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How to Calculate the Real Costs of Attending College

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Financial aid award letters have been sent out, and now it’s time to figure out where you will be going to college next year. If you need some help decoding financial aid award letters, check out my other post.

Now, once you figure out exactly how much financial aid each school is offering you, you also need to calculate your real costs of attending each college. While cost may — or may not — be your #1 factor in picking a school, you will still want to know how much attending college will cost you next year.

So, here’s what you need to do to calculate that figure: Take a look at your financial aid award letter. Most will state the total cost of attendance, including tuition, room, board and expenses. So your first step in calculating your total costs to attend a particular school is to take this number and subtract out the financial aid you have been awarded. But your job doesn’t stop there. In order to truly compare apples to apples, you must also:

Add in any additional costs, such as travel, to the cost of attending a particular school.

For example: If School A is in Rhode Island, and you live in Georgia, you must, at a minimum, calculate in the cost of some transportation (probably air fare). And you’ll probably want to go back home at least once a semester, so be sure to figure the cost of four total round trips. If School B, on the other hand, is in your hometown, you will not only save on transportation, you might even be able to live at home — thus saving on room (and possibly some board) as well.

Calculate how much of the total financial aid award is derived from sources that do not have to be paid back vs. money that does have to be paid back.

For example: School A might offer you a total package worth $15,000, but upon closer examination, you realize that all but $2,500 of that is in the form of student or parent loans. School B, on the other hand, might offer you just $8,000, but only $500 of it is loans. So the amount of your award that doesn’t need to be paid back is three times as great at School B as at School A.

Subtract #2 from #1 to determine a true comparison of cost.

For example: School A, in Rhode Island, will cost you $35,000 a year to attend, including all the extras calculated in step 1. Your total non-loan award is $2,500. Which means one way or another, you will be paying $32,500 per year to attend. (Even if you don’t have to pay back the loans immediately, you will eventually pay them back — with interest — which is why it’s a good idea to deduct them from your base line calculations.)

School B, in Georgia, will cost you $15,000 a year to attend, after you subtracted all the extras from step 1. Your total non-loan financial award is $7,500. Which means one way or another, you will be paying $7,500 per year attend.

Your true comparison of cost is therefore:
School A: $32,500
School B: $7,500

It’s now clear which school is cheaper, but you still need to decide which option is the better one for you and your family. If cost is your primary determinant, your decision is clear. But other factors may well influence your choice of schools. The important thing is that you go into your freshmen year with a complete picture of your costs and financial responsibilities.

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