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Wednesday, December 5, 2018

A Look at the Cost of a College Degree & Ways to Reduce It

Living Happily Ever After – Is it Possible?
A Look at the Cost of a College Degree and Ways to Reduce It

By Katherine O’Brien, MA CCPS

For many, their dream is to go to college, graduate, get a good job, make decent money, and live happily ever after.  Unfortunately, for many, that does not come to pass.  In this article, we’ll explore several of the reasons why and some options to consider in order to make that dream into a reality.

What does college degree actually cost and What Can We Do to Lessen that Cost?

For those who start with about $16,000 in savings, get scholarships, grants, and work to help pay for school, they will accumulate about $42,000 in student loan debt during the six years it takes most students to earn a bachelor’s degree.

In contrast, if s/he had decided to be a restaurant server rather than go to college, the student would make about $39,000 per year (assuming s/he is in the top 25% in a metro area like Houston).  In six years, after taxes and the cost of living adjustments, s/he would make just over $81,000, rather than racking up student loans.  In other words, s/he wouldn’t have a degree, but would be $123,000 ahead of the average college graduate ($81,000 + $42,000).

How long will it take the college graduate to recover that lost opportunity cost and catch up with the restaurant server?  Assuming the graduate gets a job in a field like marketing that has a starting pay of $51,000 per year, it will take 18 years to catch up with the restaurant server, assuming s/he pays off the loans six years faster than average.  This also assumes that the server’s salary steadily increases every year.  While catching up, the college graduate will pay over $18,000 in interest, a total of over $60,000 in loan payments.

What are the alternatives?

1.     Attend a Public university to lower costs?

Many people think that the only option to make college affordable is to send their children to public universities, given their lower tuition rates.  Let’s explore this assertion.

The average in-state tuition is almost $10,000.  The average out of state public tuition is $25,600 and the average private college tuition is almost $35,000.  However, those are the sticker prices.  The average net price (out of pocket cost) for tuition is $4,000/year for publics and $15,000/year for privates, per Big Future.  In order to see the cost to earn a degree, we must also consider the average number of years to graduate: public university students average 6 school years while privates average just above 4 school years.

Here’s a look at the math:

Public universities:
$4,000/year * 6 years = $24,000 tuition, on average
$10,800/year * 6 years = $64,800 room & board, on average
+ $47,268 lost wages $909/( median weekly earnings of FT workers with HS education)
TOTAL COST OF DEGREE: $ 136,068 + $27,000 in loans (approx.) (+ fees, books, etc.)

Private colleges:
$15,000/year * 4 years = $60,000 tuition, on average
$12,210/year * 4 years = $48,840 room & board, on average
TOTAL COST OF DEGREE: $ 108,840 + $33,000 in loans (approx.) (+ fees, books, etc.)

Here’s a second look, with figures from a different source.

At end of 6 years,

Public university graduate - $27,000 debt

Private college university graduate’s financial status = $68,480
2 years of working at $50,390 (Money mag) = $100,780 – $32,300 debt (with 75% in debt)
(Data from Mark Kantrowitz, 2012)

[For profit college graduates (88% have debt) with the average debt = $39,950]
[A word about for-profit colleges, in addition to their students carrying more debt, their graduation rates are much, much lower than non-profit colleges, with an average of only 19% graduating in 4 years.]

Since the idea of attending a public university to save money on college isn’t actually very effective, we’ll explore some alternatives.

2.     Graduate FASTER!

There are several ways to shorten the length of time to earn a degree (in addition to attending a school with a 4-year graduation rate of over 50%).  By working ahead via AP, IB, CLEP, and DSST exams as well as dual enrollment opportunities during high school, the student, depending on his or her abilities, can accumulate as much as two years’ worth of college credits while still in high school.  Students will need to research the acceptance policies of these various programs by the colleges and universities they are considering.  Each college/university sets its own policies (sometimes by college or department within the university, sometimes as an institution) regarding how these scores and credits are treated.

For some students, staying at home and taking classes online can be a less expensive path to earning a degree. There are, however, social sacrifices involved in that path that make it unsuitable for some students.  Online course completion rates are significantly lower than completion fates for in person classes.  Additionally, having the positive peer pressure to study and complete your degree is found on campuses with a 50% or higher 4-year graduation rate and  is a powerful aid to help students stay on track to graduate in four or fewer years.  Per the National Center for Education Statistics, 36% of public college students graduate in 4 years while
54 % of private college  students graduate in 4 years.

3.     Save more, Get More Bang for Your Buck

Starting earlier and saving more than the $16,000 used in the initial scenario is also helpful.  Saving takes diligent, sustained effort and, often, many sacrifices.  Every dollar saved will actually save your student $1.50; keeping this in mind can help you stay on track with your savings goals. Per CNBS and USA Today, the average amount families have saved for college (in 2018) is $18,000. This is a significant increase from 2004 when I began working with families.  It’s time to be way above average!

There are various types of accounts that can be used to save funds for college.  Some, like 529s and Coverdells, have limitations on the amount of money that can be deposited each year as well as regulations regarding the use of the funds.  Some kinds of accounts are considered assets and so are included in need-based aid calculations while others are not included.  Consequently, determining the best type of account to keep your college money in requires exploring both the tax and financial aid eligibility ramifications.

4.     Plan Ahead

Despite the high costs of college, many students arrive on campus with little to no idea what they want to study or what sort of field in which they would like to work.  As the adage goes, failing to plan is planning to fail.  Unfortunately, the vast majority of students have received absolutely no guidance regarding potential careers and majors.  Almost none have actually done a job shadow, further an internship in a field under consideration. reports that, per 2017 federal data, nearly one-third of students change their majors during their first three years in college. Other studies state that as many as 80% do. Ohio State University shows data that 38% of their students changed their major between when they applied and when they completed freshman orientation.  They didn’t have data available about how many more change once they matriculate nor on how many times their students tend to change their majors.

In addition to changing majors, 25% -38% of students at 4-year colleges transfer to another college or university.  Students are much more likely to take five to eight years (or more!) to graduate when they transfer, especially those who transfer twice. 

In both cases, students often have many credits they have earned that do not fulfill their new graduation requirements.  For example, a student transferring from French into chemistry will not be able to use most of the humanities credits earned towards their graduation requirements for a BS in chemistry.

When changing majors, students typically add a year to the length of time it takes to earn their degree.  When transferring, two years additional time to degree is not uncommon. The average added out of pocket costs for one extra year of college at a public university is $62,208 ($14,940 tuition/room/board + $47,268 lost wages).  The average out of pocket costs for an extra year at a private college is $74,008 ($26,740 tuition/room/board +$47,268 lost wages).

5.     Should You Start at a Community College?

This is the path that a number of today’s parents used successfully to save a significant amount on the cost of college while still graduating in four years.  Unfortunately, in addition to having a significantly lower 6-year bachelor’s degree completion rate, getting an associate’s degree actually adds the time to degree for those who do earn a bachelor’s degree.  Approximately 25% of bachelor’s degree seeking community college students actually transfer to a 4-year college or university.  And only about 10% of those who start at community colleges have a bachelor’s degree after six years.

This path can be used successfully but it takes even more careful planning and frequent visits to the transfer counselor than the other paths to a bachelor’s degree.

6.     Get Scholarships

Scholarships are given by colleges and universities as well as private organizations.  93% of college scholarship dollars come from the schools themselves.  In fact, private scholarships impact need-based financial aid eligibility dollar for dollar so may or may not lower a given family’s out of pocket costs. (While it feels great to say that your child has received a scholarship, the actual impact on the family’s bottom line tends to be the more important factor.)

Why do colleges give students money? 

Most people are aware that scholarships are awarded for academic and athletic capabilities and accomplishments.  Some know that scholarships are also awarded by some schools for student leaders and those with special accomplishments (top debaters, for example).  Fewer are aware that scholarships are also used by some colleges and universities in exactly the same way as coupons are used, to entice you to buy their product/attend their school, rather than a competitor’s. Colleges and universities that have international reputations and tend to win large research grants tend to not give scholarships intended to entice students; they don’t need to.  Colleges that serve their region or are less well known tend to use scholarships as ways to recruit students.  Some liberal arts colleges and master’s colleges (offer bachelor’s and master’s degrees only) will give all or nearly all their students significant scholarships.  In addition, sometimes scholarships are awarded despite the fact that the family has no financial need, as an inducement to have their child attend their school, rather than another.  And, it works well! 

Lastly, a number of groups of states in the US have banded together in groups called student exchanges through which participating public universities in each state will offer students from the other states a significant tuition reduction (typically $5,000 - $10,000/year) when they attend their school.

7.     Get Help! Work with a holistic college consultant

Hiring an expert to help buy and sell a home is commonplace.  Next to a house, the next greatest expenditure is college.  Hiring an expert to assist with the process saves significant time and money, and protects people from making mistakes because "we just didn't know!"

While many college consultants only work with students to create their applications, some of us work holistically with students and their families.  For each of my clients, for example, I develop a personalized overall strategy then guide the student and his or her family through it, step by step.  I typically start by guiding students to explore possible careers then majors and schools. I evaluate the family’s financial resources then advise regarding ways to lower costs and increase resources in order to help the student accomplish his or her academic and career goals.  Working holistically, I’ve fostered my students’ personal growth and skill development, enhanced their awareness of their strengths, and guided them through the application processes, both for admissions and aid.  My clients have averaged about $75k/college in scholarships, plus need based aid.  While I work with clients from all education settings and backgrounds, I specialize in working with home educated students and Catholic students.

Lowering the family’s stress levels, providing expert knowledge, and seasoned guidance provides an improved quality of life as well as better academic and financial outcomes for my clients.

Evaluate your options and find a better way to get your degree.  College shouldn’t be a debt sentence.

If you’d like to meet with Katherine, you may schedule a consultation at