US has the highest college fees in the whole world.
Kids would not have paid any fees until they finish their high school in US.
But when they get into college, the fees are so exorbitant that we might have to give up our whole life savings.
And for this reason alone, many here in US have started questioning whether a college degree is needed in the future.
First generation immigrants like us will get to know the college fees situation here only when our kids are ready to go to college.
This episode hopefully helps to avoid that shocking discovery at that time.
Hi. My name is Vijay Mohan. You are watching Investment Insights.
When it comes to US college education, the first question that we all get is, how much does it cost to complete an undergrad degree in US.
It is not easy to answer that question. Because it depends on the college we are planning to go.
There are 2 main differences in US colleges, when compared to Indian colleges.
1. All Bachelors degree here are 4 yrs degree. There is no 3 yrs BSc degree here in US like in India.
2. All degrees in a given university cost almost the same money.
There might be some minor differences. But mostly same fees.
What does that mean? It costs same money to study either BA English Literature or Computer Engineering.
We should understand these 2 differences to begin with.
Next, let us see how the college fees differ among different universities.
Just like in India, US has both Public Universities and Private Non-Profit Universities.
If we look at the top 10 universities, Harvard, MIT, Standford etc. - all are private universities.
The most expensive tuition fees is in this Private universities as well.
Before we check how much it is, make sure that you are sitting comfortably in a chair.
Have a glass of water nearby as well. Orange juice is OK too.
We dont want to get fainted right?
In Princeton, it is $54,000. Harvard - $54,000. Columbia University - $64,000.
This is one year tuition and fees cost.
When we include the other expenses like Boarding, books etc, that will add up another $15,000 to $20,000 per year.
So to study in a top private university like Harvard without any scholarships, it would cost $75,000 per year.
That means, to complete a 4 year degree, it would cost $300,000.
If your head is spinning, have that water and say “All is well, All is well” 3 times.
This cost is for top private universities.
But on average, the cost of a private university would be $41,000 tuition/fees and $15,000 for other expenses - a total of $56,000 per year.
For 4 years, it would be around $225,000. This is for private universities.
How much would it cost in a public university?
If we look at the top universities ranking in US news, public university makes its first appearance at #20 - University of California, LA.
Tuition fees here is $43,000. University of Michigan - $52,000. University of North Carolina - $36,000.
These are expensive, because they are top public universities.
But on average, it would cost around $27,000 in a public university.
If we are targeting top public universities, then we can expect to spend on average $35,000 tuition fees.
When we add the other expenses $15,000 to this, it becomes $50,000 per year.
For 4 years, it comes to $200,000. This is better than $300,000 in top private universities.
So this is for out of state students in a public university. The fees are even lesser for in-state students.
Instate student means - before joining the college, the student should have been living in the state for at least one year.
This residency rule could be difference across different states. So check the residency rules for the state that you are living in.
So in University of California, LA, our of state students have to pay $43,000 as tuition fees, but for in-state students, it costs just $13,000.
On average, in-state university tuition fees costs around $11,000.
When we add the other expenses $15,000 to this, it comes around $26,000.
Total cost for 4 years degree would be $104,000.
So if you are in US, you can definitely consider your local state university for this advantage.
Even for students applying from outside of US, they can become resident from the second year and can potentially pay the instate fees from second year.
If you are interested in that, check the local state residency rules.
So when an instate university costs around $104,000 on average, private university costs around $225,000 on average.
What is so different about private universities when compared to public universities?
Public universities are usually in a bigger campus. They also offer almost all majors.
There will be hundreds of students in each class.
That too, because of the cheap tuition fees, there will be many in-state students.
Because public universities are bigger, usually their research and lab facilities will be better.
Private universities usually offer focused majors. Student count will be far less when compared to public universities.
That means Student to Teacher ratio is will be small. That means, students could potentially get better focus from teachers.
Because the fees in private universities is same for all students across the world, usually there will be better student diversification here.
That is, private universities will not have heavy local state students, but well diversified students from all over the world.
These are all general differences between public and private universities. Each university is different.
Whatever university you are targeting, do research on it specifically to know more about it.
As of Today, total college expenses in US could be between $100,000 to $300,000.
These are published sticker prices. International students can expect to spend this much.
But US citizens and permanent residents have the possibility of bringing down this expense down thru financial grants.
There are two major types of financial grants. Need based grant and Merit based grant.
Need based grants are given depending on ones’s financial situation and based on their financial needs.
When we apply for college, we need to fill up FAFSA (Free Application for Federal Student Aid) application and submit.
Family with annual income of $65,000 or less has 100% chance of getting this grant.
Family with income less than $100,000, though does not have 100% chances, still got pretty good chances to get this grant.
Family with income upto $150,000 per year can get at least some grants.
Almost all universities, including private universities give this grant.
Infact, top elite private universities give only this need based grant. They dont offer merit based grants.
When they process the application for admission, they only evaluate all the factors other than money as criteria for admission.
Once they have decided to give the admission, they then decide on need based grants depending on the financial situation of the admitted kid.
Let us say that a family is making $100,000 per year. And let us say that Harvard has decided to give admission to their kid.
The fees for their kid is decided based on the income and assets they have reported in their FAFSA application.
That changes for each family depending on their financial situation.
Even in their site, Harvard has mentioned that the average contribution of a parent per year is $12,000.
In short, we do not have to skip Harvard just because their fees is out of our reach.
If our kid has the capability to get an admission into Harvard, money will not come out as a blocker for them to get in.
This is actually applicable not just for Harvard, but also for all top elite universities.
In general, this need based grant is available only for American citizens and permanent residents.
But in Harvard, it is equally available for International students as well. This is an exceptional case.
Grant availability is different in various universities.
So if you are interested in need based grants, check the financial aid page of the university you are interested in to learn more.
Next is Merit based grant. This is given based on the merits (talents) of the kids.
Merit could be athletic excellence or academic excellence.
Whatever the talent is, if the kid is exceptional in that, they got pretty good chance of getting this grant.
Like I mentioned before, top elite private universities do not offer merit based grants.
But all public universities offer them.
Our kids’ High School will have college counselors.
They can recommend the university that has higher chance of giving merit based scholarship to our kids depending on our kids capability.
We have to apply depending on their recommendations.
Other than these two major Need based and Merit based grants, there is another third option as well.
That is scholarships offered by private corporations. Corporations like Google and Mc Donalds offer college scholarships.
We have to search and apply for scholarships like that.
There are websites for that as well. fastweb.com, scholarsapp.com are examples.
Links for those are in description. If you are interested, check it out.
Many kids, during their final year of High school, apply for at least two scholarships every week.
Even if we can get a scholarship of $500 from that effort, it is still worth it.
Other than these grants and scholarships, we have to spend the money from our hand.
College fees has an inflation of 5-6% in US. That means, the fees gets doubled every 12-14 years.
Here in this chart, we are seeing how the tuition fees in US has changed over the period of last 20 years.
In 2001, private university fees was at $17,000, but now it is at $41,000.
Then Out of state public university fees - $10,000, now - $27,000.
Instate fees has risen from $3,600 to $11,000 now.
So, How can we calculate our future needs?
It is better if we can get a scholarship. But it is not necessary that we could get one.
Then, it is better to target the middle ground out of state public university average cost.
If you can, you can even save for private universities.
So out of state average cost is $27,000. Let us use this in our calculator.
Tuition and fees need for four years is $108,000. Education inflation rate - 5%.
Other expenses including room boarding, books etc - $15,000. So for 4 yrs, it is $60,000.
Let us assume that those “other expenses” is increasing at an inflation rate of 2% every year.
Then our Today’s needs becomes - $168,000. In 5 yrs it will be $204,000.
In 10 years, it will be $249,000. In 15 years, it will be $305,000.
The same calculation for average instate university cost $11,000 would result in $104,000 as today’s needs and $172,000 in 15 years.
If our kid is 3 yrs now, then to send them to college in 15 years, we would need at least $172,000.
What are all the options do we have to save this amount? We will check that out more in detail in next episode. Thank You.