The average cost of tuition in the 2010-11 school year was $32,617, according to the National Center for Education Statistics. That’s for private, four-year institutions and includes room and board rates. But does that figure – a school’s “sticker price” – reflect the true cost of an education? Most experts say no.
This is good news for students and parents, as the actual cost can end up being much lower. The average tuition price doesn’t take into account financial aid like grants and scholarships, which can reduce out-of-pocket costs significantly. When it comes down to it, most students can expect to pay much less than their colleges’ advertised costs.
Let’s take a closer look at college costs to find out how much you can expect to pay for a college education.
Average College Costs
Tuition and costs vary at each college and university. In general, two-year institutions are less expensive per year than four-year schools, and public schools are cheaper than private ones, especially for in-state students.
For the 2012-13 school year, here’s how each type of institution stacked up:
Other Costs to Factor In
Of course, the cost of tuition, with room and board, isn’t the only expense college students have. They’ll also have grocery or meal plan charges, transportation costs and car maintenance, and discretionary spending for clothing, eating out and entertainment expenses.
Such expenses are considered part of one’s basic cost of living. While they do add to college students’ expenses, they’re not included in college cost estimations because they always apply, regardless of one’s student status.
On the other hand, financial aid can help bring down the cost of higher education. Financial aid can range from assistance with smaller costs like textbooks to full scholarships that cover the complete cost of tuition.
The amount of financial aid will vary from school to school, as well as from student to student. Some aid is need-based while other aid is based on academic or athletic ability. Aid in the form of student loans can help you defer college costs but won’t actually cut down the final price.
Scholarships and grants, on the other hand, permanently reduce a student’s financial burden. These types of financial aid must be factored in when determining the true cost of college.
The Final Cost
Once everything is accounted for, the average student pays much less than the sticker price.
In the 2012-13 school year, undergraduates at public four-year schools paid an average of $2,900, only a third of the published tuition and fees. Students at private, nonprofit four-year schools also had high levels of aid, paying on $13,380, less than half the $29,056 average sticker price. And those studying at public two-year colleges received the most aid in relation to tuition and fees; these students received an average of $4,350 in aid, significantly more than the $3,131 average published tuition costs.
Overall, this means average college students could expect to pay only about half their schools’ published tuition. However, grants and scholarships quite often do not cover additional costs like room and board, textbooks, and meal plans.
Why the Discrepancy?
If colleges and universities cost less than their sticker prices for the majority of students, why don’t they just reduce the sticker price? National Public Radio (NPR) recently looked for the answer to this question and found several reasons.
The first and most intuitive reason: college is worth whatever you’re willing to pay. While many students can’t afford the full sticker price or don’t want to spend that much on higher education, other students and their families are completely willing and able to pay full price. From an institution’s standpoint, it would be imprudent to accept less when a student would pay more.
Tied to this is the other demographic: students who are unwilling or unable to pay full price. Revenue made from students who pay the full cost can be used to provide scholarships and aid to other qualifying students.
The final reason is less intuitive for most people. NPR reported that prospective students and their families – just like consumers at a department store – like to feel like they’re getting a good deal.
Assume you’re in a store and have the option between two comparable shirts. One is marked at $20. The other is marked at $40 and is on sale for $20. If you’re like most consumers, you’ll end up choosing the $40 shirt, as the higher original price signifies a higher quality and more value.
Colleges and universities use this same psychology in their tuition prices. They don’t mind that their advertised prices are high because it shows a higher value and, for most students, a better deal when tuition is marked down.
Whether students pay full price or receive generous scholarships, experts agree that college is almost always worth the investment. With college graduates earning significantly higher wages than less-educated individuals, higher education can pay for itself.