When people talk about college expenses, they are often referring to rising tuition costs. While this is by far the biggest ticket item, it is far from the only reason that families are spending tens of thousands of dollars per year on education.
When talking with your clients about college planning, it is vital that they understand the true cost of college, not just sticker prices. Today we are going to talk about some common yet often overlooked expenses for college.
Only 41% of students graduate in 4 years
Many students and parents alike assume that their child will graduate in four years, but that is simply not the trend. The National Center for Education Statistics found that only 41% of students on average graduate in four years with the majority taking 6 or more years to complete their undergraduate degrees. That’s at least two more years of tuition, fees, books, room and board, late-night fast food runs, and more.
If an academic curriculum is designed to be completed in four years, why does it take students longer to graduate? The most common reason is when a student changes majors/degree paths. Different colleges within a university have set curriculums so for someone looking to switch from natural sciences to communications, there will be a lot of core credits as well as school-specific credits they will need to complete in a shorter period of time. Other opportunities like work/study or study abroad, which are quite popular, can increase the time it takes to earn a degree.
Let’s run some quick numbers on this figure. Say that with everything, your clients are spending around $35,000 per year on education for their child. By graduating in four years, that total climbs to $140,000, but tack on another two years, and your clients are looking at nearly $210,000 for one child. That’s larger than the nation’s average 401k balance.
The graduation rate is a huge factor in the college planning process. There are a number of strategies for your clients to consider like having their students take core classes at a community college, enrolling in summer classes, and making intentional educational choices about their major.
Social life doesn’t come cheap
A well-rounded college experience doesn’t just include pulling your first all-nighter in the library studying for a big exam, it is also come from the people you meet and new activities to explore. But these activities come with a price.
Just because your clients are paying for a meal plan doesn’t mean that their kid won’t order in pizza, check out the local Thai place, or go out to breakfast with friends. The dorms might have a Friday pizza and movie night where every person has to chip in some money to make it happen. Who pays for the Netflix account? Does the child have unlimited data on their phone plan? Do you have to upgrade internet speeds? Are your clients going to buy them a speaker/sound system? These are just some ways that entertainment expenses could add up.
Even though the social landscape on college campuses will be changing due to COVID-19, that won’t stop in-door wine nights or ordering takeout from the cool new place downtown. All of these things cost extra money on top of what your clients are already shelling out.
Your client’s child may also want to join Greek life. With added dues, living costs, potential fines, and other social activities, that could increase their yearly expenses. The idea here isn’t to discourage social gatherings (though in the pandemic, kids need to be responsible), rather to help your clients understand that saving for college goes far beyond tuition and fees.
Travel adds up
While study abroad programs are suspended, for the time being, there are other travel expenses that could add up throughout the year. Walk your client through the following,
- Will the student have a car?
- Who will pay for the car, parking pass, insurance, gas, oil changes, and maintenance?
- Will they have to fly or take the train home? How often will you be able to afford to visit them? How often will you be able to afford to fly them home? This could be holidays, vacations, or other random visits throughout the year.
Plane tickets and car expenses can be quite costly. It is important to factor this in when your clients are deciding on colleges.
Build extras into college savings
While there are many extra expenses that creep up in college, that doesn’t mean that your clients can’t prepare for them. Bake some of those extra expenses into your client’s savings plan. Also, help your client set expectations with their kids that they need to cover pizza night from their own bank account. Facilitating a “college money talk” session with parents and their kids together can go a long way. Help them communicate their college budget to their kids so they understand that there is not a blank check for college. The main point here is to ensure your clients understand the true cost of college and help them save to get there and stick to the budget!