College may not be as expensive as you think

As we prepare for Thanksgiving next week, here's something to be grateful for: college may not be as expensive as you think. It's almost always less expensive than they tell you it will be. Let's look at some terminology.

The "sticker price" of a college is the official, listed price to attend. According to the College Board's annual survey, the average sticker price for a four-year public university for the 2016-17 school year is slightly over $20,000. For private, nonprofit four-year universities, the average is over $45,000! (These prices include tuition and fees and room and board.)

But the "net price" is how much you actually pay, after grants and financial aid. And the net price, unless you're fairly wealthy, is almost always a lot lower than the sticker price. For public schools, the average net price is under $10,000, and for private schools is a little over $25,000. That's still a lot of money, but far closer to reasonable than the sticker price. And if you can avoid the room and board costs by living at home, then the average net cost of public universities just in terms of tuition and fees is under $5,000 a year. 

Here are the charts directly from the College Board, so you can see the difference between sticker and net costs.



There are a few important things to remember:

  * Net price is based largely on financial need, so you don't know what your individual net price will be until after you've applied, been accepted, and been offered a financial aid package. Never assume you can't afford a school and decide not to apply based on cost.

  * The net price often includes loans, so you may end up actually paying more than the net price, but you will have more time and often government subsidies to help out. But you'll also have interest.


While you don't know your individual net price until you've received an offer, you can still estimate, and the results may be surprising. For example, let's use this tool to find the average net price for a student at four different schools.

If your household income is $47,000 per year, then the average net price at Yale is $7,000; at Ole Miss the average is $17,000; at Vanderbilt the average is $9,000; at U.C. Berkley it's $14,000. Again, these are averages and estimates, not guarantees. But you'll notice that the big-name private schools can be less expensive than state schools. And none of them have average net prices near their sticker price until you get into household incomes over $110,000. 

It's frustrating that we have no idea how expensive a college is until we've already gone through the trouble of applying, but we can take a little comfort in knowing that it probably costs a lot less than what they advertise. For that, be thankful.

Please share this with someone who might enjoy it. I welcome your comments and feedback.