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Considering college costs

Key takeaways

  • Gaining a clear understanding of the true costs of college can help your family make better-informed planning decisions.
  • While published average prices can be a useful source of information, remember also that costs can vary regionally and from school to school.
  • One of the best things you can do to prepare for these costs is to start saving for college early.

While the cost of college has continued to rise dramatically in recent decades and years, that hasn't diminished the importance of a college education to many parents and students. In fact, 65% of high school students and recent college graduates say the value of a college education is worth the cost, according to the Fidelity Investments® 2023 College Savings and Student Debt Study.1

At the same time, some students and families may not have realistic expectations when it comes to the cost of college. A quarter of high school students think one year of college or higher education costs $5,000 or less, according to the study. And more than half have no idea how much of their education they're expected to pay for themselves.2

Gaining a realistic understanding of how much college may cost is an important part of making a realistic plan for how to pay for it. Depending on the amount of time you have before your student enrolls, your cost may differ significantly from what you or your parents paid for your own education. Adding to the uncertainty, the amount you might end up having to pay may also differ significantly from today’s published tuition prices, especially at private colleges.

To help set realistic expectations about how much you’ll need to save and how much you might have to borrow, it’s worth looking at recent trends in college costs and also taking advantage of sophisticated financial planning tools such as Fidelity’s Planning & Guidance Center.

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What does college really cost?

While college education has become more expensive, the costs that are often reported in the financial media don't tell the whole story. For instance, because they are based on national published averages, they do not reflect regional differences or the fact that the net price (which factors in grants and tuition discounts) many students pay to attend college is often significantly lower than the published price.

Each year, the College Board publishes a detailed analysis of the cost of attending college, based on an annual survey of US schools.

For the 2022-2023 academic year, the average cost at a private, nonprofit 4-year college was $57,570 (including published tuition and fees, plus estimated room, board, books, supplies, and other expenses).3 While that amount is high enough to cause sticker shock among even relatively affluent families, a closer look reveals that many students do not pay the full sticker price. For example, the average total published price for tuition and fees, not including room and board, was $39,400 in 2022-2023, for private nonprofit colleges, but the estimated average net price was only $14,630.4

Students who attend public colleges typically pay less than those at private colleges, provided they qualify for in-state tuition rates. The average cost per year for a public 4-year in-state college was $27,940 in 2022-2023 (including room, board, and other expenses).5 Keep in mind that all of the College Board's numbers are based on national averages, so depending on where you live, the cost of attending a public college could be higher or lower.

Students who attend local community colleges for an associate's degree and then move on to earn a bachelor's degree at an in-state college may be able to complete their college education for a fraction of the cost of a private, 4-year college, and at a significantly lower cost than a 4-year public college. It's also important to consider that some expenses, such as room and board, will still be incurred regardless of whether someone attends college or not. These expenses can be reduced if your child continues to live at home rather than in a dorm room or their own apartment, but in either case, your child will still incur costs for basic living needs.

Financial aid also plays a significant role in reducing the out-of-pocket cost of attending college. The average full-time undergraduate student received about $10,590 in grant aid, $3,780 in federal student loans, and $960 in other aid during the 2021-2022 school year, the most recent year for which the College Board has data available.6 In addition, many state colleges and institutions grant tuition waivers to groups such as veterans, teachers, or dependents of college employees. Those who choose to live at home and commute to an in-state public college can reduce their costs even more.

What you can do to prepare

While there are real differences in costs among various schools, restricting your college choices based on cost may not be as prudent as it appears. It can be hard to predict where your student may be admitted, and which school might be the best fit. The cheapest option may not be the best. And even if it is, college will still likely be a significant expense for most families.

Getting an early start on college savings is one thing you can do to help yourself. The earlier you start saving, the more time your college savings portfolio will have to potentially grow. With money set aside, your child can make their college choice based on where they’re most likely to thrive, rather than on financial considerations only.

Starting early can also help you to minimize your child's student loan burden. Fidelity’s Planning & Guidance Center offers tools to help you set goals for how much to save now and set expectations for how much you might have by the time you need the money.

Even if starting early isn’t an option, it’s never too late to start saving for college. Any amount you (and your children) can set aside now will reduce your borrowing needs and your overall cost of college.

If you’re closer to the time when tuition checks need to be written, consider the importance of discussing the situation with your student. Clear communication is part of setting realistic expectations and can help you avoid surprises later.

Those who are able to establish disciplined savings habits may find that it is still possible to save enough to cover all or a significant portion of their children's future college expenses. Given the long-term dividends that a college degree can pay, parents and students may want to explore every possible way they can set aside money to pay for college expenses.

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1. This study presents findings of an online survey among a sample of 2,004 respondents who are 13 years of age or older and either a current high school student in grades 9-12 (N=1,003) or a recent college graduate of an undergraduate program within the last five years (N=1,001). Fielding for this survey was completed between May 3, 2023, and May 15, 2023, by Big Village, which is not affiliated with Fidelity Investments. 2. Fidelity Investments® 2023 College Savings and Student Debt Study. 3. "Trends in College Pricing and Student Aid 2022," College Board, 4. "Trends in College Pricing and Student Aid 2022," College Board. 5. "Trends in College Pricing and Student Aid 2022," College Board. 6. "Trends in College Pricing and Student Aid 2022," College Board.

Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.

Investing involves risk, including risk of loss.

IMPORTANT: The projections or other information generated by the Planning & Guidance Center's Retirement Analysis regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Your results may vary with each use and over time.

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