First, will be okay...eventually...

I know, it all sounds impossible. But more people are going to college than ever. And while many of them are accumulating debt faster than Congress, you can still get through this without an impossible financial burden. Just remember, that there will likely be no single source of money, you will have to be realistic on selecting the right school, and your major means everything. So, relax and start the journey, one step at a time...

Wednesday, August 31, 2011

The Real Cost of a Public College: A Case Study

College costsThe Presidents Council, Universities of Michigan (a lobbying group representing the interests of the Michigan's fifteen public universities) has released a report that demonstrates the impact of financial aid and federal income tax credits and deductions to make college more affordable for the average family.

The average annual tuition at Michigan's fifteen public universities for in-state, full-time undergraduates was $9,661 for 2010. The average awarded need-based financial aid ($2,573), merit-based financial aid ($1,718), and Federal Work-Study ($95) reduced this to $5,275. When you add the average impact of federal tax credits and deductions ($488), the average tuition net cost was reduced to $4,787, or 49.5% of the regular tuition. This  does not include the cost of room & board or other expenses.

There is a lot of variation by individual, especially for lower income families that qualify for a Pell Grant (up to $5,500 per year per student), or academic achievers who can get increased merit-based aid. Overall, some students may not get any financial aid, others may have their tuition fully-subsidized. But most students receive some level of support.

One conclusion immediately clear is that Federal Work Study (FWS) is not a big contributor for the average student. However, it can be a great help for specific individuals, as this is a targetted program for those with more extreme finanical need.

Looking at recent trends, this study also demonstrates the impact of the expansion of Pell grant recipients. The Pell program has expanded it's reach from about 6 million students in 2008 to an expected value of 9.4 million in the 2012-13 school year. This is driven by broader eligibilty requirements, increasing trends in college attendance, and the impact of the latest recession on the economy and unemployment rate. Pell grants can defray as much as half of the annual cost of tuition at an in-state public college for low-income families and individuals (62% of dependant Pell Grant recipients have a total family income of $30,000 or less, while 83% of independant students have a total income of $30,000 or less, based on 2008-2009 data).

This is just an example for the state of Michigan. Across the US, the impact of aid varies greatly, mostly dependant on the state support of secondary education. The level of state support ranges from a low of $2,281 per full-time equivalent student in Vermont, to a high of $14,709 in Wyoming (based on 2007 data). So while the average in-state full-time student at a public university pays only 36.2% of the "sticker price" of tuition, this varies from 11.5% to 79.3% (again, 2007 data). I would expect that the overall trend going forward would be toward greater net tuition costs for the student, due to tuition increases and reduced overall state support, as states address budget shortfalls. So keep that 529 Plan funded!

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