Across the United States this fall, many thousands of high school seniors are weighing their options for next year. With their parents, they are looking at the costs of attending various institutions and perhaps comparing them against additional options like joining the workforce, taking a gap year, or enlisting in the military. How much will each option cost? A new report reveals that most of America’s colleges and universities aren’t using best practices when publishing their cost-of-attendance information. The U.S. Government Accountability Office (GAO) has discovered that up to 91 percent of higher education institutions underestimate the net price of attendance.
The net price of attendance means the out-of-pocket cost that students and their families must pay. This can be complicated to determine, as there are many costs of attending college besides tuition. These include fees and room-and-board packages that may or may not be optional, textbooks and lab equipment costs, dues to join student groups and organizations, and incidental living expenses. Some scholarships may only cover tuition, while others may also be used for textbooks and school supplies, making the math complex!
Schools May Overlook Fees and Living Expenses
Unfortunately, it can be challenging to determine the actual cost of attending a college or university. First, there is the cost of tuition, which is often reduced by grants and scholarships. Schools may offer various financial aid packages to reduce the listed cost of tuition, and this can be unique depending on student circumstances. The GAO discovered that some schools included student loans in this equation, artificially reducing the net price of attendance. Others left out some student fees and living expenses from the net price, including only tuition. These artificially low net prices may convince students and parents to enroll, resulting in “sticker shock” when the first bill comes due.
Perhaps most alarming is that 41 percent of institutions did not list a net price, requiring potential enrollees to crunch the numbers themselves with external data. The vast majority of the remaining 59 percent of institutions that included a net price underestimated it. While some of these underestimations may be innocent oversights, it is important to provide accurate information on college costs to students and taxpayers who help fund public colleges and universities.
Make Sure to Budget and Shop Around!
Even if Congress follows through with GAO recommendations to require colleges and universities to accurately report cost data, it is important that students and their parents be financially savvy consumers. This includes using personal financial literacy skills that should be taught to all high school students: budgeting and shopping around for lower-cost substitutes. New college freshmen may be prone to overspending, as they are now purchasing most of their incidentals without parental oversight.
Encouraging college students to keep and maintain a budget may help reduce the net price of college attendance. By tracking their spending, students may determine ways to cut costs, such as canceling memberships to organizations or businesses they do not use or reducing how often they eat at restaurants. Regarding living expenses, shopping around for apartments may save lots of money! Students should compare the costs of apartments – and associated costs like daily transportation and parking fees – before signing a lease. Many college students may be overspending by signing on to share an expensive apartment with friends without first exploring the costs.
Living off campus, especially popular after university students’ freshman year, is full of budgeting challenges. Students will have to compare the costs of remaining in the dorms, which may be all-inclusive in terms of food, utilities, and gym access, with apartment living, which often requires all bills to be paid separately. Before students move off-campus, they should have at least a general idea of the cost of living expenses in the area and factor this into the net price of attendance!