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  • Writer's pictureKellie O'Callaghan

Sticker Shock...Let's Talk About Money

Updated: Dec 1, 2021

When I work with a new client about to embark on the college search process, the first thing I talk about is: money. I know no one wants to talk about money. We want to focus on dreams, hopes, college prestige, and college fit. At the end of the day, though, you have to write a pretty substantial check and have an actual way to pay for all those years of the “best fit” college.

Most people have a vague sense that college is expensive. Many who have been trying to save for their kid’s future are SHOCKED to discover they have not saved near enough for the cost of college today. Recently it has become harder and harder for many to afford the astonishing costs of many private universities with costs of attendance upwards of $50,000 a year, even state public universities often come in over $20,000 a year!

I am often the one who has to be the bearer of bad news. I feel terrible every time – knowing I may be about to shatter dreams. People typically believe: college is cheaper than it actually is, that they will qualify for total financial aid (most won’t), and that the student alone can take out enough loans to cover the total cost of college (they can’t without a cosigner). In fact, today’s college students can only take out a total of $27,000 over all four years without parental co-sign! Freshman year students can only take out a $5,500 loan by themselves. It is VERY difficult, near impossible, to find a college that costs just $5,500 a year. For many students, their total eligible four-year loan amount is less than one year of college expenses!

Families are often also shocked by how little financial aid they actually qualify for. Financial aid and grants vary widely, you should run your own EFC (expected family contribution) to discover your personal government financial aid. A quick rule of thumb I use for many families: the EFC will be a little less than one-third of your adjusted gross income per year (depending on your tax bracket). Sadly for independent contractors and the self-employed the percentage can actually run much higher! For many families, this means you are expected to put approximately one-third of your income towards a year of college! I always encourage families to go run their numbers first and then come back ready to talk to me realistically about the college search. Financial aid is currently based on the two-year prior tax returns. So class of 2022 will be based of 2020 tax returns.

One of the most painful things I witness is kids being pushed to get into the most prestigious universities and then being told by their parents afterward that they can not afford them and can not go. Please for the sake of sanity have an idea of what you can and can not afford ahead of time and be honest with your child. Then help them find excellent schools that fit within your budget.

It can be hard to say no to your child, about anything, much less something as emotionally charged as college. But as parents, we have to do it. One of my children would love to be driving a white Corvette convertible as a teenager but I have no problem saying NO, and I am guessing many of you think a safe used Honda Civic is just fine for your teenager. We care about sticker price when purchasing a car and a house, so why then when it comes to college are we holding ourselves to such different standards? It is time for parents, and students, to start asking honest questions. Nothing helps bring on reality quite like sticker shock.

To help you understand the sticker shock I am going to give you some numbers, though each year they grow further out of date. The cost of college is only rising so your numbers will surely be higher than the ones listed here. “According to the College Board, the average cost of tuition and fees for the 2017–2018 school year was $34,740 at private colleges, $9,970 for state residents at public colleges, and $25,620 for out-of-state residents attending public universities.” Please realize this does not even include the cost of room, board, books, travel expenses, medical, and general living expenses. “The College Board reports that the average cost of room and board in 2017–2018 ranged from $10,800 at four-year public schools to $12,210 at private schools.” So the average check a family needs to write to the school EACH year ranges from $20,000 for a state school to $47,000 a year. Ivy League and expensive private schools can top out at nearly $70,000 a year!

Some quick math for those who need to see this number on paper. The average numbers for a single student for a four-year degree: state university – $80,000, private university – $188,000, and top prestigious universities – $280,000. These are just the numbers for the check written to the university directly, they do not include books, medical expenses, travel, living, and general expenses. I will remind you again that federal student loans max out at $27,000 for all four years and the rest needs to be made up by the student and their families. Even at a state university, you are looking at a cost not covered by student loans of $53,000 for 4 years or $13,000 a year. Real money that the students and parents need to make up for. You can do the math for the private and prestigious universities yourself. Now you understand why I start with numbers. Cost matters and it is time we stop pretending it doesn’t.

There are many ways to help bring costs down AND still have a fantastic college experience! There are many merit scholarships, some full meet-need colleges, and a long list of excellent colleges that will reduce your costs because they want you to attend. Don’t be immediately scared off by a college’s listed high costs, do your research and you can find the best financial, academic, and social fit for college.

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