When it comes to thinking about college and how much it will cost, many of us start with some preconceived and overly simplistic ideas. Here are some common examples:
- We can’t afford a private college or university.
- It’s way too expensive to attend an out-of-state college.
- We earn too much money. Our student will never qualify for any aid.
- My student has good grades, so colleges will offer a bunch of scholarships.
However, assumptions about college costs are often wrong. The real cost of college for most families is far different from what you might think, so never make any assumptions. Doing that can cost you many thousands of dollars, and they can kill your child’s dream of attending the right college for their life and career goals.
In this article, I’ll show you why college doesn’t cost what you think, and I’ll teach you how college costs actually work at different types of schools. The insights might surprise you, and they’ll help you make a much more informed decision about which colleges you’re considering. By knowing the truth about college costs, you hopefully won’t waste thousands of dollars or kill your child’s dreams.
By the way, this is all based on real college data, and it’s based on my work as a college planning specialist, where I’ve helped families plan and save for college for more than 20 years. Let’s start by challenging your assumptions and taking a look at the six types of colleges and how costs typically work at these schools.
Challenging Our Assumptions
When we’re considering the vast array of colleges out there, most of us think about schools in terms of basic categories:
- Public or private
- In-state or out-of-state
- Two-year or four-year colleges
- Liberal arts, business or STEM
- Prestigious vs. less prestigious
Then we make pricing assumptions based on these categories:
- Private = expensive
- Out-of-state = expensive
- In-state = less expensive
- Two-year colleges = cheap but perhaps undesirable
- Liberal arts colleges = expensive
- Prestigious = expensive
This often leads us to make further assumptions about what’s affordable and what kind of financial aid might be available. But the reality is that these assumptions aren’t reliable.
For example, public universities have a cheaper sticker price than private colleges, but that doesn’t necessarily reflect the total cost of attendance. And it definitely doesn’t reflect the net price that families pay after receiving grants and scholarships from federal and state programs as well as the colleges themselves.
Additionally, public universities typically don’t offer much financial aid to middle-income or higher-income families. In contrast, many private schools do, which means their costs could actually be similar, the same, or even less than attending a public university. It all depends on the school and your family income.
Example #1: Public vs. Private Colleges
In my home state of Wisconsin, the University of Wisconsin-Madison is considered the top public university academically. According to 2017-18 data, it also costs around $25,000 per year—all in. Marquette University, a popular Wisconsin private college in Wisconsin, has a list price of $56,000, which is more than $30,000 more. But when we look at the federal data on the actual cost that families pay at Marquette, we get a different story.
For a family making $75,000 to $110,000 per year, the difference in cost is only about $7,800 per year ($22,148 for UW-Madison vs. $29,993 for Marquette). That’s because Marquette offers a lot more financial aid than UW-Madison to compensate for the difference in cost and help students pay for college.
Example #2: In-State vs. Out-of-State Public Colleges
Here’s another example. Historically, public universities charge double or triple tuition to students from out of state compared to the tuition for in-state residents. For example, tuition at Texas A&M (College Station, TX) is $10,968 for state residents and $36,442 for out-of-state residents. But some out-of-state public schools won’t necessarily cost more. Some offer scholarships to attract students from other states, and some have reciprocity agreements with neighboring states and charge in-state tuition to students from those states. As a result, your costs could be the same or less than an in-state school.
Unfortunately, many families don’t find out about the true costs of many colleges because they start their planning with basic assumptions and never challenge them. They don’t do the research or apply to enough schools to find out that their costs might be very different.
This is why it’s important to understand the difference between a school’s sticker price, its actual total cost of attendance, and your net cost after grants, scholarships or other aid.
To do that, we need to start with a few definitions.
Important College Cost Definitions
- Cost of attendance is a financial aid term, and it has a strict definition. It’s the total cost to attend a particular college for one school year, and it includes all of the following items:
- Tuition and fees
- Room and board
- Personal expenses
All colleges that participate in federal student aid programs must report this data to the U.S. Department of Education, which makes it available to the public through an online database.
- Sticker price is a school’s published price before any discounts or scholarships. Similar to a sticker price on a car, many people don’t pay the sticker price because grants, scholarships and other discounts lower the cost.
- Net price is the price that families pay for a particular college after receiving grants and scholarships from the federal and state government as well as the college itself. For example, the total cost of attendance at a given school might be $50,000, but your net price might only be $30,000 because your student receives a federal grant and a scholarship from the college.
Finding the Net Price at a Specific College
To find out what families in your income bracket recently paid for college at the schools you’re considering, check out my Costs of Colleges by U.S. State. These are based on the actual cost of attendance and financial data reported by each college to the U.S. Department of Education. By clicking on a state, you can see how much families in your income bracket paid at each college in that state during the academic year in question.
Understanding the 6 Types of Schools
It’s also crucial to understand how different types of colleges impact your costs and what you can expect. This is why I’ve put together a list of the six types of colleges, with proper categories for evaluating the colleges you might be considering and understanding what each one means for your student.
Each type of school has some general similarities in how it will work out for a particular type of family and student. But not every college fits neatly in a bucket.
For example, a private school that really wants your student may offer more aid and be more cost-competitive than an in-state public school. But the result at the same college could be completely different for a student that isn’t as attractive to the school. It all comes down to how each school fits your child’s educational goals and your family finances.
With that caution in mind, let’s take a look at the six types of schools and what they mean.
- In-State Public Schools
- Out-of-State Public Schools
- Public Schools Offering Out-of-State Student Scholarships
- Private Schools That Will Accept Your Student
- Private Schools that Will Pursue Your Student
- Elite Private Colleges
1. In-State Public Colleges
These are public colleges in your state, and they have the lowest sticker price. That price is usually considerably lower than private colleges and is often the price to beat when considering different schools.
However, these schools don’t offer a lot of financial aid for the typical middle-income or higher-income family, so you may end up paying closer to full price than you would at other schools. But that full price is usually a reasonable number.
In certain states such as California, Michigan, Wisconsin and Florida, the top public colleges are also quite strong academically. If you can get into one of these stronger schools and it’s in your state, it may offer the best value for your money.
Some state schools are relatively easy to get into, but others can be quite difficult. Some might also pursue your student if you’re a top applicant.
Another thing to keep in mind is “satellite schools.” These are schools within the state system that are not the flagship school.
For example, in Texas, the University of Texas-Austin is the flagship school, but there are a number of other UT schools across the state. These satellite schools generally have cheaper tuition and costs.
2. Out-of-State Public Colleges
Out-of-state public colleges are schools outside your state with similar selectivity compared to what you might see among private colleges. The selectivity of Out-of-State Public Colleges depends on the school in question. They can range from being almost as selective as an Elite Private School (see below) to being fairly easy to get into.
For example, there are elite out-of-state public colleges, such as the University of California-Berkeley, the University of Michigan, the University of North Carolina- Chapel Hill and many others. These are out-of-state colleges that expect you to pay out-of-state tuition. They often don’t offer much in scholarships. They get plenty of applicants willing to pay, so those are the students they accept.
Regardless of selectivity, state taxes subsidize lower in-state tuition prices for public colleges, so out-of-state residents usually have to pay higher tuition. Local residents would get upset if they were paying taxes for spots given to students outside their state.
Many state schools also see out-of-state students as a way to balance their budget, so many don’t offer significant amounts of aid to out-of-state students for this reason.
3. Public Colleges Offering Out-Of-State Student Scholarships
Some out-of-state public colleges are trying to attract great students and are willing to offer merit scholarships to help bring the price down. If your student qualifies, you might receive a scholarship that could negate all or part of the difference between in-state and out-of-state tuition costs.
But the price won’t usually end up being lower or much lower than what in-state students will pay. These schools are careful to avoid any backlash over state taxes being used to support out-of-state students.
Of course, there are a few exceptions for star athletes or truly elite students, but these schools will generally bring the cost closer to in-state tuition and won’t lower it below that.
As with other Out-of-State Public Colleges, selectivity depends on the school and could be comparable to an Elite Private School, relatively easy, or somewhere in between.
4. Private Colleges That Will Pursue Your Student
If you’re in the top 25% of applicants, there are private schools that will pursue your student. These are schools where your student is better than the average applicant, and colleges will more likely offer you merit-based aid, need-based aid or both.
For example, if your child has an ACT score of 32 and the school’s average ACT score for admitted applicants is 26, your child will be deemed an applicant worthy of consideration for a merit scholarship or similar aid.
These schools will probably offer more money in merit aid than Private Colleges That Will Accept Your Student (see below) because they’re trying to encourage your student to attend. These schools also accept more students than Elite Private Colleges and are less selective than Private Colleges That Will Accept Your Student.
5. Private Colleges That Will Accept Your Student
In this category, we find schools that accept slightly more students than Elite Private Colleges, but they’re still highly selective. Great students stand a better chance of being accepted at these schools, but they’re still competing against other top candidates. This means an outstanding student might be more of an average applicant, and many students might be just barely good enough to get in.
Unlike Elite Private Colleges, these colleges offer merit-based aid and not just need-based aid, but your student has to stand out among the best to qualify for it.
If your student isn’t among the best of the best or is only an average or below-average applicant, you’re unlikely to receive merit aid. Also, if your family doesn’t have a financial need, you won’t get need-based aid either. In these cases, you may be better off applying at a school where your student is a top candidate.
For example, let’s get back to our ACT score of 32 from an earlier example. This is an outstanding score and puts your student in the top 10% of test takers. But this number is your standing among everyone who took the test nationally. It doesn’t necessarily reflect your standing compared to students applying to a specific college. A score in the top 10% of all test takers might only be the average score of an accepted student at certain schools. As a result, you may not qualify for merit-based aid for your test score.
If you don’t qualify for merit aid and don’t have enough financial need, then you might have to pay full price or nearly full price. Financially, these schools are a good fit for students who qualify for aid or families that aren’t as price-sensitive and are willing to pay to get into a top-notch school.
6. Elite Private Colleges
We’ve all heard the names of the Elite Private Colleges. They’re schools such as Harvard, Yale, Stanford and MIT. They’re the top private colleges in the country, and they do their financial aid differently than most.
Many of these top schools award aid based solely on financial need. They don’t offer merit-based aid such as academic scholarships. This is because all their accepted applicants are academically exceptional. It’s difficult to pick a “rockstar” student from hundreds or thousands of other “rockstars” admitted each year.
Schools that only offer need-based aid often say things on their website such as:
“Princeton financial aid is awarded solely based on need; there are no merit scholarships.”
“MIT awards financial aid only on the basis of financial need. We do not award money based on any measure of merit—academic, athletic, artistic—or anything else.”
However, these schools cover 100% of the financial need for all accepted students, so if your family demonstrates a need, it will be covered. For families that show a high need, the cost of attendance could be lowered to $10,000-$15,000 per year or even free. In fact, the top 5-10 Elite Private Colleges even use financial aid formulas that are more beneficial to students than the average need-based formula.
For example, Harvard and Stanford have “bonus” formulas that are more generous in awarding aid than most. Students with family incomes at certain levels can even attend these schools for free, such as Harvard students with family incomes under $60,000 per year.
If you know you’ll show a high financial need, schools like this that meet 100% of financial need could be ideal options to consider (assuming you qualify for admission)
However, you typically need to be in the top 1% to 2% of your graduating class academically, and you need to be in the top 1% to 2% of performers on college entrance exams.
You need to truly stand out in a highly competitive field, and it’s not even enough to have outstanding grades and test scores. There has to be more.
For example, when it comes to extracurricular activities, it might not be enough to simply volunteer at the local soup kitchen. You might need to be the person who founded the soup kitchen. Of course, if you happen to be the son or daughter of a U.S. senator or the child of a prominent business leader or celebrity, that can help too, but most students aren’t in those categories.
Nonetheless, if you have a truly amazing student, it might be worth applying to an Elite Private College that doesn’t offer merit aid because it provides significant need-based financial aid packages.
It’s also important to know that not all Elite Private Colleges limit their aid to financial need. Some cover 100% of student financial need and offer some merit aid. They may offer merit scholarships or other forms of merit-based aid to exceptional students. However, you need to be among the top applicants at that school and not just a top student nationally, and some schools only offer merit aid to a very limited number of students or to athletes or those who qualify for specific programs such as a national merit scholarship.
Here are a couple of examples of how schools communicate their limited merit aid offerings on their websites:
“Each year, Vanderbilt awards merit-based scholarships to applications who demonstrate exceptional accomplishment and intellectual promise.”
“Generally, scholarships are reserved for students with special qualifications, such as academic, athletic or artistic talent” (University of Southern California).
“With the exception of the Bowdoin National Merit Scholarship Program, all financial aid at Bowdoin is need-based.” (Bowdoin College)
Elite Private Colleges Category #1:
Schools That Meet 100% of Financial Need But Offer No Merit Aid
Here’s a list of the Elite Private Colleges that provide only need-based aid. All of these schools, meet 100% of students’ financial need but don’t provide merit-based aid. No matter how good your student is academically, it will only get you admission at best. It won’t get you any merit-based scholarships or other merit aid from these schools.
|Barnard College||New York||NY|
|Boston College||Chestnut Hill||MA|
|California Institute of Technology||Pasadena||CA|
|Columbia University||New York||NY|
|Franklin and Marshall College||Lancaster||PA|
|Massachusetts Institute of Technology||Cambridge||MA|
|Thomas Aquinas College||Santa Paula||CA|
|University of Pennsylvania||Philadelphia||PA|
|Yale University||New Haven||CT|
Elite Private Colleges Category #2:
Schools That Meet 100% of Financial Need and Offer Merit Aid
Here’s a list of the Elite Private Colleges that provide need-based and merit aid. These schools meet 100% of students’ financial need and also offer some merit scholarships and other merit-based aid to select students. However, merit aid is usually limited and may only be available to students who meet specific requirements.
|Bryn Mawr College||Bryn Mawr||PA|
|Case Western Reserve University||Cleveland||OH|
|Claremont McKenna College||Claremont||CA|
|College of the Holy Cross||Worcester||MA|
|Colorado College||Colorado Springs||CO|
|Connecticut College||New London||CT|
|Franklin W Olin College of Engineering||Needham||MA|
|Harvey Mudd College||Claremont||CA|
|Johns Hopkins University||Baltimore||MD|
|Macalester College||Saint Paul||MN|
|Mount Holyoke College||South Hadley||MA|
|Occidental College||Los Angeles||CA|
|Skidmore College||Saratoga Springs||NY|
|St Olaf College||Northfield||MN|
|University of Chicago||Chicago||IL|
|University of Notre Dame||Notre Dame||IN|
|University of Richmond||Richmond||VA|
|University of Rochester||Rochester||NY|
|University of Southern California||Los Angeles||CA|
|Wake Forest University||Winston-Salem||NC|
|Washington and Lee University||Lexington||VA|
|Washington University||Saint Louis||MO|
Taking Your Next Steps with College Financial Planning
Now that you have a much better understanding of the different types of colleges and how costs work at these schools, it’s time to take your next steps.
If you’re not already working on a complete college financial plan for your family, start right now with my College Planning Jumpstart. It’s a complete video course that will walk you through the entire process and show you the best ways to plan and save, so you can give your child a great education without wiping out your finances or your retirement.
The course features nearly 40 video lessons loaded with tips and advice that can potentially save you thousands of dollars on college. You’ll learn proven strategies that I’ve shared with hundreds of clients in my 20 years as a Certified Financial Planner® and an expert in college funding. Visit my College Planning Jumpstart to learn more and sign up now!
Helpful Articles and Resources