An Insider’s Guide to Calculating the True Cost of College

What’s the true cost of college? Judging on social media posts and most popular portrayals of ‘college life’ it’d appear the cost is last-minute binge study sessions, spending for spring break trips and all sorts of similar adventures.

Here in the real world, the true cost of college boils down to dollars and cents, and includes far more than you might think.

But if you get a grasp of what to expect, and how much you can expect to owe on the other side, it’s a lot easier to see college as an investment in your future, rather than a ‘total cost item.’ The trick is getting ahead of the curve by sizing up exactly how much you’ll need to borrow, then it’s all about understanding the terms.

We’re getting ahead of ourselves, though; let’s start here…

What Do You Mean ‘True Cost of College’?

As mentioned above, the true cost of college is much more than cups of coffee at midnight, chipping in for that weekend road trip and buying student tickets to football games. The more important factors to consider are topics such as interest rates, cost of room and board and what you’ll need to allocate to spend on books and materials.

Because if you don’t have a grasp on the big-expense items, everyday expenses such as a Red Bull while studying or a weekend trip to a concert can sneak up on you, or not even be possible in the first place.

It sounds like a lot. Spoiler alert: It is.

The thing about loans, though, is that knowledge really is power. Once you take a deep breath, and figure out a few of these concepts, it’s all about making a realistic expectation of costs and understanding how much you need to borrow. There are even experts that will provide a free consultation to help you get some of those details worked out.

If you feel like doing your own research, Peterson’s offers a college search tool that features financial information from many colleges. There are also third-party entities that help students get a better idea of what to expect in terms of costs.

There’s good news too–By simply enriching your understanding of the process, and approaching your loans from a place of knowledge and empowerment, you’ll be ahead of your peers.

In a recent study, only 52 percent of students surveyed were able to properly estimate the total cost of tuition. That’s still better than the 38 percent of surveyed students who could put a ballpark figure on their amount of debt. The numbers are clear: A lot of students are in the dark about how much college costs, and most students are unaware of the task that lies ahead in repayment.

But you’re not reading this article because you’re ‘most students.’

Diving Into the Details

Beyond an understanding of the total costs and how much you need, there are also more specific details that have significant impacts on the true cost of college.

Interest Rates

For one, not all interest rates come in the same shape and size. Some, with fixed rates, stay the same throughout the loan, some have predetermined shifts in what you accrue (these are called variable rates). Some do both, and thus earn the moniker of hybrid loans. You also have to understand how the length of the loan, and what kind of repayment type you choose will impact the details and costs of the loan.

Credit Score

There’s also that whole credit score thing. A lot of high school students don’t even know what credit is, let alone how to establish it. It’s not really a system set up to favor high school students, which makes it more than OK to have no credit history or a low score.

But credit scores play a HUGE part in getting the total landscape of your loan options, and being able to find a cosigner can be a crucial component to making your education more affordable.

Understanding APR

One way to figure out how much you are paying is to add any additional fees to your interest rate, which will provide you with the total Annual Percentage Rate (APR) of a potential loan. There are a variety of fees that could add to your APR, but it’s important to realize that an interest rate alone won’t tell you how much they are tacking onto total cost you are paying each year.

That’s what an APR is for, and understanding how things like origination fees can factor in will give you the true cost of college.

Being Aware of the Back End

As you are sizing up your loan, there is another key phase of this process to consider before you sign on the dotted line: repayment.

It may not be best for your blood pressure to dwell too much on what this will look like while in school, but that doesn’t mean ignorance is bliss.

Only 8 percent of students surveyed said they knew their current interest rate. (They change)

That makes sense when you consider that 98 percent of students said they didn’t know if interest accrued while they were in school. (It probably does)

So why is it so important to ask these questions during the early stages of signing up for student loans? In that same survey, only 6 percent of respondents knew their repayment terms. The numbers show that if you don’t get informed early, it’s hard to catch up and understand exactly how much you owe after graduation.