The Amount You Will Actually Pay in College Costs

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It costs a lot of money to send a child to college, but the benefit can be well worth the sacrifices your family makes. The advertised amounts you see online are seldom what most families end up paying, however.

Start with a general idea of your costs to determine the impact that paying for a college education will have on your family. These include the cost of applying to college, which is sometimes higher than many parents expect. You could be out several thousand dollars before the first acceptance letter even arrives when you add up the costs of campus visits, tests, application fees, and outside professional advice. Then there are the actual costs of attending.

Key Takeaways

  • Prospective college students should expect to pay for much more than tuition, and should factor in costs of applying, books, living expenses, etc.
  • Grants or scholarships may be available, but financial aid will often come in the form of student loans.
  • Student loans have their own associated costs, including interest charges, fees, and potential late penalties down the road.

Out-of-Pocket College Costs

The cost of attending college can drive up out-of-pocket cash flow. Even students who receive a “full-ride” scholarship need to have a certain amount of money available for personal expenses.

You’ll have to take travel expenses to and from the college into consideration, as well as voice and data plans, books, food, and living expenses if your student doesn’t live on campus. Travel-abroad programs, entertainment options, out-of-pocket medical costs, and myriad other items can quickly add up to a substantial amount of money.

The Cost of Borrowing for School

Then there's the cost of the education itself. Any remaining amounts are often covered by student loans. The amount of financial aid received can reduce the “sticker” price considerably,


The true cost of student loan debt can add a substantial amount to the equation.

It might feel as though these loans are “free” because payments are “out of sight, out of mind” during the college years, but the amount due rears its head shortly after graduation. Amounts will add up quickly if your student drops out, takes longer to graduate, can’t find a job, or doesn’t earn enough.

The Amount Borrowed

Undergraduates are eligible to borrow between $5,500 to $12,500 in Direct Subsidized and Direct Unsubsidized federal student loans per year, as of 2022. The amount depends on their financial situation and year in college. Graduate students are eligible for up to $20,500 in Direct Loans.

Parents can also borrow money separately under the PLUS loan program. Those amounts can really add up over the course of four to five years, and the student could graduate with the family in debt for over $50,000. And this doesn't count any private loans that might have been accessed.


On Tuesday, Nov. 22, 2022, the Biden administration extended the pause on payments and interest on federal student loans for the eighth time. Borrowers with federal student loans won’t have to make payments, and loans won’t resume accumulating interest, until 60 days after court cases challenging Biden’s student loan forgiveness program are resolved or the Department of Education is allowed to move forward with the program. If the cases aren’t resolved by June 30, 2023, payments will resume two months after that.

Student Loan Fees

Most families don’t look at the cost of fees associated with student loans. Loan fees for Direct Subsidized and Unsubsidized Loans are 1.057% first disbursed from Oct. 1, 2020, to Oct. 1, 2022. Fees for PLUS loans are 4.228%.

Private student loan lenders may have different fee structures. An extra $10 in fees per $1,000 borrowed might not seem like a lot but could add hundreds of dollars to the amount you borrow.


On Aug. 24, 2022, President Joe Biden announced via Twitter the cancellation of $10,000 of federal student loan debt for eligible borrowers, and $20,000 for federal Pell Grant recipients.

Interest Rates

You must determine whether interest is being added to your loan during the college years. The federal government covers that cost for Direct Subsidized Loans, but interest is building and being added to the amount you owe for Direct Unsubsidized Loans, PLUS, and most private student loans.

Interest rates for 2021-22 are 3.73% for undergraduate federal student loans. They're 5.28% for graduate students and 6.28% on PLUS loans. You can add between $27 and $53 per $1,000 borrowed each month your loan is outstanding, and you’ll see how quickly these amounts can grow.

Late Fees and Penalties

There are also late fees and penalties that can be assessed for missing payments or not paying on time after you begin making payments.


Penalties for missed payments on federal student loans have been canceled and interest rates have been set to zero through Aug. 31, 2022, due to the COVID-19 pandemic. You won't be penalized for late payments, and any amount you do pay will be applied directly to the outstanding principal during this time.

The Bottom Line

The average class of 2021 graduates was estimated to hold $31,100 in student loan debt, with an average monthly student loan payment of $391, according to the Education Data Initiative in January 2022. Paying around $400 every month out of your take-home salary can severely limit your post-college options. You might not be able to attend grad school. You might have to live with your parents longer, or you might be forced to put off buying things you’ve always wanted. It will certainly be more difficult to save and invest your own money.

Put student loan costs together with the costs of applying and attending, and it could be a real eye-opener. Look carefully for steps you can take to lessen out-of-pocket costs, such as extra forms of income, family savings accounts, and private scholarships. 

Frequently Asked Questions (FAQs)

I was offered a generous financial aid package, but it's more than I think I need. Should I accept it?

If you have received scholarships or grants then by all means accept the free money. However if you have received a loan offer for more than you think you'll need, you are wise to question them. Keep in mind that loans will gain interest, so whatever amount you borrow now will only grow into future debt. You can absolutely accept only part of what is offered. So, for instance, if your financial aid package has a loan that factors in room and board, and you think you'll save money by living off campus, cut this portion out of your full loan amount, and only accept what's left.

Why do I need a co-signer on my student loan?

Most college students are too young to have much credit, so lenders rely on co-signers to assure that the amount you borrow will be repaid. This means the parent or adult who co-signs is ultimately responsible for your debt if you default.

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