Paying for College: My First Real Money Lesson

For many young adults, college is one of the biggest expenses that they have before buying a house. However, I’ve learned that most of these people don’t consider the cost of the colleges they apply to, accept, or attend. Unfortunately, this lack of foresight puts a damper on their 20s and 30s. From what I’ve seen, they are struggling to pay off college loans and keep up with the Jones, which is a recipe for disaster.

I want to bring some apparent issues forward in the whole college process. I didn’t do it perfectly, but I definitely made some decisions in the name of saving money. Hopefully, you can learn from what I did as well as learn what to avoid as you or someone you know is planning their college journey.

My College Story

First, let me walk you through my thought process before, during, and after college. I won’t add any numbers in this section. They will be broken out below so you can see the breakdown and how much you can really save.

Background

I grew up in a middle class family in New England. We had a good school system in my home town, and my parents always encouraged me to do my best. I naturally excelled in academic work, and combining that with my drive to do well allowed me to get good grades.

My parents had a savings fund set up for me. Each year, I received some money (typically a few hundred dollars) for special occasions (birthday, Christmas, etc). The fund was a mix of mutual funds that followed the market, and generally did well year over year.

Over the years, the deposits in that account weren’t as exciting as getting a new videogame or soccer ball. Naturally, I passed off the check deposits to my parents and continued playing with my toys. It wasn’t until I was in high school that my parents started talking to me about the account.

The Ugly Truth

The account my parents set up for me was to help put me through college. As I started to review my account, I saw the amount in there and was thrilled. The amount was far more than any paycheck I had made working for $10 an hour! With that, I thought I was set. College would be no problem!

Then, I looked at tuition.

My parents explained that I would be responsible for paying for college. The account they had set up was supposed to be a head start, but wouldn’t get me all of the way there. Their logic was that if my tuition was fully paid for, I wouldn’t focus as much on my school work. This was a fair assumption. Looking back, I know that if I pay for something, I will definitely take care of it better. Turns out, my education was no exception.

My parents also knew that if I had everything paid for, I wouldn’t learn anything about money. If I didn’t know anything about money after college, how would I know how to save for bills or emergencies? How would I know how to pay a mortgage and save for repairs?

Welcome to the real world, Alex.

“Ok”, I thought, “How am I going to afford this?” I sat down and started looking at college tuitions. I knew I would have to cut the largest costs first, but where to start? Most of the yearly costs of colleges were tens of thousands of dollars! I was going to need to get clever if I was going to escape debt-free.

Choosing The Right College

I started out my research journey by finding the cost breakdown for some nearby colleges. Turns out, most colleges charge about the same for room and board as they do tuition. So if you live on campus, you’re basically paying double tuition (in terms of dollars) each year. That was the first thing to go.

After cutting out room and board, I was left with in-state schools that I could commute to. I didn’t want the extra hassle of trying to find off campus living in a place where I didn’t know anyone and figured rent would cost too much, so I eliminated all of those options. I then compared the different options and saw quite a difference in private and public colleges. Private colleges were almost twice the price! Time to nix those.

That left two options for me based off price range and my major. Of the two schools left, one stuck out. It was half the tuition, 30 minutes closer (for commuting), and accepted my advanced placement (AP) courses from high school. The choice was clear and I geared towards getting accepted into that college.

Saving For Tuition

After I knew where I was going to go to college, I had to start planning for the college bills. I didn’t want to have college debt, so I needed to come up with the tuition money each semester. I already had a job and was able to work extra hours prior to starting school. That allowed me to put some extra money away.

As I planned my class schedule, I picked classes that didn’t have long gaps in between them. I also tried to plan it so I would have most of my classes only 2-3 days a week. This allowed me to pick up longer shifts and stow away some extra money to pay for tuition.

My Saving Grace

While my freshman year was a struggle financially, I did catch a break through the rest of my schooling. I got a co-op with the company I work for now, and they paid for my tuition and books on top of paying me a higher hourly rate.

With my expenses far less than before, I made sure to replenish my savings and start saving up money for the next chapter in my life.

Paying for College: The Numbers

So tat is the brief story of my financial situation through college, and I want to point out that I am aware of how lucky I was to get a job that paid for my tuition. I think it’s important, however, to take a closer look at the numbers associated with my original plan.

My Savings

My college fund in high school was at about $18k. Outside of that, I had an extra $5k in savings. All in all, I had about $23k for college, plus the rest of my expenses (gas, car insurance, rent to my parents).

In-State vs. Out-of-State Tuition

Tuition is the cost to attend classes at a university as a full-time student. There is part-time tuition, but I won’t talk about that here. Room and board are the costs of living at the university. Typically meal plans, as well as sleeping arrangements are included. Collectively, the cost of college displayed on websites includes both of these items, plus added fees and other extras.

As a side note, when I was in high school, the rates were a bit lower than what they are now. I will use today’s tuitions to ease the comparison and make the information I provide more relevant.

Taking a look at a college in my area, the tuition and fees page breaks down all of the associated costs with one year of attending college. The cost of classes (tuition) is $15,672 for in-state residents, and $38,340 for out-of-state residents. That’s $22,668 extra per year for being out-of-state! Over the course of 4 years, that’s an extra $90k in tuition alone! Obviously, this should be your first consideration. You are getting the exact same services for over double the cost. This all goes without mentioning that you would need to pay for room and board if you go out of state as well.

College Room and Board

Now going back to the tuition and fees page from before, we see that two charges are added: $7,436 for housing and $6,186 for a meal plan. Collectively, that’s $13,622 extra per year you spend on room and board. Over 4 years, that’s over $54k extra that you spend for the “college experience”.

I’m going to make a note here and say that those savings are compared to the costs of you living at home with no rent or food bills. It’s an ideal life, but some people have that luxury. I was fortunate enough to be able to live at home and pay $300 per month to my parents. The total for a school year was almost $11k, which was completely worth it for me.

If you have a different situation, run the numbers for yourself before making a decision. I wouldn’t be surprised if you can at least spend less than $700 per month on food like this plan advertises. If you need some help saving in that department, start with breakfast, then focus on lunches and dinners.

Private vs. Public Tuitions

At this point, I narrowed down my college options to those that I could attend while living at home. The college I used for the example above is a public university. Just checking the private university options, I was shocked at the difference in tuition.

For the private university, the tuition was $49,170 per year. That’s $33,498 more per year compared to the public school mentioned above! For the sake of saving money, it was a no-brainer for me to nix the private colleges and stick with public ones.

Comparing Tuitions

With out-of-state schools off the list along with private universities, I was left with nearby public universities. I compared the initial university to a cheaper, but comparable, university. The new university cost a total of $12,186 per year instead of $19,434 per year of the first university. Over the course of 4 years, that’s a savings of $29k! Just like buying furniture or a used car, it pays to shop around!

Paying for College to Avoid Student Loans

As I mentioned, I worked while I was in college. Going to such a (comparatively) cheap university allowed me peace of mind when it came to finances. Through working 20-25 hours per week plus going to school full-time, I was able to take home about $2.5-3k per semester. Expenses were just over $6k per semester, which meant I was losing about $3.5k per semester from my savings. (I had FAFSA loans as an option, but was trying to avoid them at all costs).

As I mentioned before, I had roughly $23k in savings at the start of college. I knew that I had over 2 years covered between college and life expenses going on the path I was on. This was huge for me. If I had gone with one of the other colleges, I would have been broke within a year.

Final Thoughts

It’s not fair for me to wag a finger and say everyone should graduate college debt-free. Obviously, that’s the ideal plan, but not everyone can do it. There are definitely steps you can take to get closer to it though.

The first thing I recommend doing is looking at your current financial situation. It may be wise to save money before you begin college. Working full-time for a year or two can go a long way in preventing student loan debt.

Next, I would do your research. Don’t just look at the dining halls and the level of hazing required to participate in Greek life. Instead, look at what you get for the money you put in. In my case, the question was as simple as this: am I getting twice as much out of this university for a college that cost twice as much? The answer was no. I’m not saying the two options are equal. I had to work hard through school and create my own opportunities. It paid off in the end, though, by being debt-free due to my frugality.

Finally, I recommend trying to make money while in college. Whether you are working on-campus or off-campus, the extra money can be used to help reduce the need for student loans (as long as you don’t go out partying every Thursday night). I will say that in this regard, every dollar counts, but don’t burn yourself out to a point where you are failing. Chances are, the costs of repeating a class are far greater than the money you’d make delivering pizzas or whatever your job is during college.

I hope this starts turning some of those gears in your brain about how else you can save money. Whether you are about to go into college, just came out, or have long since graduated, saving money pays off dividends in the pursuit of a happier, healthier life. If you are ready to take the first step on your financial journey, I recommend you start here.

Happy Spending!

-The Spendgineer