Money Talks, So Should You

Ask Jane: What will your kid’s college really cost?

Jane Bryant Quinn
by Jane Bryant Quinn, Dimespring Contributor  (@janebryantquinn)

It’s decision time for new college applicants, and the choice can be hard. Which school should your child accept, if there’s a choice, and will you live  financially  to tell the tale?

Too many students pay too little attention to a college’s total costs, and too many parents let them get away with it. It’s hard to deny your child his or her “dream school,” especially when a financial-aid package makes the net cost seem relatively low.

READ: 10 easy ways to avoid big college debt

But some of these “aid” packages are kidding you. They count as “aid” large student and parent loans they expect you to take out, which isn’t always clear when you get the acceptance letter. What’s more, many schools engage in bait-and-switch. They offer a substantial discount for your child’s freshman year but will raise the net cost in future years, when your child is hooked on the campus, the courses and the social life.

So when you get those acceptance packets, dig down to see what you’re really going to have to pay out-of-pocket. Then compare it with your own resources. Will it endanger your retirement or your younger children’s chances to go to school? Will your freshman-to-be have to borrow more money than he or she can reasonably expect to repay? If so, the school  even a prestigious or “dream” school  isn’t worth the price.

To see what each school is going to cost, make a side-by-side comparison. You might use the U.S. Education Department’s Financial Aid Shopping Sheet, and fill in the blanks. You need a standard form like this because schools disclose their financial offers in different ways. Some schools disclose only tuition and fees in their acceptance letters. Some offer scholarships good for only one year. If student and parent loans are counted as “aid,” you might mistakenly think the college is low cost.

READ: How can I increase my scholarship potential?

The Shopping Sheet helps you add up your true and total direct costs: tuition, fees, room, board, books and supplies, and the cost of transportation to and from your home. Books and supplies might cost $1,000 or more. Mandatory fees, in particular, have soared in recent years, at both public and private schools. They might include health insurance premiums, parking/pedestrian fees, freshman orientation fees and mystery fees (one example: a “student success” fee). They all should be lumped under the schools total for fees, on its website, but there might be extras  for example, fees for specific classes, often, in science or engineering. Call or email the admissions office, to ask. 

Once you know the school’s total cost, subtract any free grants, tuition discounts or scholarships your child gets  money that doesn’t have to be paid back. Families with modest incomes qualify for federal Pell grants. Many private institutions offer “merit scholarships” to middle- and upper-middle-class students who don’t get Pells.

The result is your net cost for the current year. That’s what you and your student will be expected to pay, from personal savings, earnings or loans.

Net costs will rise each year. To get a handle on this, ask the school what the percentage increase has been, in tuition, fees and room-and-board costs, over the past four years. (Be sure to include fees. Tuition might be frozen at some state schools, while fees are rising rapidly.) Past increases give you a good sense of how much more you’ll have to pay in the future.

If your child gets a merit scholarship, read the fine print. Some of these awards are good for only one year, or require the student to maintain a certain grade-point level. Even if renewed, they might be smaller in the future. Could your child stay at the school if the award was canceled or cut?

READ: 6 simple steps for completing your FAFSA application

If you’re tapping all your resources to get you through the first year, future years are going to be tough. So the next step is to consider how much you can prudently borrow.

I’ve written before about the risks of borrowing to pay for college or of co-signing student loans. Your student shouldn’t borrow any more money than he or she can expect to earn in the first year after graduation. As a parent, you shouldn’t borrow (or co-sign for) any more than you can afford to repay within 10 years or the year you retire, whichever comes first. The rule for parents applies to the total amount you’ll need to cover all your children, not just the first one to go to school.

The best source of loans is the federal government  Stafford Loans for students and Plus Loans for parents. They carry more flexible repayment arrangements than private student lenders offer. If your student has to get a private loan on top of a government loan, you’re probably choosing too expensive a school.

Remember: These loans will stick with you forever, even if you or your child run into financial difficulties and find it hard to repay. Unpaid student loans will wreck your credit record. They can’t be discharged in bankruptcy. The government can even garnish Social Security checks, when there’s money owed.

Young students often can’t evaluate the effect of large loans on a meager starting salary, but you can. Guide your child to the most affordable school. He or she will thank you in the end.

Jane Bryant Quinn is a nationally known commentator on personal finance, with books and columns read and trusted by millions. In her long career, she has established herself as America’s most reliable voice for people trying to manage their money well. Read more of Jane's articles here