KHIS College Enrollment Resources

My guess, assuming our daughter goes out of state for college in 17 years and attends college for 5 years is that our total bill (tuition, fees, room, board, etc.) at the end of her undergraduate education will be $354,442.02 in 2007 dollars.

Who has that kind of money?

How much does a single year of college cost today?

Living in Washington State the obvious college to think about is the University of Washington. UW’s total costs for the 2007-2008 academic year for an instate student living away from home are $18,391. In my opinion UW is the only world class university in Washington State and I wouldn’t want to pin all of our daughter’s hopes on one university. So we’ll have to face the reality that our daughter may go out of state. Since I went to UCLA let’s see what UCLA would cost for the 2007-2008 academic year for an out of state student – $27,333.23 for tuition and fees plus $16,148 for room, board, books, etc. for , assuming she lives on campus, for a total of $43,481.23 for a single year. And remember, the UCLA figure is what it costs for an out of state student to go to UCLA today, right now, this very moment. Not, say, oh 17 years from now.

2 How quickly are college costs going up?

The most comprehensive source of information I could find on college pricing is [CollegeBoard(2006)]. Based on data from pages 7 and 11 it claims that:

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Public Schools across the US Private Schools across the US

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Average increase in tuition, fees, room & board for the last 10 years 3.3% 2.6%

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Average increase in tuition, fees, room & board for the last 30 Years 2.1% 2.6%

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So do I assume that the next 17 or so years (e.g. the time my daughter has until she is supposed to go to college) will look like the last 10 years or the last 30 years? Since my crystal ball isn’t working well I’m going to randomly pick the 2.6% figure under the laughable assumption that the 2.1% for public schools (which my UCLA base line is) represented a time when the people of the United States felt investing public dollars in public colleges was a good idea and the 3.3% for the last 10 years represents public schools trying to catch up with the private schools now that the people of the United States have apparently decided that investing in public dollars in public colleges isn’t such a great idea. So I would hope after a ‘catch up’ period public schools should ’settle down’ to a cost growth rate equal to private schools. Check the appendix for a quick sanity check of the College Board’s numbers.

3 How much will the bill be?

The first question is – how long will our daughter take to get her undergraduate degree? Even when I attended college over a decade ago getting out in four years was nearly impossible. Class schedules are so compacted that getting all the necessary classes on time is a nightmare. Besides I would like my daughter to have the option of spending a year abroad as I did. Sure, you can go abroad and study in your own major and not loose credits but it isn’t easy so I have to assume that many of the classes she’ll take abroad won’t be for full credit so she’ll need longer to graduate. So I’ll budget for 5 years.

In terms of the cost basis I’m going to pick the UCLA out-of-state figure, $43,500 and the 2.6% growth rate. As my daughter is now 1 years old she has 17 years left until she goes to college. The only problem is that the school year (which determines when I have to cough up the money) doesn’t follow the calendar year. Schools start around September and run through June or so. This means my first check to college should be due around September of 2024.

The 2024 figure comes out because my daughter will turn 5 in 2011 and start kindergarten during the 2011-2012 school year. She will have 12 years of school after Kindergarten. So 2011+12 = 2023. In other words, she will graduate high school during the 2023-2024 school year. Which means she will start college during the 2024-2025 school year.

So the goal is to have enough money to pay for her first year of college by September of 2024. In reality I could stretch it out since most of her college expenses will be paid by the quarter/semester (tuition, fees, books and on-campus housing) or month (general living expenses and off-campus housing). But trying to be that exact over a 17 year period seems like useless specificity.

So, to keep myself mildly insane (as opposed to completely wacko) I’ll assume we’ll save money on a September-September basis. Or, in accountant speak, our college ‘fiscal’ year starts in September.

And yes, this always drives me nuts at work. “The project will be delivered by 2008″, “Wait, is that calendar or fiscal year?”, “AAAAHHHH!!!!!”

It also means that I’m not going to save anything for our daughter during her 2006 fiscal year (she was born during 2006 calendar year) and will start saving during her 2007 fiscal year. Which means we will save for 17 years.

So, let’s see, $43,500 base figure, 2.6% real rate of growth (e.g. after inflation), for 17 years to save until her first year of college, with 5 years of college total, the total bill will be $354,442.02. (See the appendix for details)

Oy.

Keep in mind, that the previous figure is ‘real’ not ‘nominal’ money. Or in other words, this is ‘inflation adjusted’. So $354,442.02 is how much I’m estimating it will cost to send our daughter to college in 2007 dollars. By way of comparison, sending our daughter to UCLA today for 5 years would cost $229,107.90.

So, I guess we can look on the bright side. Sending our daughter to college 17 years from now will ‘only’ cost $125,334.12 more (in 2007 dollars) then it would to send her to college today. Oy

A Are the college board numbers reasonable?

[CollegeBoard(2006)]’s numbers cover colleges all across the United States. So perhaps, because there are many cheap colleges, they hide important trends in terms of price increases. I want my daughter to go to a reasonably prestigious college. So I decided to do a little ’sanity check’ using UCLA’s numbers. In 1997-98 out of state undergraduates paid total tuition and fees of $13,150. In 2007-2008 out of state ungraduates will pay a $27,333.23 for tuition and fees. I’ll also use the inflation adjustment factor for the 1997-1998 dollars given on page 27 of the college board report even though it’s a good year out of date.

So in the last ten years the total tuition and fees paid by an out of state student at UCLA has gone up each year by 4.8%. This number only accounts for tuition and fees. Page 10 of the college board report, which lists changes just in tuition/fees, claims that public schools have gone up 4.2% over the last decade and private schools 2.8%. So in fact the college board numbers do seem to reasonably reflect reality (based on a sample of one).

B Calculating the cost of college

The math for calculating a compounding entry is thankfully very straight forward:

In the example I gave above the CurrentCost is $43,500 for 2008 and GrowthRate is 2.6%. Let’s say my daughter was going to college in one year. In that case the cost would increase over one year and be $43,500*(1+0.026) = $44,631. In other words the YearsToGrow value would be 1 because there was only one year in which the growth would compound. So if my daughter is going to college in 17 years from now then the YearsToGrow value is 17.

So the math for calculating my daughter’s expected cost of going to college is:

The cost for sending my daughter to college in 2007-2008 would be:

References

[CollegeBoard(2006)] CollegeBoard. Trends in college pricing 2006, 2006. URL http://www.collegeboard.com/prod_downloads/press/cost06/trends_college_pricing_06.pdf.