This is an article on draw again with lesson number seven costs of attendance. Smart college financial planning happens long before you ever enter the campus. If you save on costs, that means you need less scholarship money. This may make some colleges immediately more affordable. Also, you're less likely to be stressed out about trying various ways to win scholarships. You will also need to borrow less.

This makes your lifetime cost of attendance lower because you pay less in bank interest. Remember that lowering the denominator in our college ROI equation that is lowering cost of attendance is a powerful way to plan for college. So which components of cost should we Focus on costs in college are the most impactful. The two big ones are tuition and fees and room and board costs after college are next in line. These largely involve loan payments, such as interest and fees, costs before college are the smallest component. Let us analyze the college's cost of attendance table again and find all the cost components.

We will go back to the cost of attendance at Texas a&m University. Not all costs are discounted for state residents only tuition is it would be highly discriminatory for a college to charge more for books and food simply because the student is from out of state. This list of costs even includes the college's estimate of travel expenses such as when you return home from The holidays and personal expenses such as for your cell phone and insurance and gas for your car. So is this list complete? Not really. The total cost is a little over $109,000.

Unless you pay from savings, the total cost is much higher than this amount. Most students borrow to go to college to pay for tuition and fees, room and board books and supplies everything. borrowing costs additional money because banks charge interest. But no college provides an estimate of this cost because how much you borrow what the interest rate is and how long you take to pay it all off is unknown to the college. Let's stay with the Texas a&m cost table of $109,000 over four years suppose you're somehow able to corral $29,000 in cash from family and friends so that your loan amount is about 80,000. Here's the breakdown $13,000 as a gift from family or a scholarship that you don't have to repay $16,000 in interest free loan from family that you promised to the note, the first two items represent free cash.

The first item is a gift. The second item is an industry law. And now you get an $80,000 loan from the bank that you agree to levy after graduation suppose you commit to a payment of about $700 a month towards the backlog. How long do you think it will take for you to pay off your loan? Very long, 15 years and you will pay $47,826 in interest alone, more than half the amount you borrowed. There are excellent student loan debt calculators online that will do the math for you.

These calculators will help you estimate how much student loan debt you could potentially manage. Based on your expected starting salary upon graduation. So the summary so far is that we have considered free because interest free loans from family and friends, cost of attendance, interest on student loans. But there are other costs too. A big one is the opportunity cost. The opportunity cost is simply the money you would have made had you work on a job instead of going to college.

Suppose that upon graduates from high school, a friend of yours who chose not to go to college got a job as a technician for a company and makes $13 an hour. Assume a 3% raise each year for this friend and it was a $6,000 salary during your first year in college. Your friend would have made nearly $109,000 over four years at this rate. The opportunity cost of college in this example is $109,000. This is the amount of money You are giving up because you're in college. So what is the final tap?

It is $252,600 simply to attend college assuming that you will graduate in four years. Are there other hidden costs? Yes, there are on a monthly basis. These costs, like dining out you were typically stack up to 250 to $500 a month. Let me close to what students actually pay for tuition. But for now, let's leave them out.

There are some caveats about these cost of attendance tables for private schools in particular, cost tables can never represent what you pay to attend. Just like buyers of cars never really pay sticker price, and are able to negotiate a lower price before driving them out of the dealer's lot. Most families rarely pay the sticker price listed on the college website. The net price of attending college is highly tailored to an individual situation and considers a variety of factors unrelated to the merit of the student. Colleges and Universities quote the net price estimates based on this information. The only meaningful way colleges obtain this information is when families file the Free Application for Federal Student Aid, also called the FAFSA.

This form has to be prepared annually by current and prospective college students to determine their eligibility for student financial aid. We will learn all about financial aid in a separate module. This is why do students with identical academic accomplishments can be offered entirely different net price estimates from the same school. Throughout this course, we use the sticker price to model all of our calculations recognized recognizing that for most families, the net price being lower will likely bring In these very calculations more than their failure to estimate an approximate net price, visit your desired schools website and be prepared to spend 20 to 30 minutes to answer questions about your situation to get the most accurate estimate. Or you could go to the One Stop site of the college board's and do the same for the many participating colleges on the site. But remember, the only binding net price is the one you get from your college after you file your FAFSA.

You can discern the net prices in US government tools as well and this is explained in the next three slides. In this example, we are trying to find a list of four year private colleges with the lowest net price. Remember that this is the average net price. Your net price may be higher or lower based on your financial situation. The key takeaways from this lesson are, the cost of attendance tables are an imprecise estimate of what you will spend to earn a college degree. You must consider all the hidden costs like we have done so far to arrive at a better estimate.

Every opportunity you have to gain costs will make your financial plan sounder. Unfortunately, many college bound students and families do not appreciate just how powerful this is. Most families spend more time worrying about getting financial aid, so planning scholarships and loans but spend little time on lowering costs. lowering costs improve ROI is an extremely powerful principle in the world of finance. all other things being equal. If we were to strive to lower our cost of college attendance, our return on investment will be much higher.

And higher ROI is mean that going to college will be worth it. We will devote a lot of time in future lessons on various ways to lower college costs. If you have any questions or comments, please let us know. Thank you