Why are colleges so expensive?

College is a big life milestone — so if you’re heading off to school, congratulations! 🎉 College is a big deal for your future and your wallet. The average annual cost of college is $36,436, and the cost typically increases by 3% each year.* 

While college is an investment in your education and a right of passage for many, it’s also costly. But don’t worry. In this blog post, we’ll break down all the college expenses you need to know about — so you feel prepared for your next step.  

Tuition

Tuition is likely the first thing you think about when considering the cost of college. And for good reason. Tuition is the cost of attending classes — and makes up the bulk of college expenses.

As you research different colleges, you’ll see two types of tuition fees for public schools: in-state and out-of-state tuition. On average, in-state tuition costs $9,678, and out-of-state tuition costs $27,091 annually.* If you’re thinking, “Why is out-of-state tuition so expensive?” Let’s break it down. Public universities are owned or funded by the state. That makes states more likely to lower the tuition cost for in-state residents since their families have previously paid taxes to that state. It’s also a way for states to retain talent since many students get jobs in the same state as their college.

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Now, let’s talk about private colleges. The average annual tuition for private schools is $38,768 — which is even more than the average out-of-state tuition.* So, why is tuition so high in the first place? The answer is, well, complex. Many factors influence the cost of tuition, including the economy, inflation, and increased demand for higher education. 

Housing and living expenses

Let’s move on to the next largest portion of college expenses: housing and living — AKA room and board. Your housing cost is the cost of rent wherever you live — in a dorm, in off-campus housing, or at home. Students at 4-year public colleges spend $11,520 for on-campus housing or $11,365 for off-campus housing each year.* Living at home, with family, or with roommates will help offset these costs 💰

In addition to housing, you’ll have to cover living expenses. TLDR; Living expenses are your day-to-day expenses, including food, clothing, entertainment, and transportation. Students spend between $3,000 and $6,000 on these additional expenses.

Pro tip: Living on campus = limited to no transportation costs!

Administrative and other costs

In addition to tuition, most colleges charge administrative fees. ‘Administrative fees’ may be used as a blanket term for the money that funds various on-campus services like healthcare, transportation, and recreation — in addition to others. Alternatively, schools may break down their fees into different categories. 

Regardless, the amount of fees and what they cover varies widely from school to school. As you narrow down where to apply, check each school’s website for an explanation of their fees.

Examples of additional fees:

• Health fee — this may cover on-campus health services and student health insurance

• Activity, technology, or service fee — this may cover recreational facilities, campus maintenance, and technology

• Registration fee — this may cover enrollment platforms that enable students to sign up for classes

• Administrative fee — this may cover all of the above or be used as a separate fund for the school to use toward various initiatives

Textbooks and materials

We’ve covered tuition, housing, and fees. Now, let’s talk about textbooks! 📚

Did you know the average college textbook costs $105.37? That means the average college student spends $1,226 annually on books and supplies. Additional supplies that contribute to this number include notebooks, writing utensils, technology, and equipment — such as lab coats and supplies. 

Pro tip: Rent textbooks from local bookstores or online to lower spending. Want a digital alternative? Get the e-book version of your textbook for a fraction of the cost.

Financial aid — loans and scholarships

Many students don’t have enough cash to pay for their education upfront. Enter financial aid and scholarships. 

Financial aid is funding from the government, or other financial institutions, that helps cover the cost of secondary education. While financial aid is an excellent resource, be aware that it may not cover all of your expenses. Federal lenders still expect students, or their families, to contribute toward the cost of their education. If you can’t cover the difference, you’ll need to rely on savings, private loans, or scholarships.

Most colleges offer merit-based and need-based scholarships. Want help understanding your options? Email or call a prospective school’s financial aid office to learn about their financial assistance.

Remember, loans should be taken seriously. When applying for a loan, calculate how much you’ll owe each month and when it has to be paid off. Federal loans don’t require repayment until after graduation, but private loans might be due earlier. Regardless of loan type, make sure you feel comfortable with the monthly repayment amount.

Pro tip: Many online resources — including your college’s career counseling center — can help you roughly estimate your post-grad salary. These metrics are no guarantee, but they will give you a rough idea of your expected income. You can also search online for salaries associated with the majors you’re interested in or for the most lucrative majors. This will help you determine what student loan amounts will be comfortable for you to repay.

Save for college with Greenlight

It’s no secret that college is expensive. That’s why saving is important. Get prepared with a 529 savings plan or with Greenlight’s money app for families. With cash back and savings rewards, your family will be college ready in no time.

*Average college-related costs taken from the Education Data Initiative.