Non-tuition college expenses make up a significant portion of the cost of college, but can be the most difficult to tally. Sometimes, the published “sticker price” of a college may underestimate or overestimate the cost of living. Researching this number is important for families saving for college.
The sticker price
Federal law mandates that a college’s published sticker price includes tuition and fees, books, supplies, transportation, and other living costs. This price is posted on a college’s website.
According to the College Board, room and board make up 26% of the cost at a private, four-year institution and 52% at a public, four-year institution. The report also found that students at a four-year university spent an average of $12,500 for expenses outside of “tuition and fees,” for items such as room and board, books, technology, transportation, and health insurance. Room and board represented the greatest percentage of non-tuition college expenses.
A college’s estimate may differ from real costs
Regional differences in the cost of living can have an impact on the price of room and board. For example, the cost of living at schools in the Midwest and South can be as much as $2,500 cheaper than for those in the Northeast and West. Consider the cost of living in Chapel Hill, North Carolina, which is about half that of New York City.
A 2015 study found that average room and board charges at public four-year institutions range from $8,376 in the Southwest to $12,050 in the West. Room and board as a percentage of total charges ranged from 48% in the Midwest to 57% in the West.
In addition to geographic differences, variations can exist among schools in the same city. For example, Drexel University and Peirce College are both in Philadelphia. But, in a recent report, Drexel estimates that students living off campus should budget $18,365 for living expenses for the nine-month academic year, while Peirce College estimates $7,790. According to researchers, colleges can be challenged because there is no uniform federal guideline for calculating the off-campus cost of living.
College estimates matter
For 529 college plans and financial aid, college estimates for room and board matter. Savings in a 529 college plan can be used for room and board, whether a student lives on or off campus, but only up to the amount that the college allots for room and board.
Off-campus rent — as a qualified expense — will be capped at the cost of attendance published by the school. If a student is going to live off campus and the costs will be higher, parents may want to save the difference in a separate account. Families can save for college with a combination of 529 plans, personal savings, and financial aid.
Federal financial aid through the FAFSA also uses the school’s estimate to determine cost of attendance. A student’s ability to take out federal loans may be compromised if the college has underestimated the cost of living.
Students have some control over costs
Choosing where to live can affect the cost of living. Sometimes it’s less expensive to live off campus. An analysis of 20 large U.S. universities found, that, in 15 of the schools, on campus housing was more expensive than if a student shared a two-bedroom off-campus apartment. Depending on the region, the opposite could be true. For example, at Columbia University in New York City a student may pay nearly twice as much to live off campus. Even within the same city, there can be sharp differences between living on or off campus. Both Boston University and Boston College were surveyed. For B.U., on-campus room and board was 29% cheaper than off campus, while at B.C., it was 32% cheaper to live off campus.
Research, plan, and save
It’s important for families to research published costs and cost of living from sources outside of the college’s website. Consider whether the student can save on cost by living on or off campus, or renting an apartment with multiple roommates. Plan ahead as much as possible to ensure you are saving enough to cover the true cost of college.
For informational purposes only. Not an investment recommendation.
This information is not meant as tax or legal advice. Please consult with the appropriate tax or legal professional regarding your particular circumstances before making any investment decisions. Putnam does not provide tax or legal advice.