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Course: Financial Literacy > Unit 9
Lesson 2: College, post-secondary education, and trainingTrue cost of education
As you begin to explore your postsecondary education options, it's important to understand the difference between the cost of attendance (COA), and the net cost. Which one do you *actually* pay?
Figuring out the true cost of education
When you're researching the cost of attending a college or training program, you might come across two different terms: Cost of Attendance (COA) and net cost.
COA is the total estimated cost of attending a program, including all direct and indirect costs, like tuition, fees, room and board, books, and other expenses. But here's the cool part: you may not actually have to pay the full COA!
The net cost is the amount you'll actually pay after subtracting financial aid, like grants and scholarships, from the COA.
So, think of COA as the starting point, but definitely not the end cost. COA is the highest possible price for education that you can lower many different ways.
Finding COA and net cost
To find the COA for a specific college or program, you can usually visit the school's website and search for "Cost of Attendance" or "Tuition and Fees." Most schools will provide a breakdown of the costs, including tuition, fees, room and board, and other expenses.
To find the net cost, you'll need to know the amount of financial aid you're eligible for. This can include grants, scholarships, loans, and other forms of assistance. You can use a , which is usually available on their website, or check your financial aid award letter if you've already applied and been accepted.
Calculating net cost
Now that we've established that net cost is the true cost you will pay to the school, let's talk about how you calculate it.
Calculating net cost is pretty simple - just subtract your financial aid from the COA:
Let's look at an example:
Imagine college X has a COA of , and you've been awarded in financial aid. To find your net cost, subtract the financial aid from the COA:
So, the true cost of attending college X for you would be , not .
Comparing schools with net cost
When comparing different colleges or programs, it's important to consider the net cost instead of just the COA. A school with a higher COA might actually have a lower net cost for you because of your financial aid package.
For example:
You are considering getting a degree from two different colleges: college A and college B. You research college A's cost of attendance and see that it is . The same degree program at college B has a cost of . Initially, college A seems more affordable.
You then look at their financial aid packages and compare the two:
College | COA | Financial aid | Net cost |
---|---|---|---|
A | |||
B |
In this case, even though College B has a higher COA, it has a lower net cost for you, making college B more affordable.
Understanding the true cost of education
By understanding COA and net cost, you can make more informed decisions about which college or postsecondary program is right for you. Always remember to consider the net cost when comparing schools, and use online tools like net price calculators to help estimate your costs. Happy school hunting!
Want to join the conversation?
- It seems to me that you are treating loans like they’re free money. Why aren’t loan repayment costs included in the net cost?
Ignoring these costs can get you into a lot of trouble.(6 votes)- I do agree that ignoring student loans can get you into a LOT of trouble. The idea behind net cost in the article and the associated exercise is to calculate how much you have to pay per academic year to attend the school and pay TO the school. Essentially, if you take out a loan for the entire amount it costs to attend, the payment to the school would be $0. So, your net cost for that year is $0 because you did not have to pay anything to attend and while attending. I think a "net bill" may be more appropriate way to describe the idea, but the schools call it "net cost". Hope that makes sense :-)(5 votes)
- How do the colleges make money on the financial aid money they give to you? Who gives them the money?(3 votes)
- Colleges don't make money on the financial aid money that they give you. Just set that one aside right now.
Colleges run like businesses, with income and outflow. When the income is greater than the outflow, they develop surplus accounts. Since colleges are usually non-profit corporations, they can't keep all of that surplus, so, in order to attract and retain good students, they give some of it away in the form of merit based or need based grants and scholarships.(5 votes)
- how does this all workout at the end(5 votes)
- It works out to a LOT of money that has been spent for you. Some of it was by the taxpayers, some by philanthropists, some by your family and some by yourself.(1 vote)
- Whatever you do, don't take out loans!(2 votes)
- You could say the same about buying a car or a house, "don't take out loans!" But then most of us would be going around in old cars and renting apartments for the rest of our lives.
So, when estimating the cost of your education, figure in the amount you'll have to repay after you graduate and get a good job. Figure, also, how to manage that debt over the 10 or more years after you finish the degree. Find ways, like military service or teaching in poverty districts, to get portions of your debt reduced or forgiven.(3 votes)
- Is this COA and net cost only available in US or it can be also applied to other countries?(1 vote)
- If, for example, you wanted to know the COA of a degree program in Burkina Faso or some other nation, you could likely find it out locally, wherever you live. But you probably would have to physically go to the institution to ask, and the data might need to be gathered from several different vendors to compute the final total.(3 votes)
- How much money does financial aid give(1 vote)
- they dont give you any money you have to earn it and pay for the fees to get the cash they lead you.(2 votes)
- What if you receive a grant and financial aid? How would you put that into the equation? I know that a grant is a form of financial aid, but what if you receive both. Would you add them both up and then subtract it from the COA?(1 vote)
- Yes. That's exactly how the University will do it. In the end, there will be a number for the amount of money you'll have to borrow from someplace.(1 vote)
- how make money no how try do work at job(1 vote)