Is college as unaffordable as it seems? There are ways to whittle down costs
It’s common for parents of high school seniors to joke, “At least when he goes off to college we won’t have to feed him! Think of how much we’ll save on grocery bills.”
If you look carefully at actual college costs, this may not be such a joke.
According to the Education Data Initiative, the average cost of attending a four-year in-state institution is now $27,146 a year, while private nonprofit colleges average $56,628 annually. Numbers like these are a source of anxiety for many families, to the degree that some of them see higher education as so unaffordable they don’t even pursue it.
A 2024 survey of more than 2,100 high school juniors and seniors found that 67 percent of families had ruled out colleges based solely on the published price, up from 58 percent just two years earlier. A separate survey of more than 21,000 college-bound students put the figure at 81 percent. Perhaps most telling, peer-reviewed research published in Education Finance and Policy found that students apply to colleges less often when sticker prices rise.
Yet that sticker price, especially for private colleges, is often far higher than what students actually end up paying. Tuition discounting and financial aid can significantly reduce the total out-of-pocket cost. A recent study found that the average discount rate for full-time undergraduates at private institutions hit an all-time high last year at 56.3 percent. Add to that an average federal grant of just over $5,000, and the net cost of a private college education for many students falls to roughly $30,000 a year. This compares favorably to state schools.
Then there’s the “saving on the grocery bill” factor. According to the USDA’s Expenditures on Children by Families report, the average teenage child living at home costs a family around $17,000 a year when you add up food, clothing, and other basic living expenses. For higher-income families who realistically expect to send their children to college, that number frequently exceeds $20,000.
If a family spends $17,000 to $20,000 a year on a teenager at home, and the net cost of college runs around $30,000 a year, one way to look at it is that sending the kid to college only adds about $10,000 to $13,000 a year to what the family is already spending. Obviously, this is very simplified math. It also does not factor in the costs for a high schooler—like phone plans, clothes, health insurance, and transportation—that parents most likely would continue to pay for a college student.
The larger point, though, is that it’s a mistake to make decisions about college based on the published or average costs. Each family needs to do its own work to compare schools, research grants and scholarships, and explore loan options. It’s also important to be realistic about its own current and potential spending. For example, if a high school graduate gets an entry-level job rather than going to college, would they still live at home with parents still providing some financial support?
None of this is meant to discount the real financial weight of higher education. Student loan debt is a legitimate concern, and the return on a college degree varies enormously by field, institution, and student. The key is to look realistically and specifically at each student’s needs and interests, each family’s finances, and all the sources of funding and support that might be available.
It’s also helpful to think of those first few years after high school as an investment in the future. Making thoughtful choices can help safeguard the parents’ financial wellbeing as well as supporting the child’s path to success.
Rick Kahler, CFP, is a fee-only financial planner and financial therapist with a nationwide practice, Kahler Financial Group, based in Rapid City. His co-authored books include “Coupleship Inc.” and “The Financial Wisdom of Ebenezer Scrooge.”
Photo: public domain, wikimedia commons
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