Fine print, Living with credit, Protecting yourself

Choosing a college? 4 money tips to consider

Kelly Dilworth

If your high school senior is just now receiving his or her college acceptance letters, congratulations! This is an exciting time for all. Before you get too wrapped up in comparing college rankings, now’s the time to sit down with your college hopeful and talk about costs.

The optimistic cost-of-attendance estimates posted on college websites rarely give the full picture of what you’ll actually have to pay. Financial aid letters, meanwhile, typically only cover what your family will owe in the first year. Here are some additional expenses you’ll want to keep in mind when comparing college costs:

1. Student loan finance charges. When you sift through your child’s financial aid award letters, you can often expect to see a list of scholarships or grants your child has qualified for, the total amount of federal loans she is eligible for and any remaining tuition, fees or room and board costs that still need to be paid with private loans or personal savings. However, the letters won’t cover how much interest will accumulate over the next four years, nor will they tell you what your child’s student loan monthly payments will be after graduation. Before your family accepts an aid package, figure out how much that borrowing is really going to cost. The College Board offers an easy-to-use calculator that estimates interest payments. The Consumer Financial Protection Bureau also has a handy tool for comparing financial aid packages.

Tip: If you can, try to delay taking out loans until your child’s third or fourth year. Interest starts accumulating on many federal and private student loans as soon as the loans are disbursed. So if you have enough cash saved up to put off borrowing — or at least to reduce your loan total — you’ll save more money on interest.

2. Books, school supplies, laundry machines and other incidental expenses. The financial aid letter should also estimate the total cost of books, supplies and other miscellaneous expenses your student will owe in the first year. Those costs can vary widely, depending on the choice of college major, living situation and other variables. For example, if your child chooses to major in the sciences, he might have to spend more on pricey textbooks than a literature major, whose book budget is largely spent on inexpensive novels. Similarly, a student living off campus and driving to school will also have to factor in the price of gas and maintaining a car.

Tip: When comparing offers, research the cost of living in the college’s hometown. Are food and gas prices higher? Will your child be using public transportation? What about rent? Many colleges only guarantee housing for underclassmen. If your child has to move off campus, will she be able to afford the area’s rental prices?

3. Hidden fees and tuition costs.
Don’t expect the tuition and fees to stay the same all four years. Colleges are notorious for bumping up those costs every year. You may want to round up when estimating how much your family will have to pay over the next four years, just in case you’re hit with a series of surprises. Any scholarships and grants listed on your child’s financial aid package might not last very long, either. Some colleges try to woo students with big grants early on, but then cut the assistance in the ensuing years.

Tip: Be prepared for unexpected increases. If your family can just barely afford a particular college, it’s probably best to avoid it. You’ll also want to find out all you can about your child’s aid package. Talk with the university about which grants apply just for the first year or require your child to meet specific conditions. For example, your child may have to keep up a certain GPA to continue receiving money.

4. Travel and entertainment.
If your child’s first choice college is more than a few hours’ drive away, expect to spend a substantial amount on gas or airfare over the next four years. You may also want to factor in the cost of entertainment and other miscellaneous expenses. It’s easy at the beginning of the year to set a strict budget and expect your child to stick to it. But it can be tough for college students to constantly say no when they’re invited to nights out or events. Rather than expect students to stay home every weekend, try to help them set aside or earn some extra money that’s strictly just for fun.

Tip: To avoid any overdraft charges if your child goes overboard with spending, consider linking his debit card to a credit card with a very low credit limit or make sure he opts out of overdraft protection. Or, consider giving him a prepaid debit card instead. Just make sure you encourage your child to shop around, rather than accept the first card they see. Colleges often partner with banks on campus debit card deals. But the cards that are offered on campus don’t always offer students the best benefits or lowest fees.

Your bottom line
Take the time to fully estimate how much a particular college will cost and come up with a realistic budget for the next four years. If your family can just barely afford a particular college, consider moving on. No matter how prestigious a school may be, it’s probably not worth extensive debt.

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