Considering college costs

Understanding the real cost can help you save for your student's education.

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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.

The cost of a college education has risen dramatically in recent decades, as both students and parents are aware. In fact, about 40% of college-bound high school students now rate cost as "most important," when asked how important cost is in choosing where and how to pursue higher education, according to Fidelity Investment's 2021 College Savings and Student Debt Study.1

At the same time, many families continue to underestimate the real cost of a degree, with 1 out of 4 high school parents believing that a full year of college will cost $5,000 or less, according to the study.1

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.

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 nearly 4,000 US schools.

For the 2020-2021 academic year, the average cost at a private, nonprofit 4-year college was $54,880 (including published tuition and fees, plus estimated room, board, books, supplies, and other expenses).2 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 $37,650 in 2020-2021, but the estimated average net price was only $15,990—a difference of $21,660.2

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 $26,820 in 2020-2021.2 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 $9,850 in grant aid, $4,090 in federal student loans, and $1,000 in other aid during the 2019-2020 school year, the most recent year for which the College Board has data available.2 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.

Use Fidelity’s college cost prep tool to explore the estimated cost of college based on your situation.

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.

Next steps to consider

Open a flexible, tax-advantaged 529 college savings plan.

Create a plan of action in the Planning & Guidance Center.



Visit the Fidelity Learning Center


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