May 26, 2022
The high cost of attendance most colleges advertise—upward of $80,000 per year for the most selective schools—can leave even the most well-prepared families with sticker shock. Fortunately, for the vast majority of students, that advertised cost may be decreased substantially by a combination of grants, scholarships, and education tax benefits. The result is known as the net price, and it’s often a number that college-bound students find easier to manage.
Even so, the net price can vary by school, family income, and asset level, or even by the number of dependents in a household. Furthermore, many variables can remain unknown for much of the savings period, sometimes until after the student is admitted to and selects a particular university.
Online tools can help families estimate net college costs
Most universities offer a net cost calculator on their websites, which can be helpful for families who know which university or small selection of universities a student may target. Still, many families, particularly those with young children or babies, may want to consider a fuller range of possible schools. It’s the rare family that knows which universities will make Baby’s eventual wish list.
Still, some families can narrow their scope early on. Is the child a legacy at a particular university? What are the desirable schools within the family’s geographic region? Do family members more commonly choose a private or public education? Once a family has considered the options, they can get an estimate of projected college costs by plugging their personal information into one or more of the following calculators:
Location can affect the published price and net cost of college
Even if a student doesn’t know where they want to go to school, their family can still make a best guess determination of the cost of college. Regional costs vary, as do the costs of private versus public schools, and the level of selectivity factors in as well.
College Tuition Compare analyzes average costs of college by state, presenting the differences between in- and out-of-state tuitions, fees, and living costs. While most families won’t pay the published price, this information can help estimate future costs based on type of school and location.
Even wealthier families may qualify for aid
Some higher-income families skip the FAFSA—the free application for federal student aid—but that may be a mistake. Recent Vanguard research found that some aid may be available for families with incomes up to $275,000, particularly for those with more than one dependent enrolled in college. Based on an analysis of net price estimates from 67 schools, having two children in college at the same time lowered a family’s net cost by an average of 28%. Even the highest-income families in the study saw an average discount of around $10,000.
Figure 1: Families with one student in college
Figure 2: Families with two students in college
Figure shows MyinTuition pricing for one year of school for families with one (Figure 1) and two (Figure 2) college students by asset level (light turquoise for high, dark turquoise for low) and household income (range is from $75,000 to $275,000). Sixty-seven schools were reviewed. Total pricing (defined by MyinTuition as tuition, fees, room and board, and other costs) is shown in dark yellow. Low (high) assets are defined as assets totaling one-half (twice) household income. For example, if income is $75,000, low assets would be defined as $37,500; high assets, as $150,000. Home values and home equity are assumed to be twice income in all scenarios. Annual net cost estimate is defined as the best estimate plus the value of any applicable loan and/or work study offered.
Sources: Vanguard calculations, using data from MyinTuition, collected in February 2021.
Source: Vanguard calculations, using data from MyinTuition.
Projecting into the future
Of course, tuition costs will change during a family’s planning period. Over the past decade, net college costs have risen by an average annual rate of 1.75% for private and 2.28% for public schools. (That compares to an average annual sticker price increase of 2.81% and 2.37% for private and public colleges, respectively.) 1 Net pricing estimates may act as a better gauge for many families. However, wealthier families, particularly those whose EFC—or, starting in the 2024-2025 school year, student aid index (SAI)— may disqualify them from need-based financial aid, could benefit from an analysis built on the published cost of attendance.
There is little doubt that the college aid equation is complex and presents challenges for families at any stage of the financial planning process. Still, there are considerations, tools, and estimates that can help a family home in on an appropriate net pricing target, which in turn helps them create a plan that is more likely to result in a college nest egg of an appropriate size.
1 Felton, Clifford and Kahler, Jonathan, to be released in late May 2022. What’s my Target? Estimating College Planning Costs. Valley Forge, Pa.: The Vanguard Group.