We’ve all heard, “Take your general classes at a two-year college and then transfer. It’s so much cheaper!” This seems to be the standard advice given to many high school grads and their parents when they’re considering the most frugal path into higher education. But like all things, there’s no one-size-fits-all solution, and the best path really depends on each student’s individual goals and financial situation. Here are some things to consider as you approach the application process:
Adding Up Credits
According to the College Board, the average cost of tuition and fees during the 2015-2016 school year is:
- $3,435 for state residents at a 2 year college
- $9,410 for state residents at a 4 year college
- $23,893 for out-of-state residents attending public universities
- $32,405 at private colleges
The average cost for a 14-hour semester at the University of Missouri in Columbia is $10,586, while the average cost at Metropolitan Community College-Longview in Lee’s Summit, Missouri, is between $1,330-2,450, give or take other fee-based charges. Over the course of four semesters, that’s a difference of nearly $30,000!
The difference in these rates is eye-opening. Students hoping to study out of state can plan on paying an additional $5,000-10,000 more in tuition annually; not including what could be a wildly different cost of living, too.
Of course you’ll want to evaluate and ensure credits transfer to the 4-year school you’re targeting, but the savings is staggering. Look at it another way: If you took this approach, and invested the $10,000 difference in savings during those first two years into a retirement account where 5 percent compounds annually you’d have approximately $90,000 in that account when you retired without adding anything to it!
Obviously the college experience and becoming more independent should be worked into the equation, we’re spelling out options that can have major financial implications — making it worth evaluating very closely. In reality, most parents are in the middle of their prime-earning years — when retirement savings are critical — and because there is no loan for retirement, it’s important to not forsake anyone’s future.
With the 2-year route first, parents should consider working out a payment plan with students who wish to live at home while going to college locally. Contributing to utilities or grocery funds is a smart way to instill financial responsibility and begin teaching the value of what real-world living is really like. For students eager to leave the nest, they can expect apartment rentals in the range of $400-800 per month, depending on the neighborhood and if they choose to live with a roommate (or three). So a slow roll into that scenario is usually a sound wake-up call, an invaluable life lesson in practicality.
Both of these options are cheaper than room and board at a state school, where you can expect to pay roughly $9,640/year for room and board. Even a pricey near-campus apartment would still be cheaper for nine months of rent, coming in at $7,200/year. The catch? You can roll room and board into your financial aid/loan package at a state school. For those living at home or renting, these costs are due month to month, which can put a strain on your class schedule and financial situation, especially for those who aren’t working or carrying a full class load.
Real Life Social Network
There are many advantages to these savings opportunities, but there are also benefits to on-campus living. Research indicates that students have an easier time adjusting to a campus lifestyle when they start at year one, as opposed to their third year. At that point, many students have established social circles and joined activities that allow them to thrive away from home.
If your student is an independent, flexible self-starter, a two-year college may be a great way for them to get their feet wet with the college lifestyle and the ever-important financial life lessons as well. If you think your student would benefit from a fresh start at a state school, the 117 percent difference may just be worth it.
Deciding on where to go to school is just one step of many for college-bound students. How to best use the money in your college savings account is what we’ll cover next week. For more advice on navigating financials or saving for higher ed, click here for friendly advice from our friends at CommunityAmerica Credit Union.