The Price You Pay For College - Part 1

I've been looking forward to reading Rob Lieber's new book for months. Over the next week, I'll be passing along excerpts from each section of the book that I find valuable. Although I'm only a chapter in, the financial planning implications of this changing landscape are profound. Every parent with young children that they expect to educate in the future should read the book.

When looking at the net cost of college, private college tuition expenses haven't increased anywhere near what most think.

"89 percent of students at private colleges get a need-based or merit aid discount. Yes, you read that right: only a small fraction of families actually pay full price. What do the 89 percent pay? Ruffalo Noel Levitz, a consulting firm that we'll learn more about in the merit aid chapter, runs a survey of 280 private colleges and universities each year and pegged the number at $23,952, including room and board. Again, you read that right. The actual revenue that private colleges take in per student, on average, is less than the list price (including room and board) at many public universities."

"On average, what families are actually spending hasn't gone up by completely unreasonable amounts over the past twenty years, even as the list prices have gone to the moon. That's because the discount rate has gone up steadily over time as well."

"The College Board tracks all of this data very carefully, and the price that families paid for tuition, room and board for full-time in-state students at four-year public universities was $15,400 in 2019-20, after any discounts. In twenty years, it had risen by 70 percent. At private colleges the average net price was $27,400, but the rise over the previous twenty years had been just 21 percent."

There are always exceptions and specifics to your own family. But the net cost of college is a good starting point when considering how much one should target saving for future college expenses. It's a little less overwhelming than you may think.

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^{Source: The Price You Pay For College (Ron Lieber)}

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