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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 most parents. In fact, parents ranked saving for college as their top savings priority, even surpassing retirement, in the Fidelity Investments® 2022 College Savings Indicator Study.1

At the same time, many families are falling short on their intended college savings goals. While parents on average hope to pay for 69% of their child's education, they're only on track to meet 27% of that goal, 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.

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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 2021-2022 academic year, the average cost at a private, nonprofit 4-year college was $55,800 (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 $38,070 in 2021-2022, for private nonprofit colleges, but the estimated average net price was only $14,990.2

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 $27,330 in 2021-2022.2 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 $10,050 in grant aid, $3,780 in federal student loans, and $970 in other aid during the 2020-2021 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.

Save and invest for college

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

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1. As part of the study, Fidelity conducted a survey of parents with college-bound children of all ages. Parents provided data on their current and projected household asset levels including college savings, use of an investment advisor and general expectations and attitudes toward financing their children’s college education. Using Fidelity’s proprietary asset-liability modeling engine, the company was able to calculate future college savings levels per household against anticipated college costs. The results provided insight into the financial challenges parents face in saving for college. Data for the Indicator (number of children in household, time to matriculation, school type, current savings and expected future contributions) was collected by Boston Research Technologies, an independent research firm, through an online survey from April 18 – May 30, 2022, of 1,858 families nationwide with children aged 18 and younger who are expected to attend college. The survey respondents had household incomes of at least $30,000 a year or more and were the financial decision makers in their household. College costs were sourced from the College Board’s Trends in College Pricing 2021. Future assets per household were computed by Fidelity Personal and Workplace Advisors LLC (FPWA), a registered investment adviser and a Fidelity Investments company. Within Fidelity’s asset-liability model, Monte Carlo simulations were used to estimate future assets at a 75 percent confidence level. The results of the College Savings Indicator may not be representative of all parents and students meeting the same criteria as those surveyed for the study. 2. College Board,  Trends in College Pricing 2021 (PDF) .

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.

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