A college education will probably be the first or second most expensive purchase that an individual will ever make over the course of his or her entire lifetime. Yet, most people will select an institution and either completely ignore the cost or not be aware of what the true cost of that school will be. Then, once they get accepted and have their heart set on one school or another, they find that the cost of education is far more than they expected. 

While it is true that a college education has gotten incredibly expensive for almost anyone, a huge contributing factor to skyrocketing student debt is that students are choosing to attend schools that they simply cannot afford. Students and families are compelled to take on significant loans to pay for these high-cost educational choices. And then find themselves in very challenging financial situations upon graduation. 

Instead of taking the “fire, ready, aim” approach to choosing a college, families should be much more measured with their tactics if they want to avoid being overwhelmed by college costs. 

How do I calculate the cost of college?

• Know your budget;
• Explore a lot of different colleges;
• Calculate the all-in cost of each school;
• Research the financial aid generosity of each college;
• Determine the likely financial aid package you’ll receive based on your income and assets.

How do I calculate the cost of college as an admissions factor?

Step 1: Know your budget 

Before you even consider applying to college, take stock of your family’s financial situation. Ask yourself, how much do I have available to spend for a college education, and how much am I willing to spend and sacrifice? Consider the future. What if something happens and you have a lot less money coming in once the student has started college (e.g., you lose your job, an expensive health issue crops up, etc.)? Will you still be able to fund college? Are there other family members who will also need to tap into the family’s finances in the future? 

Step 2: To assess the cost of college: Cast a broad net, initially 

Identify a number of schools that fit the student’s interests and academics. Don’t just choose one or two; find several. Even if the student thinks he or she knows the exact college where he or she wants to go, expand the search. First, there’s no guarantee that the student will get admitted to that school. Second, there’s no guarantee that the school will fit your budget. By finding many schools that could be a good match for the student, you will increase your chances of putting together a list of schools that you can afford. 

Step 3: Explore the fully loaded cost of college 

You cannot assume that the price of college will be “about the same” irrespective of where you attend. From one college to the next costs will vary tremendously. Where do you find information on school costs? What is meant by “fully loaded” costs? Schools will generally provide tuition information on their websites. Many schools will include what is called an estimated Cost Of Attendance (COA), too. 

The COA represents an approximation of your fully loaded cost, and will usually include: 

• Tuition 

• Room and Board 

• School Fees 

• Books and School Supplies 

• Travel 

• Personal Expenses 

Visit each school’s website that your child is interested in, and if the school provides an estimated COA use it as a starting point to calculate your costs. You need to figure out what your actual outlay is likely to be based on your own individual circumstances. Schools use an average number to figure costs like travel and personal expenses, but you should try to be more exact.  

For example, if the student will be bringing a car to campus, the school will not add car-related expenses into their COA calculation. But you should put it into yours. In short, project how the student will be living while attending college and tally up all the costs associated with that lifestyle. 

Step 4: Investigate the financial aid generosity of each school 

Not all schools are created equal when it comes to their financial aid generosity. Some will meet full financial needs while others won’t. Some schools will be very generous with merit aid for those who don’t meet the criteria for need-based aid. And others will only provide merit aid to a select few. 

To figure out just how generous a school is with their aid, a good source is College Data. Click on the College Search tab where you can search by a specific school name which then presents a Facts & Information page for that school. Click on the Financials tab of this section which reveals what percentage of financial need was met at that college, how much it provided in need-based and merit aid, and how many students were awarded aid for the most recent year available. 

By looking at this information for each of the schools of interest, you can get a good sense of how generous a school is and whether you might have a shot at getting some aid. 

Step 5: Assess your likelihood of receiving financial aid to reduce the cost of college 

You know your budget. Also, you know what your finances look like. You know what the cost of college is. You know the typical aid packages offered by the schools on your list. But, you still don’t know what each college on your list is actually going to cost you.  Will you qualify for financial aid and bring down the COA? While you can’t get a definitive answer about your costs before you apply and actually get admitted to a school, you can get a reasonable approximation of how much a college education will cost you at a given school. 

Colleges are required to make online Net Price Calculators (NPC) available to the public. NPCs allow prospective students to input some basic financial information about themselves and then the NPC calculates approximately how much financial aid they are eligible for and how much it will consequently cost them to attend that school – the “net price”. Net Price Calculators can be found at a college’s website, and The College Board also provides an NPC for the hundreds of colleges that utilize its NPC tool. 

Beware that the NPCs provide only an estimate of your likely cost, and sometimes a very loose one at that. The information captured isn’t as thorough as on an actual financial aid application, and the NPCs don’t take into account either special circumstances or your potential eligibility for merit aid (which is based on student performance rather than financial strength). So, the output of the NPC is likely not what you expect to receive. 

Still, by going through the Net Price Calculator process for each school on your list, you’ll get a directional sense of what the school will cost you.
The bottom line is that if finances are an issue when you are first considering where to apply consider your budget, school COA, and financial aid in the calculation. By doing so, you just may save yourself a little heartache and a whole lot of money. 

Need Help with the College Admissions Process?  

Figuring out the likely all-in cost of college at specific universities can be very complex. As part of our comprehensive packages, we help families assemble a well thought out college list that takes into account any financial aid considerations. So, please contact us for a complimentary consultation. At Great College Advice, we provide personalized college consulting focused on helping make the process of preparing, selecting, and applying to college more successful, less stressful, and more fun.   

Since 2007, the expert team of college admissions consultants at Great College Advice has provided comprehensive guidance to thousands of students from across the United States and over 45 countries across the world. Great College Advice has offices in Colorado, New Jersey, Chicago, North Carolina and Massachusetts.  

In addition to our one-on-one counseling, Great College Advice extends its support through one of the most active and resource-rich Facebook Groups for college-bound students and their families: College Admissions Experts. With over 100,000 members—students, parents, and experienced counselors—this vibrant forum offers peer support and expert advice like no other.

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In 1897, an editorial in the New York Sun responded to an 8 year-old girl named Virginia that there was, in fact, a Santa Claus. And now Santa has appeared in the form of a slim man in aviator sunglasses who resides not at the North Pole, but in the White House.

In 2022, President Biden just announced the cancelation of $10,000 in student loan debt for Americans making less than $125,000 per year. He also intends to cancel another $10,000 in debt for recipients of Pell Grants, thereby helping those who have come from the lower rungs of the economic ladder.

Ho, ho, ho!

The Supreme Court struck down this plan, and Biden responded with a new and different plan.  It seems that there will be some back-and-forth here, and probably–at some point–Congress will have to weigh in on this idea of loan forgiveness.

I am not going to comment on the wisdom of this policy here. It’s clear that lawyers and banks and Congress and the courts and others are going to file lawsuits challenging, amending, and revising the policy.

So, I’m not going to discuss the policy. Rather, I’m going to talk about this belief. This fervent belief that families across the country share. That somehow, magically, the cost of college will somehow be affordable, even if we do not save, do not economize, do not make a plan, and ignore the burden of debt. If we just wish it hard enough, we believe, Santa will come through.

He won’t. College is ungodly expensive. And you need to make a plan.

Forget student loan forgiveness: college is expensive

Many things bother me about the cost of college these days. And there are many reasons why college costs have skyrocketed. A report by Yale faculty points to the possibility that university administrators have proliferated, while faculty salaries and budgets have stagnated. Some, including me, have pointed to the arms race in amenities (e.g., climbing walls, luxurious residence halls, lazy rivers, “free” massages, puppy therapy). And there is no denying that systemic racism is part of the explanation, as eloquently described and painstakingly documented by Adam Harris in his book, The State Must Provide: Why America’s Colleges Have Always Been Unequal—and How to Set Them Right.

Regardless of the reasons for the high cost of higher education, the fact is that many, if not most, American parents are in denial about how they will pay these extraordinary costs.

A recent survey of over 2000 parents by EAB illustrates the problem. Parents not only underestimate the costs they will be asked to pay, but they also have very little idea of how they will pay for these expenses.

Here’s a screenshot from the report.

What does this mean for college costs and student loans?

It means that an awful lot of parents don’t make a budget. They don’t make a plan. They have no idea what they might have to borrow, and they have not calculated what they can really afford.

They also don’t realize, often, that their kids cannot actually borrow very much. The maximum a kid can borrow—without income or assets—is $27,000 over four years (there will be nothing for years five and six…). Anything beyond that, the parents will have to sign for.

I also find that many parents do not discuss the issue of debt with their own kids. I know one young woman who blissfully went off to a private college with the full support of her parents. Upon graduation, Mom and Dad threw her a party and later gave her the loan agreements. Only then did she realize she was $100,000 in debt, with an expected monthly payment of $1161.08.

If she wants to be able to pay off the debt in 10 years before she, herself, has a family and mouths to feed. Her parents were just too ashamed and afraid to talk about their finances before the young woman went off to college. But their shame and fear became the young woman’s burden, rather than an opportunity for economic stability.

Excessive debt is not an opportunity. It is anything but.

Student Loan Debt: A Burden Too Big to Ignore

Many parents, sadly, are in denial. They don’t save enough and don’t make a financial plan. Research colleges without any understanding of how financial aid works, or how rare those scholarships really are. Believe that somehow, miraculously, their son or daughter will get that mythical “full ride” to the college of their dreams. They may as well buy a lottery ticket. Though they may have a better chance of winning the Megabucks than getting that full ride.

And I understand it. I empathize. It’s more fun to dream than to count our pennies or make a budget in Quicken.

And we don’t want to admit to our kids that our finances might limit their options. Who among us wants to watch our kids aspire and achieve and do their best throughout their formative years, only for us, the parents, to have to say, “I’m sorry, honey, but we simply cannot afford that dream college—you’ll have to settle for something less.”

Of course, in other aspects of life, we don’t hesitate to put limits on what our children can spend. We don’t give them credit cards and tell them to buy whatever they want at Saks Fifth Avenue (or, well, most of us don’t). Don’t present brand new Mustangs or Mini Coopers to our kids on their 16^th birthday (or do we?). While we might splurge occasionally, we don’t take our families out to dinner at the Michelin 3-Star restaurants for a weekend meal. We think about how we spend our money, and our kids understand that we are making the family ends meet.

Except when it comes to college. This is when we resort to our belief that Santa will bring a tuition check for Christmas, that Elijah will walk through the door during Seder dinner with a bucket of gold coins, and that the Tooth Fairy will leave a mature stock portfolio under the pillow. Or maybe that Ellen DeGeneres will invite your kid onto her show and present you with a big cardboard check.

Oh, wait. Ellen has been canceled.

At least we still have Santa, Elijah, and the Tooth Fairy.

Dreams. Hope and dreams. And maybe some student loan forgiveness from the Federal Government.

No, Virginia, there is no Santa Claus. Maybe, just maybe, you’ll have a bit of our debt canceled by the Feds (but I wouldn’t count on it just yet).

But even a little $10,000 present is not going to change the fact that most Americans will still owe gobs of money to faceless bankers who gleefully make money off our collective inability to plan, to save, and to place some sort of financial limitations on our kids.

If you do not put some limitations on your family spending, the world will.

College Loan Debt Restricts Opportunity

Think about it.

According to NACE, the National Association of Colleges and Employers, in 2021 the average salary of a newly-minted college graduate was $55,260. Here’s the report. Remember that some will make more, but many (half, statistically speaking) will make less.

Let’s start an average of $55,260.

Assume that the federal government will take 18%, leaving the student with $46,107 in take-home pay (not including any state taxes, which we won’t calculate just yet).

With $50,000 in student loan debt at 6% interest and intent to pay off in 10 years, that monthly payment is $555, or $6660 per annum.

That leaves our student with $39,447.

Assume the student lives in a two-bedroom apartment in Chicago (because they have to be in an urban area to make that average salary), that goes for $2423 per month but is shared with a BFF from college.

That leaves our students with $24,903, or just over $2000/month.

Adjust for utilities, public transportation to and from work, food, weekend spending money, occasional take-out, the cell phone plan, streaming video services, streaming music services, dating apps (essential!),

How about a car? A car payment (?). Auto insurance? Gas? A new set of tires? Parking? Tolls?

Oh, and then there is health insurance. Will that be covered by the employer (small companies don’t offer it, so I guess you can’t work there)? Or will you, as parents, cover that cost until your son or daughter is age 26?

And then there is the fun stuff. The destination wedding of a college roommate in Jamaica. A long weekend of skiing in Vail with a bunch of buddies. I know some kids whose cannabis budget alone is several hundred dollars a month.

Oh, and what about those air tickets home to visit Mom and Dad?

Sigh.

Savings for a down payment on a starter home? Savings in the 401k or IRA account? Savings so that THEY can pay their own kids’ college tuition someday?

Fuggedaboudit.

Of course, the earnings of this average student will go up. On average. If they start out at average. Or if they continue as average.

But think about what that $555 per month, or $6660 per year, could make possible. Savings. Further professional development. A present for mom on Mother’s Day….

You see the point. You need a plan. You need to learn about how financial aid works. You need to assess your own ability to pay, and you need to assess colleges’ willingness to give your son or daughter discounts (Pro tip:  kids with the best academic records get the biggest discounts). You need to save way more than you think. You need to understand 529 accounts and prepaid tuition plans.

Don’t plan on student loan forgiveness

As we have seen with the political and legal back-and-forth about student loan forgiveness, it’s not really a good plan to count on government beneficence to rescue us from our financial folly. Heck, most of us are wondering if Social Security will be fully available to us when we retire.

No.  Given that we have–either by design or by accident–privatized higher education in this country, the burden for paying for it will remain the responsibility of families for the foreseeable future.

To ignore this responsibility is folly–and could very well limit a child’s future opportunity.  And to make this belief that the government will come to our rescue and bail us out the foundation of our family financial plan?

What word shall we use?  Folly is perhaps not strong enough. Self-delusion? Idiocy? Insanity?

Then again, it might happen. The possibility exists that the political system could unite to provide student loan forgiveness and reduce the cost of college education. But these are long odds, and your child is growing up fast and your nest egg is not growing fast enough.

College counseling to avoid student loan debt

At Great College Advice, we generally work with families who have made solid plans for their kids’ college education. Still, there are many who really don’t have any idea what they can afford or how they might be able to reduce the cost of college.

We can help families understand how to assess their budgets and how to predict how much a particular college might charge their student (for every kid may pay a different price—sort of like seats on an airplane). And help folks understand the landscape so that they can make good decisions based on facts, a family’s values, and the budget. We aim for educational opportunities.

But we don’t believe in Santa Claus. Sorry.

If that makes you sad, give me a call.

The post Student Loans, College Costs, and Parental Self-Denial first appeared on College Admission Counseling.