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College Decision Time: How to Weigh the True Cost

Millions of high school seniors are taking last looks at their favorite colleges before making the final decision about which university to attend. For many, the cost of college tuition will have a significant influence, even as pricy private schools attempt to cut the cost of admission.

Experts will tell you to look at the cost of tuition, fees, books and board -- minus guaranteed scholarship and grant aid -- to determine the "all-in" price of college. But educators say that's not enough. There is a hidden costs of college that can have a dramatic impact on how much you really pay--potentially doubling or even tripling the apparent college rack rate. And most parents overlook it.

What is it? The amount of time it takes to graduate.

At some schools, the chance of graduating within four years is slim, virtually guaranteeing that you'll pay for an extra year or two to obtain a degree, Ali R. Malekzadeh, dean of the Williams College of Business at Xavier University in Cincinnati, recently told a conference of business journalists. The cost of those extra years can boost your expenses, but it also eats into the student's lifetime earnings by delaying the point when the student is able to get a full-time job. If the student borrows to finance college, it also adds two additional years of interest charges onto that debt.

The overall cost can be overwhelming. And yet few parents know to check graduation rates before packing their student off to the university.

How can you predict whether a child will complete their studies within four years? Naturally, some of it depends on your student and what they're studying. But the school could be equally important and the Department of Education compiles a vast number of school-by-school statistics that can help you handicap that answer. The statistics you need to know:

  • What percentage of students drop out of the school after their first year, laying waste to a full year of tuition and time
  • The percentage who graduate within four years
  • The percentage who graduate within six years
  • The percentage who graduate at all
To find these numbers, go to the National Center for Education Statistics' College Navigator site. Now you can type the name of the school in the search bar, or you can search schools based on a set criteria. Once you find the institution you're seeking, you can look up their tuition, fees and estimated expenses (if you don't already know them) and multiply by four to figure a rough estimate of what you'll pay over four years.

Now, click on "retention and graduation rates" to find out the chance that your child will graduate in four years.

The first statistic in that box is what percentage of students returned to the school for a second year. The next section tells you what percentage of the student body completed a degree program, regardless of how long it took.

The third section is what helps you handicap how long your child will be studying. This tells you what percentage of students graduate in four years and how many graduate in six years.

Let's take a look at a couple of California schools to illustrate what you're going to find.

First I looked at Woodbury University, a private school in Burbank, Calif., which estimates that a student living on campus will spend nearly $41,673 annually. The four-year cost of that education (without accounting for potential college-cost inflation): $166,692.

But checking the retention and graduation rates tells me that it's the rare student who graduates in four years. Only 39% of those who started their studies in 2002 graduated within that time and just 57% graduated after six years. The message for someone paying for this college: If I shell out $250,038 (the annual cost times 6), which is roughly the price of the median home in Los Angeles, my student has a little better than a 50-50 chance of getting a degree. And that doesn't account for two additional years of lost earnings. If you figure those years at $30,000 each, Woodbury's cost exceeds $300,000--again, for a less than 60% chance of getting a degree.

With those odds, you might as well play the lottery.

Now let's look at Occidental College, a private school in Los Angeles. The estimated cost of attendance, including room and board, is even more -- $52,973 annually, or $211,892 for four years. On the basis of four-year rack rate, Occidental seems more costly than Woodbury.

But 82% of the students attending Occidental graduate in four years. When factoring in the graduation rate, Occidental starts to look like a relative bargain -- at least when compared to Woodbury.

How about a less-expensive choice? University of California, Los Angeles, estimates that its in-state students will spend $26,617 per year in tuition, fees, books, room and board. (Out-of-state students pay a premium to go to public colleges since their parent's tax dollars are not used to find the school.) That's $106,468 for four years.

UCLA reports that just 65% of its students graduate within 4 years, but 89% graduate within six years. The best way to handicap this one? Consider you student. Is he or she determined enough to be among the 65% graduating on time? If not, is the student likely to require one or two more years?

If it's one additional year, add in the $26,617, plus the "opportunity cost" of losing a year of work that we're going to figure at $30,000, just to be consistent. Adding a year would make your total cost $163,085; Adding two would boost the college cost to $219,702.

Now you're ready to make an informed decision.

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