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How much does a college education cost?

Preparing Your Child For College: 1996-97 Edition


United States Department of Education

Table of Contents


Cover Page

A Note to Parents

General Questions About College

Preparing for College

Choosing a College

Financing a College Education

Long-Range Planning

Important Terms

Other Sources of Information

Many people overestimate the cost of college or believe that all schools are expensive. For example, a recent Gallup survey indicated that 13-to 21-year-olds overestimated the average cost of public two-and four-year colleges by more than three times the actual figure. The same group estimated that the costs of private four-year colleges were one-third higher than they actually were.

Although some colleges are expensive, costs vary from institution to institution. In addition, the availability of financial aid -- money available from various sources to help students pay for college -- can make even an expensive college affordable for a qualified student.

College Costs

The basic costs of college are tuition, fees, and other expenses:

  • Tuition
    Tuition is the amount of money that colleges charge for instruction and for the use of some facilities, such as libraries. Tuition can range from a few hundred dollars per year to more than $20,000. The least costly option for postsecondary education is typically a local community college where the average tuition and fees are generally under $1,500 per year. There are also many four-year colleges and universities that are relatively inexpensive. For example, Chart 4 shows that a little less than half of the students who attend four-year colleges go to institutions that charge less than $3,000 in tuition and fees. This occurs because about 68 percent of the students who attend four-year colleges attend public institutions whose tuitions are much lower than those of private institutions.

  • Fees
    Fees are charges (usually small) that cover costs generally not associated with the student's course load, such as costs of some athletic activities, student activities, clubs, and special events.
  • Other Expenses
    Besides tuition and fees, students at most colleges and universities pay for room, board, books, supplies, transportation, and other miscellaneous costs. "Room and board" refers to the cost of housing and food. Typical college costs are listed in Chart 5 below.


Typical College Costs

            Tuition                 Books           
            Fees                    Supplies
            Room                    Transportation  
            Board                   Miscellaneous  

Tuition at Public and Private Colleges

It is important to know the difference between public and private institutions. A school's private or public status has a lot to do with its tuition.
  • Public Institutions
    Over three-quarters of all students in two-and four-year colleges attend State or other public colleges. Since these schools receive a large proportion of their budgets from State or local government, they can charge students who live in that State (in-State students) relatively low tuition. Students from other States (out-of-State students) usually pay higher tuition.

    In 1995-96, in-State students attending public four-year colleges faced an average tuition and fees of $2,860 per year. In-State students at public two-year colleges faced an average tuition and fees of $1,387 per year in 1995-96. Tuition and fees for out-of-State or out-of-district students at public institutions averaged $2,775 and $4,508 at two-year and four-year colleges, respectively.

    If the costs of room, board, books, supplies, transportation, and other personal expenses are added to tuition and fees, the average total cost of attending a public four-year college was $9,285 in 1995-96. Since many students who attend two-year public schools live at home, the average total cost of attending a two-year public college in 1995-96 was $5,752. This includes the cost of tuition, fees, books, supplies, transportation, and other personal expenses for a commuter student.

  • Private Institutions
    Private (sometimes called "independent") institutions charge the same tuition for both in-State and out-of-State students. Private college tuitions tend to be higher than those of public colleges because private schools receive less financial support from States and local governments.

    Most private colleges are "non-profit." Other private postsecondary schools -- mostly vocational and trade schools -- are "proprietary." Such institutions are legally permitted to make a profit. Students at private colleges in 1995-96 faced an average tuition and fees of $12,432 per year at four-year colleges and $6,350 per year at two-year non-profit colleges.

    If the costs of room, board, books, supplies, transportation, and other personal expenses are added to tuition and fees, the average total cost of attending a private four-year college was $19,762 in 1995-96. If these same kinds of costs are added to the tuition and fees of a two-year private college, the average total cost of attending such a school was $12,710 in 1995-96.

    Chart 6 below shows the average tuition and fees faced by students at four different kinds of colleges in school year 1995- 96.

Future College Costs

By the time your child is ready to attend college, the tuition, fees, and costs of room, board, and other expenses will be larger than the amounts discussed in this handbook. Because there are many factors that affect the costs of a college education, it is impossible to know exactly how much colleges will charge when your child is ready to enroll. Be cautious when people tell you a particular amount; no one can be sure how much costs will change over time. In addition, as college costs increase, the amount of money you earn, and thus the amount you will have available to pay for college, will also rise.

How can I afford to
send my child to college?

Saving money in advance and obtaining financial aid are common ways for parents to make their child's education affordable. Other ways of making college affordable, such as attending college part time, will be discussed later in this handbook. (See the section Are there other ways to keep the cost of college down?)

Saving Money

Saving money is the primary way to prepare for the costs of college. Setting aside a certain amount every month or each payday will help build up a fund for college. If you and your child begin saving early, the amount you have to set aside each month will be smaller.

In order to set up a savings schedule, you'll need to think about where your child might attend college, how much that type of college might cost, and how much you can afford to save. Keep in mind that colleges of the same type have a range of costs and your child may be able to attend one that is less expensive. You can also pay part of the costs from your earnings while your child is attending school. In addition, your child may also be able to meet some of the costs of college by working during the school year or during the summer. Finally, some Federal, State, or other student financial aid may be available, including loans to you and to your child.

You will also want to think about what kind of savings instrument to use or what kind of investment to make. By putting your money in some kind of savings instrument or investment, you can set aside small amounts of money regularly and the money will earn interest or dividends. Interest refers to the amount that your money earns when it is kept in a savings instrument. Dividends are payments of part of a company's earnings to people who hold stock in the company. A savings instrument has an "interest rate" associated with it; this refers to the rate at which the money in the instrument increases over a certain period of time. Principal refers to the face value or the amount of money you place in the savings instrument on which the interest is earned.

Chart 7 shows how much you would need to save each month in order to have $10,000 available when your child begins college. As the chart demonstrates, the amount varies depending on the interest rate you obtain and the number of years that you save. The higher the interest rate and the earlier you begin to save, the less you need to set aside each month.

For example, if you start saving when your child is born, you will have 18 years to save. As shown on the chart, each month you will only have to deposit $32 in an account earning 4 percent interest in order to save $10,099 by the time your child is 18. However, if you use the same savings instrument but do not start to save until your child is 16, you will have to save $401 each month. In addition, if you use the instrument with the higher interest rate -- 8 percent -- you will only have to put away $21 each month starting when your child is born.

Remember, by starting to save early and by using instruments with higher interest rates, you can put aside smaller amounts. If you wait until later to start saving, you may not be able to afford to put away the larger amounts of money needed to meet your savings goals.


Amount You Would Need To Save To Have $10,000 Available
When Your Child Begins College

                                  Amount Available when Child Begins College
If you start  | Number            ------------------------------------------
saving when   | of years  | Monthly  |             |  Interest  |   Total
your child is | of saving | savings  |  Principal  |   earned   |  savings
              |         (Assuming a 4 percent interest rate.)    |
Newborn       |    18     |  $32     |   $6,912    |   $3,187   | $10,099
Age 4         |    14     |   45     |    7,560    |    2,552   |  10,112
Age 8         |    10     |   68     |    8,160    |    1,853   |  10,013
Age 12        |     6     |  124     |    8,928    |    1,144   |  10,072
Age 16        |     2     |  401     |    9,624    |      378   |  10,002
                        (Assuming an 8 percent interest rate.)
Newborn       |    18     |  $21     |   $4,536    |   $5,546   | $10,082
Age 4         |    14     |   33     |    5,544    |    4,621   |  10,165
Age 8         |    10     |   55     |    6,660    |    3,462   |  10,062
Age 12        |     6     |  109     |    7,848    |    2,183   |  10,031
Age 16        |     2     |  386     |    9,264    |      746   |  10,010

When deciding which type of savings instrument or investment is right for you and your family, you should consider four features:

  • Risk: The danger that the money you set aside could be worth less in the future.

  • Return: The amount of money you earn on the savings instrument or investment through interest or dividends.

  • Liquidity: How quickly you can gain access to the money in the instrument or investment.

  • Time Frame: The number of years you will need to save or invest.
When you select one or more savings instruments or investments, you should balance these factors by minimizing the risk while maximizing the return on your money. You will also want to be sure that you will be able to access the money at the time you need to pay for your child's education.

If you start early enough, you may feel confident about making some long-term investments. Some investments are riskier than others but can help you earn more money over time. Chart 8 lists some of the major kinds of savings instruments and investments that you may want to use. You can get more information on these and other savings instruments at local banks and at your neighborhood library.

Don't forget that you won't necessarily have to save for the entire cost of college. The following section tells about student financial aid for which you and your child might qualify and other ways to keep college costs down.

Chart 8 -- Examples of Savings Instruments and Investments

Financial Aid

Financial aid can help many families meet college costs. Every year millions of students apply for and receive financial aid. In fact, almost one-half of all students who go on for more education after high school receive financial aid of some kind. In school year 1994- 95, postsecondary students received about $47 billion in financial aid.

There are three main types of financial assistance available to qualified students at the college level:

  • Grants and Scholarships;
  • Loans; and
  • Work-Study.

Grants and Scholarships

Grants and scholarships provide aid that does not have to be repaid. However, some require that recipients maintain certain grade levels or take certain courses.


Loans are another type of financial aid and are available to both students and parents. Like a car loan or a mortgage for a house, an education loan must eventually be repaid. Often, payments do not begin until the student finishes school, and the interest rate on education loans is commonly lower than for other types of loans. For students with no established credit record, it is usually easier to get student loans than other kinds of loans.

There are many different kinds of education loans. Before taking out any loan, be sure to ask the following kinds of questions:

  • What are the exact provisions of the loan?
  • What is the interest rate?
  • Exactly how much has to be paid in interest?
  • What will the monthly payments be?
  • When will the monthly payments begin?
  • How long will the monthly payments last?
  • What happens if you miss one of the monthly payments?
  • Is there a grace period for paying back the loan?

In all cases, a loan taken to pay for a college education must be repaid, whether or not a student finishes school or gets a job after graduation. Failure to repay a student loan can ruin a person's credit rating and make finances much more difficult in the future. This is an important reason to consider a college's graduation and job placement rates when you help your child choose a school.

Work-Study Programs

Many students work during the summer and/or part time during the school year to help pay for college. Although many obtain jobs on their own, many colleges also offer work-study programs to their students. A work-study job is often part of a student's financial aid package. The jobs are usually on campus and the money earned is used to pay for tuition or other college charges. The types of financial aid discussed above can be merit-based, need-based, or a combination of merit-based and need-based.

Merit-based Financial Aid

Merit-based assistance, usually in the form of scholarships or grants, is given to students who meet requirements not related to financial needs. For example, a merit scholarship may be given to a student who has done well in high school or one who displays artistic or athletic talent. Most merit-based aid is awarded on the basis of academic performance or potential.

Need-based Financial Aid

Need-based means that the amount of aid a student can receive depends on the cost of the college and on his or her family's ability to pay these costs. Most financial aid is need-based and is available to qualified students.

Choosing a College | Common sources of financial aid


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