The Real Cost of a Higher Education...and how to get your money’s worth!

Sticker Price vs Net Price of College

The college’s sticker price represents the full, advertised cost of attendance, including tuition, fees, room, and board. The net price, which is what the student actually pays, is often significantly lower due to various forms of financial aid, scholarships, and grants. The difference between these two can help prospective students evaluate the true cost of higher education.

Paying for your studies requires more than just tuition. So, how can you avoid financial shock, and get the best return on your investment? The following guide walks you through the likely costs of paying for college beyond tuition, identifies opportunities for offsetting that cost, and advises on how to get the best return on your investment.

What Is the Sticker Price in College Costs?

The college sticker price is the estimated annual cost of attendance (COA). It includes direct and indirect costs, including tuition, program fees, housing, meals, books, and other expenses.

Actual costs may vary based on individual choices. Prices range from over $75,000 to under $3,000 annually. Sticker prices have increased about 70% at private and public institutions between the 1995-1996 and 2019-2020 academic years.

Sticker prices differ widely depending on institution type and location, which is why private colleges are typically more expensive than public ones. While sticker rates are generally considered high, you can still lower the actual price you will pay, depending on your funding sources.

What Is the Net Price in College Costs?

Net price in college costs is the actual amount a student pays after subtracting financial aid from the total sticker costs. The net price can vary significantly from the sticker costs and is often a more accurate representation of what you will actually pay.

This number may be quite different from the price listed in the brochure. The net price is meant to account for an array of necessary incidentals from housing and textbooks to meal plans to general living expenses. It should tell you what a year in your chosen institution will actually cost.

It takes into account various forms of aid, merit-based aid, and private scholarships. Other factors like the student’s aid index, test scores, and the number of students enrolled are equally important.

What Are Ways to Lessen the Net Costs?

The average net price paid by full-time students can be higher or lower than the published cost for an academic year, depending on whether you can secure financial aid. Knowing ways to lessen the net costs is important because this can help students avoid paying the full sticker rate, especially at four-year institutions.

Understanding these methods can make your studies more affordable and accessible. This can potentially open up opportunities at institutions that might otherwise seem financially out of reach due to their high sticker prices.

1. Free Application for Federal Student Aid

Free Application for Federal Student Aid (FAFSA) can significantly lessen the net costs by providing access to various forms of financial aid, including grants, loans, and work-study programs. Completing the FAFSA is often the first step in determining your eligibility for federal, state, and institutional aid, which can substantially reduce the average net price paid.

As a vital tool for many students to make studying more affordable, these are the basic steps you need to take:

• Gather necessary financial documents, like tax returns and bank statements.
• Create an FSA ID at the Federal Student Aid website.
• Complete the free application online, providing accurate information about your financial situation.
• Submit the FAFSA as early as possible to maximize aid opportunities.

2. Need-Based Aid

Need-based aid can significantly lessen the final price by providing financial assistance to students who demonstrate financial need. This type of aid includes grants, scholarships, and work-study programs. These are awarded based on the difference between the sticker fees and the student’s ability to pay.

This type of aid can greatly reduce the financial burden for enrolled students. It makes degree programs more accessible for those with limited financial resources. To achieve this, you need to:

• Complete the FAFSA to determine eligibility for federal and state aid.
• Research and apply for institutional aid offered by your chosen colleges.
• Maintain satisfactory academic progress to continue receiving aid.
• Reapply for financial aid each academic year.

3. Merit Aid

Merit aid is another way to lessen the net costs by rewarding students for their academic, artistic, or athletic achievements, regardless of financial need. Colleges often offer this type of financial aid to attract high-achieving students who want to reduce fees.

While few students receive full-ride merit assistance, many institutions offer partial merit aid that can substantially lower the final price as well. To help you find the best merit-based funding for your studies:

• Research colleges that offer generous merit aid programs.
• Maintain high academic standards, including GPA and test scores.
• Develop a robust extracurricular profile in areas of interest.
• Apply early to maximize your chances of receiving merit aid.

4. Private Scholarships

Private scholarships can provide additional funding from external sources such as foundations, organizations, and corporations. These funds are typically awarded based on various criteria, including personal background, academic achievement, or specific talents.

Part-time and full-time students can often stack multiple private scholarships to significantly reduce their out-of-pocket expenses. To get a private scholarship to supplement other forms of financial aid, you need to:

• Research scholarship opportunities using online databases and local resources.
• Create a scholarship application schedule and track deadlines.
• Tailor applications to fit specific scholarship requirements.
• Apply for multiple scholarships to increase your chances of receiving aid.

Why Does the Difference Between the Sticker Price and Net Price Matter?

Many colleges and universities underestimate these expenses during the recruitment process. This means that students often enter into college unprepared for the real incidental costs of a four to six-year bachelor’s degree program.

Understanding the difference between net and sticker rates for college can help you determine the actual price you need to pay after financial aid. Likewise, this can help you find the best resource to fund your studies and potentially make seemingly expensive schools more affordable to attain your dream degree.

• Family income: The gap between the net and sticker price often varies based on family income, which can influence the grants or loans you will receive.
• Financial aid package: Knowing the net costs helps you accurately assess a financial aid package and determine its true out-of-pocket costs.
• Budgeting purposes: Identifying the net costs encourages more accurate financial planning and helps avoid overestimating the costs of your studies.
• Comparing options: Net prices let you compare your options, as schools with higher sticker prices may sometimes have lower net prices due to generous aid.

Should I Focus on the Sticker or Net Costs?

When considering college costs, families often focus on the full sticker price, which includes tuition, fees, room, board, and other expenses. However, the more relevant question is, “What will this school cost me?“.

Focusing on the net costs offers a more accurate picture of what you’ll actually pay, taking into account your individual financial circumstances. It covers merit scholarships and the expected family contribution (EFC), which considers your family’s taxed and untaxed income, benefits, and assets to determine your potential financial support.

Calculating net costs can be complex and varies significantly. Ultimately, the actual cost a student pays can be drastically different from the published sticker price. This is why you need to look beyond the initial numbers advertised by a school.

Getting the Best ROI From Your College

How much should you spend on your college degree? That really depends on what you want out of college, and what you need to achieve in your studies and your career. Consider these factors as you size up your investment.

1. Choosing the Right Type of College Experience

The best way to get a return on your investment is to choose the educational experience that is right for you. Students have different goals and priorities.

A costly private institution may be the best path to the degree and career you seek. Conversely, you might be able to achieve your professional goals by earning an associate’s degree at a community college before transferring to a reputable in-state public school for your bachelor’s degree.

You may thrive at a large research university with an enormous variety of resources, or you may do your best in a more intimate environment with a real focus on teaching. To get the best return on your investment, start by determining if the college you select matches up with your goals.

2. Finding an Accredited College

Accreditation is the stamp of approval, indicating that a college or university is meeting and maintaining certain standards of quality and credibility. These standards are set by accrediting organizations which have been recognized by the U.S. Department of Education. These organizations typically consist of university faculty, administrators, executives, and experts.

There are two primary types of accreditation: regional accreditation and national accreditation. Regional accreditation is widely regarded as a more rigorous standard and a marker of higher quality and credibility than national accreditation. To this end, accreditation is also an extremely important indicator of your probable return on investment.

Attending an institution with no accreditation will likely make you a less competitive candidate for certain career opportunities. Accreditation status must be considered as you calculate the value of a degree, and eventually, your diploma. Accreditation can also be a great way to avoid low-quality for-profit schools.

3. Seeking Tuition Discounts

Tuition discounts, which include institutional grants and scholarships, have reached record levels in 2023, significantly reducing the actual cost for students to attend college compared to the sticker price. The National Association of College and University Business Officers reveals that 56% of grant aid funding came from institutional revenue, including general funds and unplanned contributions.

At private colleges, the majority of freshmen receive institutional funding that significantly reduces their out-of-pocket costs. A survey from the National Association of College and University Business Officers shows that about 90% of first-year students received institutional grants, averaging 62% of tuition and other costs from 2023 to 2024.

The trend has widened the gap between advertised and actual costs for enrolled students. This makes it more important than ever to understand the concept of net costs when considering expenses.

4. Preparing a Loan Repayment Plan

Just as the cost of college has grown dramatically in the last 30 years, so has the rate of debt of students. Over the past decades, inflation-adjusted tuition costs have more than doubled at both public and private nonprofit four-year colleges, contributing to a staggering $1.75 trillion in total student loan debt across federal and private loans.

This dramatic increase in college expenses highlights the growing financial burden on students and families. Before you take on a massive amount of your own debt, be aware of your borrowing terms, including your repayment schedule and interest rate.

Your interest rate is a number that is also not reflected in the basic sticker price of college yet it will be very real when you begin making monthly payments. To get the best return on your investment, borrow only with a clear sense of when and how you will ultimately be making your payments upon graduation.

5. Matching Your Cost of College With Your Earning Potential

In addition to the type of school you choose, your degree path will have a direct connection to your likely ROI. Some bachelor’s degree programs offer a higher earning potential than others.

Students majoring in fields like business, accounting, engineering, and computer science will likely see higher entry-level pay and more robust salary growth than social work, theology, or theater majors.

You shouldn’t choose your career path based simply on earning potential. Find something that you care about and that you can truly see yourself doing every day. However, be aware of the earning potential associated with certain program majors, and make your degree investment accordingly.

As you consider your degree path, visit the Bureau of Labor Statistics and find out what people in your intended field are earning today. Make sure you are aware of these figures before you decide how much you should spend on your undergraduate degree.

6. Selecting a Reputable School

Some of the most influential campuses are also among the most expensive colleges and universities in the world. For instance, both the tuition and sticker fees for Harvard University can be high.

However, Harvard’s reputation for excellence, the value of its degree, and the access it provides students to influential faculty, state-of-the-art resources, and excellent job prospects make it likely that the average Harvard graduate will eventually earn a return on their undergraduate studies.

The lifetime earnings for graduates of the most prestigious institutions typically reflect this pedigree. It’s also worth repeating that Harvard — and many other top campuses — can deploy their considerable endowments to fund aid for deserving students.

So just as you should be aware of the many costs that accompany tuition, don’t let a large sticker price frighten you away from your top choice. Explore every opportunity for funding first if you believe you have the ability and qualifications to attend an elite college or university.

The Real Cost of College

The easy answer is that tuition and other costs for the average four-year degree were around $38,270 in the 2022-2023 school year. According to U.S. News & World Report, the average yearly cost of tuition and fees for in-state public colleges is $10,662, while the average cost is $42,162 for a year in private school.

However, the real answer is far more complex. There are a lot of factors you must consider, from housing and textbooks to everyday living expenses and opportunities for aid.

These factors will figure into how much you’ll likely spend on your degree, and how likely you are to get a good return on investment (ROI). Here’s an overview of the 2024 average cost of college for public and private institutions.

Breakdown of College Expenses

What are you getting for your money? What follows is a closer look at the various costs and living expenses that you’ll need to prepare for as you calculate the average cost of college per year.

Housing Expenses

Room and board is likely the most significant cost that most students will pay beyond tuition. For students who will live on-campus or who will rent, housing is a major expense. This expense is often proportional to the relative cost of your studies.

Colleges with high tuition will likely also offer costly housing options. Geography can also directly impact the cost of housing. Students seeking housing in small towns will likely pay far less for rent than those leasing space in major metropolitan cities.

Textbooks

Another major expense that is often underestimated in the stated sticker price for college is the cost of textbooks. Over the course of each year, students are required to purchase textbooks which are mandated by professors and course syllabi.

These texts will only be required for course participation, yet they will include access codes for supplementary online materials. This means there are typically very few ways to skirt the actual-and often very high-cost of required textbooks.

According to CBS News, “Over the course of a year, the average student spends around $1,200 on books and materials, according to the College Board. This is a considerable out-of-pocket expense that students must manage at the start of each new semester.

Education Materials

Beyond mandatory textbooks, most students will need to purchase any number of peripheral educational resources over the course of a year including laptops, tablets, ink cartridges, cloud storage, educational apps, and any incidental expenses that may arise in the completion of a project.

Cost of Living

In addition to the various items that you must pay for, you still have to account for basic living expenses like travel, phone bills, toiletries, healthcare, medication, clothing, recreation, and more. When you live off of campus and don’t partake of your school’s meal plan, you can also add in the cost of food.

In other words, don’t forget the cost of basic survival when you consider the price tag of getting an undergraduate or graduate degree. Students are no different from the general population when it comes to the costs of housing, food, and living expenses.

Your commitment of time to study requires you to forgo an income from full-time work. This is the “opportunity cost” that must also be factored into the final fees. The limited budget of time for work further magnifies the impact of basic living expenses.

The cost of living will vary considerably. Living expenses can be impacted by factors like location, housing, online course access, and personal circumstances. Consider your own needs — geographical, medical, dietary, recreational — in forecasting the budget you will likely require to satisfy your basic cost of living expenses.

Calculating the Average Net Price and Comparing College Financial Aid Offers

Considering financial aid offers from colleges can be complex. However, using a net price calculator and systematically comparing offers can help you understand the actual price you need to pay after receiving funding.

When evaluating financial aid packages, it’s important to differentiate between gift aid and loans, as the former reduces the net costs while the latter must be repaid. Provide accurate numbers as much as possible. Prepare for differences since the final price may still be higher or lower than the college’s actual estimate.

You can use net price calculators on college websites or the U.S. Department of Education’s version to estimate costs before applying. Here’s a step-by-step process to calculate net price and out-of-pocket costs to help you identify which institution offers the best financial value compared to its sticker price.

1. Calculate direct costs: Add up tuition, housing, food, and standard fees from your aid offer.
2. Determine the net costs: Subtract monetary aid from direct costs.
3. Evaluate loan offers: Add up offered loans and grants separately, considering long-term costs.
4. Calculate out-of-pocket costs: Subtract them from the net costs.
5. Compare programs: Repeat this process for each institution to compare financial offers.

Sample Calculation of Fees

Harvard University makes the top of our list in nearly every major category of influence. Harvard’s tuition for the 2024-2025 school year costs $56,550. However, when you include additional COA fees, you can expect the total to reach up to $82,866.

Let’s take a closer look at Harvard’s 2024-2025 fees:

Costs can add up quickly at top universities like Harvard. However, Harvard is also among the most generous educational institutions in dispersing grants. An estimated 55% of Harvard students receive need-based scholarships with the average grant total amounting to $53,000, while 70% of students receive some form of aid.

In this case, the sticker price is far higher than the stated tuition, although Harvard’s endowments allow it to offset this cost dramatically for most students. This demonstrates how varied the prospective answers are to the question driving our discussion — how much does college cost?

There is no single answer. Every student’s situation will differ, as will the costs and opportunities associated with any given school. This is important to keep in mind as you ask and answer the following question:

Is College Worth the Money?

In general terms, college is a worthwhile investment for any student. However, like any investment, one must choose wisely. The cost must be offset by the benefits and opportunities that you’ll create in your studies.

When a more costly experience is the best path to the opportunities you hope to create, it may actually be worth the investment. The New York Federal Reserve reports an average earning for graduates of $78,000 per year, relative to $45,000 per year for those whose highest degree is a high school diploma.

At an average difference of $33,000 per year, this suggests that students paying the average rate of $26,120 a year for four-year private and public universities do see a meaningful college wage premium in the labor market.

You could spend a lot more, or a lot less, on a four-year degree from an accredited institution. So what you should consider as you decide is where you want to go, how much you’re willing to spend, and whether this expense is ultimately worth it.

Exceptions to the Rule

The rising cost of tuition and the rising length of commitment for those pursuing degrees have been matched by rising fees, costlier educational resources, and increased living expenses.

The return on investment for college is based on the job prospects and earning potential that you nurture by earning your degree. Degree holders are typically in a good position to see this return. However, the following conditions are critical.

You Must Graduate

It should come as no surprise that in order to earn what the average college graduate earns, you must, first and foremost, graduate from your degree program. College completion is critical to recouping your investment no matter what type of experience you seek.

A 2021 study reveals that only 45% of college students graduate within four years, and fewer than two-thirds of students manage to finish their degrees within six years. This underscores the importance of choosing an institution where you believe you can succeed and one that you can afford.

Investing in the wrong school could place you on the path toward substantial debt, with little else to show for your effort.

You Must Perform Well

This is also true for those who underperform. Those who fall in the bottom 25% of their graduating class will likely struggle to compete with better-performing peers, both in the job market and in the competition to enter reputable graduate school programs.

Consider that each additional year it takes to complete your undergraduate degree is another year of tuition, fees, housing, and the additional living expenses outlined in the first section of our discussion.

Naturally, this changes the equation as you calculate the value of your degree relative to your job prospects and earning potential. In simple terms, the longer you take to complete your studies, the longer it will likely take you to earn a return on your investment.

Related Questions

How Can I Make My College Fees Affordable?

Colleges understand that personal expenses vary among students, so explore financial aid options to reduce your out-of-pocket costs. You may also consider attending community colleges for GE credits, working part-time while studying, or picking a more affordable school to minimize the amount you’ll need to pay.

What Can Offset the Initial College Sticker Price?

Financial aid, scholarships, and geographical considerations offer ways to offset the initial fees. In some cases, the costliest institutions are likely to be the most generous when it comes to the disbursement of merit and grants.

What Is Included in a Federal Student Aid?

Federal financial aid is a student-based financial assistance program that considers the student’s financial situation to determine eligibility. It typically includes grants, work-study opportunities, and loans, all aimed at making college more affordable for eligible students.

Conclusion

Recognizing the disparity between a college’s sticker price and the average amount a student actually pays empowers you to make more informed decisions about attaining a degree. By focusing on the net costs rather than the sticker fees, students can better understand their true financial commitment and potentially expand their college options.