Introduction: How Are We Going To Pay For This?
First of all, don’t panic! Help is available. All students, regardless of financial need, are eligible for some type of financial assistance. The assistance may be in the form of a loan or multiple loans that must be repaid, but a quality education is the wisest investment you will ever make. An often quoted statistic in the higher education community is that a college degree equates to nearly $1 million more in lifetime earning potential than someone with a high school diploma! That’s significant and worth the cost.
The single most important thing a new college student or parent of a new college student can do to prepare financially is to make a budget. Making a budget requires knowing two things: 1) how much is college going to cost? and 2) how much money do I have to cover these costs? Our section titled How Much is this Going to Cost? can help you answer the first question. Every school will cost something different. Our Cost of Attendance worksheet will help you start putting some real costs together and start you on your way to a sound financial plan.
If you’re like most Americans, you probably don’t have enough stored away under the mattress to simply write a check for your college bill. In fact, a recent survey by Academic Management Services found that 57% of parents with at least one child entering college as a freshman in 2005 waited until their child was in high school before researching ways to pay their child’s tuition. But you’ll be glad to know that help is available. Most college students receive some form of financial aid. (Sometimes, it’s good to know that you’re not alone.) Following is the percentage of undergraduate students receiving financial aid in the 2003-2004 academic year:
- Two-Year Public Colleges 46.8%
- Four-Year Public Colleges and Universities 68.6%
- Four-Year Private Colleges and Universities 83.3%
- Private, for Profit (Proprietary) Institutions 89.9%
- Total (All Institutional Types) 63.2%
Does this surprise you? In the year 2005-2006, the average total tuition at a 4-year, public was $5,491. When you take into account the additional expenses of room and board and books and supplies, the price tag jumped to just over $13,000! Private institutions cost even more. The average tuition at a four-year private college was $21,235, and with the additional expenses mentioned previously, the price tag goes to $29,930! The costs at two-year colleges were $2,191 and $8,901 respectively.
From 1981 to 2000, average tuition (adjusted for inflation) more than doubled at most post-secondary institutions while the median family income only grew at 27% during that same time. The good news is that few families actually pay the “sticker price.” Once you deduct grants, scholarships and loans from the bottom-line, most families are left with a very manageable net cost.
Over $122 billion in financial aid was distributed to undergraduate and graduate students in academic year 2003 - 2004; the majority coming from either loans or institutional grants. Below is a list of financial aid sources for 2003 - 2004 (in billions).
The point being: financial assistance is available to all and knowing where and how to apply for it is the key to a better financial position. The financial aid process can be intimidating, but knowledge is power. The other sections of this site will equip you with the information you need to make better decisions regarding the financing of your college career.
U.S. Department of Education, National Center for Education Statistics, 2000 National Postsecondary Student Aid Study, Undergraduate Data Analysis System, May 2005.
The College Board. Trends in College Pricing
The College Board. Trends in Student Aid
AMS (2005). AMS Study of Parents of College-Bound Freshmen