College students this fall are getting ready to take on one of the biggest financial commitments of their lives. The average cost of a four-year postsecondary program has gone up nearly 170% from 1980 to 2019, according to a report by Georgetown University.
And though federal funds have helped colleges maintain costs over the course of the pandemic, rising costs of energy, food and just about everything else means getting educated is getting even more expensive
“The big drivers of inflation — energy costs, food costs, rising wages — of course, hit colleges, because they're paying salaries, they're providing room and board, they're heating buildings, doing all of those things,” says Ann Garcia, a fee-only financial advisor and author of How to Pay for College.
Several universities froze tuition throughout the pandemic. But now, some are raising their prices to counteract the costs of inflation.
Brown University is raising its undergraduate price by 4.2%, the largest increase in 14 years. And the University of Virginia will raise its tuition 4.7% this year and 3.7% next year in order to catch up with prices that have stagnated for the past few years — that’s an 8.4% increase for students over the next two years.
And as costs rise for institutions, they get passed on to students, who often have even more expenses than we realize. Many of the students attending university and colleges these days don’t fit the classic demographic we often imagine when we think of college students, says Michele Streeter, senior director of college affordability at The Institute of College Access and Success (TICAS).
Students are now often older, and have the financial responsibilities that come along with that.
“They need to find ways to cover all of their other life responsibilities,” says Streeter, which could include childcare or missing out on earnings, if they’ve left a job.
“I think everyone other than the very wealthiest students in the country are probably rightfully concerned about how to cover all these costs.”
Additionally, the cost of borrowing a student loan has gone up as the Federal Reserve raises interest rates to combat inflation.
For example, a Federal Student Loan taken out before July would have had an interest of 3.7% for its life. But loans taken out after July 1 will now have a rate of 4.99%.
The good news is, if students and their families are strategic about where they go and how they pay for it, they’ll find there are many ways to finance a college education without having to take on debt that will weigh them down for decades.
Every college is required to have a tool on its website called The Net Price Calculator, which will show you how much your family will have to pay for the university, it will also estimate how much scholarship money you could get or be eligible.
“I always tell people don't apply to any college [if] you haven't done the Net Price Calculator for it,” says Garcia. “Because that's really your best indicator of what that college is going to cost you.”
Garcia offers her daughter’s experience as an example. Having applied to both private and public colleges, she used the Net Price Calculator and received price ranges from $11,000 a year to $81,000 a year — all using the same information.
“It's just a matter of how colleges price and discount their services based on the students that they want to bring in,” says Garcia.
If an institution wants to diversify, says Garcia, then it will likely offer more needs based funding for students, while a college that wants to move up in the US rankings, is going to offer merit scholarships to students with good grades and test scores.
“Sadly, it's up to students and their families to do the legwork to find out,” Garcia says.
Before deciding on a school, applicants should think about the kind of financial aid that school offers and what scholarships they might qualify for, whether they be needs- or merit-based.
The best tool for that is the Student Aid Estimator on the Department of Education Website, says Garcia.
“You type in all your financial information and it will give you an estimate of your expected family contribution, which is the amount of money that the federal methodology says you should be able to pay for college,” says Garcia.
Once you know what your family is expected to cover, you’ll be able to figure out if you’re eligible for student aid. And it’s possible that you could be eligible for aid at some colleges and not others.
“Think of a family whose expected family contribution is $35,000. They're not going to be eligible for needs-based aid at public colleges, but they will be private colleges,” she says.
While many people think of merit scholarships as being for high caliber athletes and students, Garcia says that’s a misconception.
“If you're not eligible for scholarships on the basis of need, chances are good that there's some college out there that will offer you a scholarship on the basis of merit.”
That could mean a lot of things. There are scholarships for under-the-radar activities such as e-sports, she says, or you could get a scholarship for being the only person from your state at a small university.
“They are really broadly available, including from public colleges,” Garcia says.
Garcia suggests letting your financial situation somewhat guide your decision of what school to go to, because by knowing what kind of funding you need, you can match to a school based on what kind of funding it has for students.
“Many colleges are extraordinarily generous to students with high financial needs, others are not,” says Garcia. “So it's not enough to just have a low expected family contribution, you have to find what colleges will meet your financial need.”
In addition to scholarships, billions of dollars are consistently left on the table because many students don’t fill out their federal student aid (FAFSA) forms, says Streeter.
It’s one of the first things college applicants should do.
“Filing the FAFSA is the way that you become eligible for needs-based financial aid. But just filing it doesn't guarantee that you're going to get any,” says Garcia.
And because the filing process is very long and complicated — like every part of trying to pay for college, it seems — many people don’t end up completing it.
It can seem like a daunting task to try to pay for college these days, but knowing what you’ll actually be expected to pay and where you can potentially make up the difference could save you a lot of money in the long run.
“Part of the challenge is that we have let the Stanfords and Harvards drive the narrative which is, it's really hard to go and you should be super grateful that they even accepted you,” says Garcia.
“I mean, the vast majority of colleges are actively trying to recruit and enroll students. One of their primary tools for doing so is scholarships.”
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
