College Affordability

College Costs and Financial Aid

May 20, 2024

College affordability matters. Understanding college costs and financial aid works should be one of your first steps in making a college list. This is a long article, but I want to give you a strong overview of college costs and financial aid, so you are prepared to consider your options.

Think about your family budget, college financial aid priorities, and where your student is likely to receive substantial financial aid. Building affordability into your college list is better than hoping you can “make it work” with small outside scholarships and big parent loans. 

Graduation cap on a pile of US money. Text reads: College Costs and Financial Aid. Logo of Admissions Decrypted
College costs and financial aid are key factors in building a good college list.

Cost of Attendance
In-State vs Out of State Tuition
Cost of Private Colleges
Types of Financial Aid
How to Apply for Financial Aid
How to Estimate College Costs
College Fit Includes Affordability

Cost of Attendance: Direct Costs vs Indirect Costs

When you consider the cost of each college, consider both direct costs, what you pay the college itself, and indirect costs, other expenses that come from being a college student.

Tuition and fees, housing, food, and books are examples of direct costs. This includes additional fees for specific majors like engineering or aviation. 

Transportation, dorm supplies, clothing, toiletries, computers, laundry, entertainment, club & activity costs, and fraternity/sorority expenses are examples of indirect costs. Housing and food could be direct or indirect costs, depending on whether the student chooses to live and eat on or off campus. 

When you add up direct and indirect costs, you get the Total Cost of Attendance (COA). This is the full cost to attend, before reductions from financial aid. 

Total Cost of Attendance = Direct Costs + Indirect Costs

Some colleges do a good job of estimating total cost of attendance, but it pays to look at the assumptions. Students who live far from the college might find the estimated travel costs too low. Students with dietary restrictions might have higher food costs that include trips to a grocery store. And students in Greek life should add the costs of membership and activities to their personal expenses.

Note: Unless a college explicitly promises to freeze costs, plan for a 3-5% increase each year for tuition, food, and housing.

In-State vs Out of State Tuition

Public colleges typically charge students who aren’t state residents higher tuition rates. State institutions receive financial support from state governments and may have a primary mission of educating state residents (ie, taxpayers). 

Some colleges list two separate tuition rates. Other colleges list one tuition rate, but charge an additional non-resident supplement or surcharge. 

US Average Costs for Public Four-Year Colleges, by Residency

Residency CategoryTuition & Fees
Public four-year college in-state$11,260
Public four-year college out-of-state$29,150
Source: Trends in College Pricing, College Board, 2023

But these were averages. Some popular colleges charge non-resident students much more in tuition.

Sample Annual Tuition and Fees for Resident and Non-resident Students, 2023-24

InstitutionResident (in-state)Non-Resident
University of California$18,961$48,715
University of North Carolina$8,998$39,338
University of Michigan(Costs vary by year in college)$17,228 – $19,390 $58,072 – $62,142
University of Virginia(Costs vary by program and year in college)$18,816 – $30,336$56,428 – $68,456

Remember, this is just for tuition and fees. You still need to account for food, housing, and indirect costs. Colleges that have a significant tuition difference for non-resident students often offer very little financial aid to out of state students.

Residency for College Tuition

States set their own policies about what qualifies a student as a resident for the purpose of tuition. Requirements vary, but typically consider where the student lives or graduates from high school and where their parents reside. 

Colleges might require documentation such as proof of address, driver’s license, or voter registration. Military families, expat families, and students who split their time between divorced parents may need to provide additional information to support state residency claims.

It can be difficult to establish residency after starting as a college student. Many states base residency for dependent students on parental residency and don’t count a move for educational purposes (ie, to attend college) as grounds to change residency classifications for tuition. 

I recommend finding the college or state guidelines for residency and reading them carefully. What worked for your neighbor a decade ago or your cousin in another state might not prove useful for your family’s situation. 

Don’t be afraid to ask the college questions or submit an appeal based on additional information. Usually the registrar or bursar’s office handles this type of question, but military families may also want to reach out to the veterans’ service office on campus. (These can have different names, but would be where the VA School Certifying Official works.)

In State Tuition for Military Families

Military families may have residency in one state, but live somewhere else because of military orders. This creates challenges in qualifying for in-state tuition, but they may also find that their kids are eligible for in-state tuition rates both where they live on military orders and in the state where the parents maintain residency. 

There are two main paths for getting in-state tuition in a state other than their state of residency.

Public Colleges in the State Where the Service Member is Stationed

Federal law (20 USC ch 28 sec 1015d) requires colleges to charge in-state tuition rates if the service member has permanent military orders to the state where the college is located. The college should keep the student at in-state tuition rates even if the service member has a change of duty station, as long as the student stays continuously enrolled. 

Note: As of July 1, 2024 this also applies to families of a “member of a qualifying Federal service,” which includes members of the Foreign Service and specific members of the intelligence community.

Students Using GI Bill or other VA Educational Benefits

Another federal law (38 USC ch 36 sec 3679) requires colleges to charge no more than in-state tuition to students using VA educational benefits such as Post 9/11 GI Bill, Fry Scholarship, or Chapter 35. But wait, because there can be additional requirements. 

The same law allows colleges to require additional documentation of an intent to establish residency in the state where the college is located. This might include a state driver’s license, proof of address in the state, or other documents. 

This federal law only applies while the student is using VA educational benefits, but does not require the college to continue charging in-state tuition rates if the student stops using GI Bill or other VA funding. Some colleges keep the student at in-state rates, and others will immediately revert back to the higher non-resident tuition rate. This depends on state law and college policy. 

Make sure you research the requirements and policies for the specific colleges your student is considering. Relying on old information and broad statements on social media could cost your family tens of thousands of dollars. I’ve found the veterans’ service office is the best first stop for these questions.

Home of Record Is Different from Residency

Home of Record (HOR) is a military specific term that refers to where the service member joined the military. Colleges don’t use HOR to determine eligibility for in-state tuition rates. 

Cost of Private Colleges

Private colleges and universities are self-governing and not directly supported through state funding. They can be very small (California Institute of Technology has less than 1,000 undergraduate students) or quite large (University of Southern California has over 20,000 undergraduates). As independent institutions, they control their own budget, including tuition and housing costs as well as institutional financial aid. 

The average cost of tuition and fees at a private non-profit college was $41,540 for the 2023-24 school year. But there can be huge differences between actual net costs at individual private colleges, depending on how they award financial aid.

Some private colleges have significant endowments and use them to offer need-based financial aid. This can result in significant scholarships for students with high financial need. On the other hand, other private colleges might use their financial aid budget to offer discounts to encourage students to enroll.

Many private colleges require students to complete the financial aid application known as CSS Profile to be eligible for financial aid from the college. They might also require FAFSA (Free Application for Federal Student Aid) to determine eligibility for federal financial aid (such as Pell Grants, federal student loans, and federal work study).

As a general rule, very selective private colleges put more of their financial aid budget towards meeting demonstrated need. If your family has a higher income or assets, you may want to look towards less selective colleges that offer non-need based aid to many or most students.  

Basically, don’t assume that a private college would always be more expensive than a public college (especially a public college where the student would be a non-resident). In other words, try to compare estimated costs rather than lumping all private colleges and all public colleges into the same baskets.

Types of Financial Aid

Financial aid includes grants (money that does not have to be paid back), work study (money earned through specific campus jobs), and loans (money that will have to be paid back — with interest). This aid might come from the federal government (ex, Pell Grants, federal work study, or federal student loans) or from the college itself (labeled as grants or scholarships).

The federal government uses the Free Application for Federal Student Aid (FAFSA) to determine which federal aid individual students are eligible for. Many states use data from the FAFSA or a state specific financial aid application to determine eligibility for state financial aid. 

Colleges may also use FAFSA information to determine financial need, sometimes in combination with another aid application, CSS Profile. As a general rule, the largest amounts of financial aid come from individual colleges. But remember that how much aid a college offers and which students they offer it to varies a lot, depending on the college’s financial aid budget and institutional priorities

Need-Based Aid 

Need-Based Aid is financial aid that is offered because the college has determined the student and their family have fewer financial resources that could be used to pay for college costs. The difference between the Cost of Attendance and what the student and their family are estimated as being able to pay (using savings, income, and loans) is a student’s Demonstrated Need

Need-based aid often takes the form of grants or work study, but could also include subsidized federal loans, where the interest doesn’t accumulate while the student is in college. Need-based aid could come from the federal government (Pell Grants, federal work-study, subsidized loans), from state governments (state grants for college), or from the college itself (grants or need-based scholarships)

Merit Aid and Scholarships

Non-Need Based Aid, sometimes called Merit Aid is financial aid that is not tied to the student’s family financial status. This money might be labeled as scholarships and could be automatic, based on grades and test scores, or be competitive, with additional application requirements. 

Some colleges routinely discount tuition to encourage students to enroll. These colleges realize that families get excited if a college that offers a $20,000 discount labeled a “scholarship.” But it’s important for students to look at the final Net Price rather than being excited about the size of a discount. 

Few colleges commit to meeting 100% of demonstrated need. It’s common for there to be a gap between the amount the college thinks the student can afford and what is covered through a financial aid package. In addition, the amount that colleges suggest families can afford is often beyond what a family might have budgeted. 


Loans are considered a type of financial aid, but unlike grants, a loan has to be repaid, with interest added to the original loan amount. There are annual caps to federal student loans, which usually have lower interest rates than private loans. The limit for a federal student loan for a college freshman is $5,500. Since most students coming out of high school don’t have much income, they will likely need a cosigner for additional loans. 

Some colleges include loans in their  financial aid packages. These are not always clearly labeled as loans, and might use abbreviations that obscure the fact that they have to be paid back (ex, Fed Unsub L). If you aren’t sure what something in a financial aid letter is, reach out to the financial aid office at the college for an explanation. Remember that college loans have to be repaid, even if the student doesn’t graduate.

How to Apply for Financial Aid

There are two main applications for financial aid, FAFSA and CSS Profile. 


FAFSA is the Free Application for Federal Student Aid. It’s administered by the US Department of Education and uses information about income and assets from the student as well as other family members, known as Contributors, to calculate a Student Aid Index, or SAI.  (This used to be called the Expected Family Contribution, or EFC). 

All US students are eligible for federal student loans. The SAI is used to determine if the student should receive subsidized or unsubsidized loans, as well as eligibility for federal work study, and federal grants (including Pell Grants). 

Most students complete the FAFSA online, using income information from the “prior-prior year” and current assets. In other words, students applying for aid for Fall 2025 would use income from 2023 and asset numbers current when they fill out the form. 

FAFSA is started by the student, with additional information provided by applicable Contributors, which might include a student’s parent or spouse. Income information is drawn directly from the IRS, except in a very small number of situations (usually related to not filing US income tax returns). 

Both the Student and any Contributors must have their own Federal Student Aid (FSA) ID. Requesting an FSA ID is separate from completing the FAFSA and can take several days (or longer) to process. FSA IDs don’t change, so if you applied for federal student aid in the past (ex, if a parent received federal student loans for their education decades ago), you would need to use the same FSA ID.

Independent Students

Some parents think that if they don’t plan to pay for college, their children can just fill out the FAFSA as an Independent Student. However the Department of Education uses specific set of criteria for determining if a student is Independent or Dependent

Students who do not meet the criteria for Independent Students will normally need to have a parent submit financial information as a FAFSA Contributor. 

Not claiming a student on parent taxes does not make them Independent Students for FAFSA. Saying you won’t be paying for college does not make a student Independent for FAFSA. 

Submitting financial information on FAFSA does not mean parents are required to pay for college, but not submitting financial information limits the financial aid the student is eligible to receive.

Related: Guide to FAFSA

Issues with the “New” FAFSA

The FAFSA online application and the formula used to determine aid eligibility changed on the 2024-25 FAFSA (for students applying for aid for the 2024-25 college academic year). The Department of Education delayed releasing the new form and it had lots of technical issues. Colleges in turn had to delay sending financial aid offers to students. 

It’s not clear if these issues will persist into the application cycle for the 2025-26 academic year, which is scheduled to open October 1, 2024.

CSS Profile

CSS Profile is another financial aid application used by a smaller number of colleges that are mostly private and more selective. These schools typically have larger endowments and often give large amounts of need-based aid to help reduce their higher costs of attendance. 

CSS Profile is administered by the College Board, and there is a charge to submit each application (there are fee waivers for families earning up to $100,000). This application asks more questions in order to create a picture of family financial resources that goes beyond income and savings. The colleges that are most generous with need-based aid, tend to require CSS Profile in addition to the FAFSA. 

Check the financial aid pages for each college your student applies to in order to see if they require CSS Profile. Or use this list of CSS Profile colleges and programs

When to Apply for Financial Aid

Usually FAFSA and CSS Profile open on October 1 for aid used the following fall. The federal government has a FAFSA deadline in June, shortly before the summer term of the college academic year in which the aid would be applied. 

So for example, the 2025-26 FAFSA should open on October 1, 2024. Students should apply soon after the application opens (I usually suggest waiting a week for bugs to be identified and corrected). This application would be available until June 30, 2026, since students attending college classes during Summer 2026 would usually be considered attending during the 2025-26 academic year. (Note: There are several months in which two different FAFSA applications overlap. Make sure you complete the form for the appropriate aid year.)

Colleges typically ask students to submit their financial aid applications (FAFSA and/or CSS Profile) around the time they apply for admission. But there are some additional considerations. 

Students applying Early Decision (ED) need to apply for financial aid with their ED application in order to get a financial aid letter with their admissions decision. Since cost is the only reason why students can back out of a binding Early Decision agreement, having this information can be crucial. 

Some colleges have Scholarship Priority Deadlines that are earlier than the Regular Decision (RD) application deadline. Waiting until the RD deadline to apply could reduce the amount of money offered by the college.

State grant programs often have their own application deadlines, even if they use FAFSA data and not a state specific application. 

How to Estimate College Costs

So, how do you come up with an estimate of how much your family would have to pay?

Net Price Calculators Estimate College Costs for Individual Students

Net Price Calculators (NPC) are available on most college websites*. They ask for some of the same information required by the FAFSA or CSS Profile and usually produce an estimate that includes federal aid, applicable state grants, and typical discounts from the college. 

The more detail an NPC asks for, the more accurate its results are likely to be. However, they are only an estimate and are not binding on future financial aid offers from the college. You can use the Net Price Calculator Center from the Department of Education to search for Net Price Calculators for specific colleges. 

*Federal law requires colleges that accept federal aid to have a Net Price Calculator. Some colleges that do not accept federal aid will not have this tool on their website. If that is the case with a school you are considering, contact the college financial aid office for more information about expected costs and institutional aid.

Common Data Set Records Need Based and Non-Need Based Aid

The Common Data Set (CDS) is a set of questions and responses that use a common format across all participating colleges. This provides information about admissions, costs, class size, number of degrees in each major, and financial aid.

Section H reports Financial Aid data. It lists how many students requested need-based aid; how many were determined to have need; how many received need-based grants, self-help (work study), or other grants; and what percentage of need was met. Another set of responses shows how much non-need based aid was offered the same year. Pay attention to both the percentage of students offered aid and the size of the award.

Question H5 shows how many students took out loans and the average size of the loans. Be aware that this may not include all loans taken out by parents, such as home equity loans used to pay for college costs. You can find a CDS by searching for the college name and Common Data Set, then selecting the most recent year available.

College Fit Includes Affordability

I know this can feel both confusing and overwhelming. It might seem like a lot of alphabet soup and looking at the costs can trigger strong emotions. But denial isn’t a great coping strategy. 

Some families ignore the cost of attendance. Others tell their children “just get into the best college and we’ll make it work.” Spring of senior year comes around and they realize that only a few of the colleges that offered admission are actually affordable. 

One of the best resources on college affordability is The Price You Pay for College by Ron Lieber, a financial columnist for the New York Times. This is one of the books I recommend parents of high school students read.

It’s better to have an awareness of cost and affordability earlier in the process. I ask families I work with to make an honest assessment of their college budget and estimated need. Then when we create a student’s college list, we include colleges that are affordable and likely to admit the student. If this is an area where you’d like help, use the Contact page to schedule an appointment.