Preparing Your Child For College: 1996-97 Edition
United States Department of Education
Table of Contents
A Note to Parents
General Questions About College
Preparing for College
Choosing a College
Financing a College Education
Other Sources of Information
Many people overestimate the cost of college or believe that
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
The basic costs of college are tuition, fees, and other expenses:
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
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 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,
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-
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
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
send my child to college?
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
Amount You Would Need To Save To Have $10,000
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:
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.
- 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
instrument or investment through interest or dividends.
- Liquidity: How quickly you can gain access to the
in the instrument or investment.
- Time Frame: The number of years you will need to save
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
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
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
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
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
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
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.
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