College Planning 101
Over the years, it has become increasingly clear that acquiring some level of post-secondary education is an important advantage in terms of surviving and thriving in a highly competitive-and expensive-world.
Statistics from the College Board indicate that the typical bachelor's degree recipient can expect to earn over 60% more than the typical high school graduate over a 40-year working life, a financial advantage that is amplified even further with higher levels of education. The implications of this disparity are particularly meaningful at a time when the average home in the United States sells for nearly $300,000 (2008) and a gallon of gasoline costs nearly $3 (as of November 2009).
Rising College Costs
While the value of a college education is rising, so too is the cost of attending. According to the College Board, for the 2009-2010 school year, tuition and fees at a four-year college were:
- $7,020 for in-state students of a public school, up 6.5% from the prior year.
- $18,548 for out-of-state students of a public school, up 6.2% from the prior year.
- $26,273 for a private (not-for-profit) school, up 4.4% from the prior year.
Add the cost of room and board, and those annual figures increase to $15,213, $26,741 and $35,636, respectively. Then, multiply that by four years and factor in tuition hikes to determine your approximate bill. Assuming an annual increase of 6%, that's a four-year bill of $66,553 (in-state public), $116,981 (out-of-state public) or $155,892 (private).
| Estimated Cost of a Four-Year Education | |||
|---|---|---|---|
| Year | In-State | Out-of-State | Private |
| 1 (2009-10) | $15,213 | $26,741 | $35,636 |
| 2 | 16,126 | 28,345 | 37,774 |
| 3 | 17,094 | 30,046 | 40,040 |
| 4 | 18,120 | 31,849 | 42,442 |
| Total Cost | $66,553 | $116,981 | $155,892 |
Based on data from the College Board for tuition, fees and room and board at a four-year school. Assumes a 6% annual increase in costs. | |||
This takes into account the common and more "obvious" expenses of higher education, but your calculations should also include less obvious costs – for example, books and supplies, a computer, off-campus housing and transportation (i.e., auto expenses and/or airfare).
College Costs, 2009-2010
Average Published Charges for Undergraduates
(Enrollment-Weighted)
Tuition and Fees
| 2009-2010 | 2008-2009 | $ Change | % Change | |
|---|---|---|---|---|
| Public Two-Year | $2,544 | $2,372 | $172 | 7.3% |
| Public Four-Year (in-state) | 7,020 | 6,591 | 429 | 6.5 |
| Public Four-Year (out-of-state) | 18,548 | 17,460 | 1,088 | 6.2 |
| Private Four-Year | 26,273 | 25,177 | 1,096 | 4.4 |
Room & Board
| 2009�2010 | 2008�2009 | $ Change | % Change | |
|---|---|---|---|---|
| Public Two-Year | N/A | N/A | N/A | N/A |
| Public Four-Year (in-state) | $8,193 | $7,773 | $420 | 5.4% |
| Public Four-Year (out-of-state) | 8,193 | 7,773 | 420 | 5.4 |
| Private Four-Year | 9,363 | 8,986 | 377 | 4.2 |
Total Charges
| 2009-2010 | 2008-2009 | $ Change | % Change | |
|---|---|---|---|---|
| Public Two-Year | N/A | N/A | N/A | N/A |
| Public Four-Year (in-state) | $15,213 | $14,364 | $849 | 5.9% |
| Public Four-Year (out-of-state) | 26,741 | 25,233 | 1,508 | 6.0 |
| Private Four-Year | 35,636 | 34,163 | 1,473 | 4.3 |
N/A indicates sample too small to provide meaningful information.
Source: Annual Survey of Colleges, the College Board, New York, NY.
Enrollment-weighted tuition and fees are derived by weighting the price charged by each institution by the number of full-time students enrolled in fall 2008. Public four-year in-state charges are weighted by total fall 2008 full-time enrollment in each institution, including both in-state students and out-of-state students who pay additional nonresident charges. Out-of-state tuition and fees are computed by adding the average in-state price to the out-of-state premium weighted by the number of full-time out-of-state students enrolled at each institution. Room and board charges are weighted by the number of students residing on campus.
"During their working lives, typical college graduates earn over 60% more than typical high school graduates, and those with advanced degrees earn two to three times as much as high school graduates." - The College Board
Who's Paying How Much
Of course, not every student will attend the "average" college, so your costs could be higher or lower than those cited previously. The chart below outlines the distribution of full-time students by tuition and fees paid for the 2009-2010 school year.
Four-Year Schools Based on Published Tuition and Fees, 2009-2010
Notes: For out-of-state students enrolled in public four-year colleges, the nonresident premium has been added to in-state tuition and fees. Some out-of-state students pay lower prices because of reciprocity agreements. The distribution of students across institutions is based on the latest available enrollment data, which are for fall 2008. Percentages may not sum to 100 due to rounding.
Source: Annual Survey of Colleges, the College Board, New York, NY.
Lowering Your Bill
Regardless of whether your college costs are ultimately above or below average, there are several potential avenues for lowering your bill. Among them are:
Community College: Most two-year colleges offer programs at a lower cost than four-year public and private colleges, allowing students to earn a certificate or an associate's degree while also accruing credits toward a bachelor's degree should they choose to continue their education at a four-year college. Many four-year schools offer automatic admission and/or scholarships to community college students who transfer into their programs. Some states and their community colleges extend additional incentives to recent high school grads. In New Jersey, for example, many community colleges offer free tuition and fees to high school students who graduate in the top 20% of their class and who enroll in a full-time associate's degree program.
Advanced Placement (AP): For some students, taking college-level classes in high school may be an option. These students then have the opportunity to earn credit or advanced standing at many colleges and universities. Students with high scores on placement exams can test out of some college courses.
College-Level Examination Program (CLEP): Similarly, some colleges allow prospective students to take college-level examinations through CLEP to receive college credit. There is a nominal charge for each test taken.
In-State Tuition Programs: Public universities generally extend a lower tuition rate to in-state students. Most states have certain requirements for "in-state" status. For example, a prospective student must live in the state for at least a year before claiming residency and show the intention to remain in the state for a certain period of time after graduation. Some states have reciprocity agreements with neighboring states and will grant in-state tuition.
Other College-Specific Incentives: Check with your chosen schools to see if they offer tuition discounts for employees and/or alumni. Some colleges also offer sibling discounts to families with children close in age and attending the same school.
Contact the office of admissions at the college(s) of your choice for information on specific discounts.
No matter how many "discounts" are applied, the cost of a higher education is still one of the biggest financial obligations most parents will ever face. It also is money well spent when you consider the doors it can open for your children and the financial advantage it can mean for their future. There are several options available for paying the tuition bills. Read about them in Part II of this series, "Investing for College."
This material is provided as an educational tool and is based on current tax laws, which may change in the future. BlackRock cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. BlackRock is not engaged in rendering any legal, tax, accounting or investment advice. Please consult with a qualified professional for this type of advice.
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