As millions of college students prepare to go to school this fall, the cost of financing the school year is on every parent's mind.
Although most parents think about the cost of tuition, room and board when saving for their child's college expenses, they often neglect to take into account many of the other expenses with a college education. According to the National Retail Federation, the average consumer spent more than $665 on back-to-college expenses in 2003.
Back-to-school expenses aside, once you take into account items such as transportation to and from school, textbooks and course packets, a computer, phone calls, etc., the price tag of a college education rises significantly. In fact, according to the College Board, a year at a state university — including tuition, housing, board, books and other expenses — costs $13,833 on average this year and $29,541 at a private university. At Northwestern University, for example, parents are told total to estimate expenses (including books, room and board, and personal expenses but not transportation) at $42,297 for this coming school year. As such, here are a couple of areas where being a smart consumer can improve a students' financial grade.
Cell Phone or Land Line?
Standard long distance phone service packages from college dorms are infamously expensive. Fortunately, there are some excellent alternatives to the standard dial tone.
Internet phone: As unlimited, free Internet access is a staple of most college dormitories, computer savvy college students can benefit tremendously from using their computers to make phone calls.
For example, students can use services provided by Net2phone.com to either make calls directly from their computers or their phone via their high-speed Internet connection. The cost? Outbound calls can be made for as little $.02 a minute. Furthermore, for $35 a month students can make unlimited phone calls and keep their home area code — a benefit to parents who can save on outbound calls to their children.
Cell phone: If used responsibly and diligently, a cell phone instead of a landline can amount to student savings. Cell phone plans vary from carrier to carrier, but average around $66 a month. However, students need to be forewarned — if they exceed their allotted minute plan they could find themselves facing a hefty charge. Additionally, activation fees, contract requirements and roaming charges can make cell phones a greater expense than savings.
1-800 numbers: Parents should consider setting up a 1-800 number exclusively for their college-bound students. For example, SBC in Illinois charges a $2.95 monthly fee and a 7-cent-per-minute fee for calls made anytime of the day or night. An exclusive line home will not only encourage students to call more often, it will amount to considerable savings.
The average retail price of a laptop computer — a college freshman's computer of choice, is between $800 and $2,600. Add on the cost of a printer and the total computing expense can be as high as $2,800. One way to save on computer costs is to purchase the system directly through the school as many colleges and universities offer student discounts that beat the price of retailers.
For example, at NYU's computer store, a student can buy a Dell Latitude D600 laptop and HP DeskJet 5650 color printer for $1,540 at savings of $504, or roughly 25 percent, versus buying the same laptop directly through Dell and printer at CompUSA.
Financing the Books
A recent study by the Public Interest Research Group's Higher Education Project in California found that the price of textbooks is dramatically rising — 33 percent increase since 1998 — and students are definitely feeling the pinch.
According to the College Board, the average annual cost for books and supplies in 2003-2004 is $843 at a four-year private college. However, this amount can vary widely depending on the school. For example, the average cost of books and supplies at the University of Illinois at Urbana-Champaign is $740, while the average cost at Northwestern University is $1,326.
In order to reduce this amount, there are a few practices a student can follow. First, whenever possible, buy used books. Also, you may want to see whether you can order your books from a discount bookstore, such as Amazon.com or BestBookBuys.com. Additionally, depending on the type of book — such as novel or book of poetry for an English class — you may be able to borrow it from the library.
A quick search of Amazon.com produced over 50 new and used editions of the Principles of Economics text — a freshman staple. While the book would cost over $90 at a typical university bookstore, a student could find a used copy for as low as $27.50 on Amazon.
Planes, Trains and Automobiles
Beyond the cost of books and computers, travel to and from campus is often the next most significant cost for college students. For example, at the University of Arizona the school estimates an undergraduate student will spend $558 on travel a year. This cost will vary significantly depending on the distance a student needs to commute and the mode of transportation.
One excellent source for discount airline tickets, especially at the last minute, is SideStep.com. SideStep is a free search engine which looks for the best travel deals from 585 airlines and on other travel sites such as Orbitz.com. A search on SideStep.com found a plane ticket from Chicago to Boston (departing on Aug. 23 and returning to Chicago for Thanksgiving weekend on Nov. 23) for $165.20 on US Airways. The same destinations and dates priced at $386.70 on the US Airways Web site — a savings of $221.50 thanks to SideStep.
When it comes to driving at school, this requires careful consideration. Aside from the monthly car payments and annual insurance premiums, there are costs related to maintenance, gas, parking and of course, parking tickets, which many students seem to wrack up over the course of the school year. This is an area where good grades can help offset the cost of the car. Most major insurers offer full-time student drivers under age 25 a discount for outstanding academic performance.
Finally, for those students going by rail to school, Amtrak gives a 15 percent discount for passengers who show their Student Advantage Card. The Student Advantage Card enables students to get discounts on everything from train tickets to Timberland shoes. However, the card is not free — it comes with an annual fee of $20.
According to a 2002 study by student loan provider Nellie Mae, the average college student graduates with three times as many credit cards and twice as much credit card debt as when they entered as a freshman. In fact, 96 percent of undergraduates have an average of six credit cards entering their senior year.
There are, however, alternatives to reckless credit card spending. All the major credit card companies offer student cards with pre-set spending limits and no annual fees. For students who rely on airline travel to get back and forth to school, Visa offers a co-branded card with United Airlines (called the College Plus card) which allots one mile for every $2 purchase. Visa also offers an excellent primer for students on the basics of credit and money management.
In lieu of a credit card, many universities now allow students to use their student identification cards in the same fashion as a debit card. The pre-loaded cards may now be used on campus and at off-campus merchants (restaurants, convenience stores, pharmacies, etc.). This spending method is a very effective way to keep student spending in check.
Mellody Hobson, president of Ariel Capital Management (arielmutualfunds.com) in Chicago, is Good Morning America's personal finance expert. Ariel associates Matthew Yale and Aimee Daley contributed to this report.