The pace of college tuition cost increases is finally slowing – at least in the last two years. According to the College Board’s annual Trends in College Prices report, the average cost of tuition for in-state students at public four-year colleges and universities increased 2.9 percent in the last year. Out-of-state public tuition costs rose a bit more – 3.3 percent, while private nonprofit tuition rose 3.7 percent. Despite the fact that costs are still rising and college remains an expensive investment, the slowdown is welcome news for students and parents alike. So what are the latest tuition figures?
Average tuition for in-state students at public four-year colleges totals $9,139. Average costs jump to $22,223 for out-of-state public tuition and increase further to $31,231 for a private four-year college or university. Add-on the average housing cost of $9,804 for public schools and $11,188 for private schools, and suddenly annual all-in costs seem unattainable. While these figures represent national averages, costs will vary by state. For example, in-state four-year public tuition will run about $4,646 in Wyoming while the in-state costs in New Jersey are closer to $13,000 per year – the fourth-highest in the nation.
Published vs. net prices
Much like the sticker shock consumers get when viewing the MSRP of a new car, students and parents can become overwhelmed when they see the sticker price for college. In the same way very few buyers pay MSRP at the car dealer, the net cost for college after financial aid, grants and scholarships is often significantly lower than the tuition “MSRP.”
Remember, a school’s published tuition is not necessarily what you will pay. According to the Trend in Student Aid Report, average net prices are much lower than published prices because many students benefit from grant aid from federal and state governments, colleges and universities, and other sources, as well as from federal education tax credits and deductions.
Undergraduates received an average of $14,180 in financial aid in 2013-14, including $8,080 in grants from all sources, $4,840 in federal loans, $1,195 in education tax credits and deductions, and $65 in Federal Work-Study. In 2014-15, full-time students receive an average of about $6,110 in grant aid and education tax benefits at public four-year institutions, $5,090 at public two-year colleges, and $18,870 at private nonprofit four-year institutions. This helps reduce the net cost of tuition.
Who provides the most aid? The latest statistics suggest that nearly 40 percent of all grant aid came from the federal government, 39 percent from colleges and universities, 13 percent from employers and other private sources, and 8 percent from state governments. It is important to note that the report found on average, students with family income of $30,000 or less often received grants and aid sufficient to cover nearly all tuition and fees. While this does not include housing or books, it is certainly encouraging that assistance is available for some students. Additionally, public two-year college tuition can be a great value and starting point for many students, allowing them to transfer later to a four-year institution while reducing overall tuition costs. In fact, with two-year costs averaging $3,347, this can be a very reasonable approach to managing expenses.
How much do students owe?
While it is widely publicized that student loan debt has grown to over $1 trillion dollars, the College Board notes that the amount students have borrowed has actually fallen by 13 percent in the last three years. How much student loan debt does the average student have? Forty percent of borrowers with outstanding education debt owed less than $10,000, 29 percent owed between $10,000 and $24,999 and 4 percent of borrowers owed $100,000 or more. This debt includes borrowing for both undergraduate and graduate studies.
While the pace of college tuition increases is slowing, providing for a child’s college education is no easy task. Debt associated with college funding remains a serious economic issue and it is critical for parents and students to have a game plan to address it. A cost-conscious approach geared toward maximizing aid while selecting studies with attractive job prospects can help minimize the financial burden of obtaining a college education. Since everyone’s situation is unique, consider speaking to your tax and financial advisers to determine the most appropriate approach for you.
Kurt J. Rossi, MBA, CFP®, CRPC®, AIF® is a CERTIFIED FINANCIAL PLANNERtm Practitioner & Wealth Advisor. He can be reached for questions at 732-280-7550, kurt.rossi@Independentwm.com, www.bringyourfinancestolife.com & www.Independentwm.com. LPL Financial Member FINRA/SIPC.