lot of caveats and ifs,” says Engelmyer, who writes for The website provides users with an EFC calculation and allows them to learn what they might pay at multiple schools by comparing estimated financial aid packages. To get an EFC and be eligible for any type of federal, state, or institutional financial aid, families must file the FAFSA after October 1 of the year before the student will enroll in college. FAFSA deadlines vary by school. Engelmyer advises parents and students to read the financial aid filing requirements of each school, which are listed online.

Abigail Seldin, cofounder of College Abacus, a free online tool that compares estimated net price costs, agrees. “A lot of folks get confused between EFC and the net price,” she says. Net price is cost of attendance minus grant and scholarship aid. “With the EFC calculation, families assume that the expected family contribution is what you are going to pay for college when in fact the EFC is just an index number provided by the federal government. “Many schools will charge you quite a bit more than your EFC, while some will charge you quite a bit less. Folks confuse the two. It is important to recognize that all schools set their own financial aid policies and have their own financial aid formulas.” Every postsecondary institution is required to post a net price calculator on its website. These calculators generate the estimated amount families will pay minus grant aid, which is free money. An institution may use either federal methodology or institutional methodology to approximate the student’s EFC.

Financial aid tips

Many families are surprised to learn they have some need-based eligibility even though they don’t think of themselves as “needy.” A common misconception about financial aid is “we make too much money,” says Sean Moore, President of SMART College Funding and a certified financial planner. “Financial aid goes beyond need-based aid. Merit-based scholarships and grants are awarded to exceptional students from all income brackets. Each family situation is different. Family size, marital status, school choice, and type of assets will all affect how much aid your family may qualify for.” Another error is to assume the school aid office is looking out for the student’s best interests. “The aid office is working with hundreds or thousands of students each year,” Moore says. “While they are a great resource, they can’t possibly know every option for every student.” Lastly, don't assume that all financial aid is free money; for example, many loans are considered financial aid because of their more favorable interest rates and repayment plans. “Parents need to understand how much of the aid awarded is free and how much will need to be paid back,” Moore says.

Apply for the FAFSA early and accurately

Families should apply as early as possible for financial aid, as many scholarships and grants are first come, first served. Applying early gives the best shot at the most money. Another tip is to not rely on your college aid office as the only source of aid. “Start close to home and work your way out. Ask your high school, house of worship, parents’ employers, and local civic organizations about scholarship opportunities. While they are often not large scholarships, every little bit helps, and there are many to be found that can add up to significant dollars,” Moore says.

Students and their families can also maximize the aid they get by filing the FAFSA properly. “More than 80% of FAFSAs contain mistakes. Entering the wrong assets and overstating values or income can have disastrous consequences on your aid package,” Moore says. “Plan ahead. Families should understand the implications of certain financial decisions. Retirement plan contributions decrease taxes but get added back when calculating your EFC. Selling a block of stocks may disqualify you from potential aid or tax deductions like the AOTC (American Opportunity Tax Credit). Refinancing your home may reduce your aid award. Timing becomes very important when students are approaching or in college.”

Related: The Best FAFSA Advice and Resources

Ask your questions

Ask key questions to better understand financial aid packages, says Joseph Bagnoli Jr., Vice President for Enrollment and Dean of Admission and Financial Aid at Grinnell College. Important factors to look at and compare when exploring aid packages include the net price due from the family at each institution, the loan values, and the level of expectation being assigned for summer savings and academic-year work. “It is important to know that financial aid policies, especially those related to institutional financial aid expenditures, vary dramatically from school to school,” Bagnoli says. “Just because a family received a certain answer from one school doesn’t mean it applies elsewhere.”

When reviewing award packages, experts advise families to decide if the aid package makes enrollment truly affordable rather than simply attainable. Other questions to consider: Given the student’s desired field of study (which can change), does it make sense to assume substantial amounts of debt? Does the student believe the lifelong value of the educational experience he or she will have at a particular institution outweighs the net price of attendance? Can the student expect other add-on fees that aren’t reflected in the stated price of tuition, fees, room and board, and indirect expenses (e.g., registration, graduation, and activity fees)?

Extra semesters = extra money

Families should ask about an institution’s four-year graduation rate. “If they don’t graduate in four years, their costs will be higher,” says Bagnoli. “Additionally, they may become ineligible for aid in the ‘extra’ semesters. Families often assume their students are adequately motivated to graduate in four years. However, low graduation rates are often a function of institutional registration, course delivery, and curricular progression structures and have less to do with student motivation.” Not graduating in four years is a robust but hidden cost, as most families may not consider the cost of an extra year or two in their financial aid calculations. According to the National Center for Education Statistics, only 62% of those in four-year nonprofit programs will graduate within six years, and only 31% of those in two-year programs will graduate in three years. This is one reason for growing student debt. If students or parents are planning to pay for just two or four years of college, they will likely fall short.

There are many reasons why so few students finish college in four years, according to David Bakke, a contributor to Money Crashers. A student can be considered full time with just 12 credits, even though most schools require 15 credits per term to graduate on time. Sometimes students have difficulty choosing a major. Other students who transfer to another college lose some of their credits in the process. “Some do not finish on time because they do not have the professional support needed to stay on track with their studies, such as through a guidance counselor,” Bakke says, while “some students simply fail to sign up for the correct courses in order to graduate on time.”

Financial planner Michelle Perry Higgins, author of College Poor No More, encourages parents to have honest conversations about expectations and contributions. “Don’t be afraid to talk about money, how much you have saved, and what the boundaries are with your children,” she says. “Tell them how much you have saved and how much they need to take in loans.” Students can save money while in high school too, Higgins says. And parents can help by teaching them budget-savvy life skills like how to cook, bargain shop, live frugally, and manage a budget, all of which will benefit a cash-strapped college student.

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