The difference in cost between in-state and out-of-state tuition and fees for public universities can be huge. On average, out-of-state tuition is more than two times the cost of in-state tuition. For some states like Florida and California, it can be closer to triple or more.
In-state tuition is the cost of tuition and fees paid by students with a permanent residence in the state in which their university is located. Out-of-state tuition refers to the cost of tuition and fees that students coming from outside the state, including international students, pay to attend a public state school.
Public universities rely on tax revenue from their state governments to subsidize their operations, unlike private universities that are 100% responsible for their expenses. As a permanent resident, an in-state student has been indirectly funding state schools with their tax dollars; therefore they are given a “break” on tuition and fee costs.
The average in-state cost of tuition and fees in 2020 is $6,072, with the low being California at $3,088 and the high being Vermont at $13,128. Vermont is actually the highest across the board for in-state, out-of state and private school tuition, which can be at least partially attributed to lower levels of state support for higher education.
The average cost of out-of-state tuition and fees in 2020 is $13,129, which is 2.2 times the in-state tuition average. Average living expenses for 2020 are estimated to be $14,000 on top of these tuition and fees amounts.
COVID-19 has impacted cost of attendance
The novel coronavirus has made Americans more money conscious in 2020, so there is a trend of college students taking a gap year or attending community college as schools are still navigating remote learning and other Covid-related concerns. Colleges are taking a financial hit due to this trend.
If it weren’t for income-driven repayment plans and widespread federal student loan relief this year, schools may have been in more danger if their past students’ default rates on student loans increased. The Department of Education uses default rates on federal student loans as a measure to determine what schools are at risk of losing future eligibility for federal grants and loans. The payment pause and interest freeze in place through Dec. 31, 2020, as part of the CARES Act has likely helped avoid this problem for now.
Colleges consider tuition freezes
The cost of attendance for college has consistently increased year over year at a rate of two to four times faster than inflation on the Consumer Price Index, home values and median income since before the 1990s.
Many colleges are implementing a tuition freeze, meaning they’re not increasing the cost of attendance in 2020 like they otherwise would. This approach keeps the cost the same as the previous school year, 2019, with a value of $300 to $650 based on the average cost of in-state and out-of-state tuition and fees from above with the assumption there would have been 5% inflation.
Some colleges are offering tuition discounts
During this unusual time, some schools like the University of Nebraska will be covering all tuition and fees for students whose families make less than a certain amount of income per year. Others, like Albion College in Michigan, are doing that plus offering more scholarship money.
Other examples of tuition discounts stemming from the impact of the pandemic include:
- A percent of tuition discounted for individuals who lost their jobs or hours as a result of the coronavirus
- Allowing those whose college was closed completely as a result of coronavirus pandemic to pay in-state tuition and fees
- Discounts for students not returning to campus but instead opting for virtual options
- Individually revised financial aid packages, handled on a case-by-case basis
Colleges and students could see long-term impacts from the pandemic
Public universities subsidize their expenses with state funding to make their tuition and fees generally less expensive than private colleges. With the pandemic negatively affecting state budgets and resources, however, colleges will need to either raise revenue or cut costs to stay afloat in the future.
Freezing or discounting tuition for the 2020-2021 academic year could mean a steeper increase in tuition and fees in the future. The law of demand says that at higher prices, buyers will demand less of an economic good. College cost of attendance has historically been immune to this rule, however, because higher education has become an expectation post high school for Americans. Could the COVID-19 pandemic pop this higher education bubble?
How you can reduce the cost of out-of-state tuition in the current economy
When you are going to calculate your cost of attendance, you need more information than just a breakdown of tuition and fees from your school. Gather information from your school, state and other organizations to see what opportunities there are for you to lower your cost of attendance. For example, you could look into the following options:
Earn a merit scholarship
Merit scholarships are financial awards that students can receive based on their academic success in high school. In addition to strong academics, students who have scored well on the SAT or ACT may receive offers from colleges that cover the difference between out-of-state and in-state tuition fees. Extracurricular activities and school or community involvement may also be a consideration. These scholarships are often renewable, and in some cases, students may even have their entire tuition covered.
Seek out-of-state scholarships
Some colleges offer scholarships exclusively to out-of state students. Use resources online to find scholarships in your state of residence, in the state where your school is, or that are offered to anyone.
Seek a waiver
Some state colleges will offer out-of-state waivers based on financial need or to those with families who have public service or military backgrounds.
Attend a state school in an academic state tuition exchange program or with tuition reciprocity agreements
Some regions in the U.S. consist of states that have partnered to offer tuition discounts or waivers. Under these agreements, a student in one state can attend a participating school in another state without paying a significantly higher out-of-state tuition rate. Some of the larger programs include:
- Midwestern Higher Education Compact: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin.
- New England Board of Higher Education: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.
- Southern Regional Education Board: Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia and West Virginia.
- Western Interstate Commission for Higher Education: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming.
Serve in the military
Military veterans can qualify for out-of-state tuition fee waivers in order to register at a school and pay the in-state tuition rate.
Become a resident of the state.
If you’re going out of state for your undergrad, getting residency will be tough to do unless your parents or guardians are willing to relocate full time to that state too. As an undergrad student, you’re considered a dependent student in the eyes of financial aid programs until you’re 24, so your parents or guardians will impact your financial aid process one way or another.
To become a resident of a state as a graduate or independent student, most states require that you reside in that state for at least a year and have proof of residency such as a state driver’s license, state taxes paid, voter registration, or utility bills with your name and address.
How to finance out-of-state tuition
Your federal aid, including how much you could receive in grants and what types of loans you can qualify for, will be determined after completing your FAFSA and by your expected family contribution (EFC). The information you report on your FAFSA form is used to calculate your EFC. Your EFC is an index number that college financial aid staff use to determine how much financial aid you would receive if you were to attend their school.
Your college first determines how much needs-based aid you can receive, such as grant money, and what types of loans you can borrow by using this simple formula: COA – EFC = needs-based aid award.
Which loans you should take out first
If you’re going to borrow money to fund your education, you should do so strategically. Weigh the pros and cons of the following loan types in this order:
1. Federal Direct Subsidized loans
Subsidized loans are available only to undergraduate students who have financial need, and they do not accrue interest while in deferment or within a grace period.
2. Federal Direct Unsubsidized loans
Unsubsidized loans are available to both undergraduates and graduate or professional degree students. These loans accrue interest starting from when the loan is disbursed. You are not required to show financial need to receive an unsubsidized loan.
Both federal subsidized and unsubsidized loans have lower interest rates than PLUS loans.
Your federal loan availability is limited as an undergraduate dependent:
- In your first year, you can borrow up to $5,500.
- In your second year, you can borrow $6,500.
- In your third year and beyond undergraduate, you can borrow $7,500.
The amount you can borrow is capped at an aggregate of $31,000. Independent students have a higher limit per year and an aggregate loan limit of $57,500.
3. Federal Parent PLUS loans for undergraduates
Parent PLUS loans can be an attractive option when you need aid above and beyond what subsidized and unsubsidized loans will give you for your undergraduate degree program:
- Neither the amount awarded or interest rate is dependent on the parent or student’s creditworthiness. Parents with adverse credit history could be denied, however.
- Parent PLUS loan borrowers have access to the income-driven repayment plan Income-Contingent Repayment after a consolidation, which is based on 20% of discretionary income. They also could potentially have access to REPAYE, PAYE and Income-Based Repayment through a double consolidation process, and those plans are based on 10% to 15% of discretionary income.
- Parent PLUS loans are 100% dischargeable in the event of the parent or student’s death or permanent disability.
- Parent PLUS loan borrowers can pursue Public Service Loan Forgiveness or longer-term forgiveness if the loans are consolidated and on an income-driven repayment plan.
Student Loan Planner’s recent analysis of PLUS loans found that interest rates will be at an ultimate low this upcoming 2020-2021 school year, making other loan options potentially even less attractive.
4. Graduate PLUS loans for graduate students
Graduate PLUS loans have the same federal flexibilities and repayment options as undergrad loans. These are only available to graduate students in a qualifying graduate program, however.
Parents’ and guardians’ expected family contribution becomes obsolete when it comes to the impact on graduate degree federal aid. The FAFSA still needs to be completed each year, but you fill it out as an independent student instead of a dependent.
5. Private loans
Private loans are the final choice after PLUS loans for covering the cost of your degree because, while they will allow you to borrow up to the cost of attendance, private loans have no forgiveness opportunities, usually no income-driven repayment options, and your interest rate could be higher because the loan award is based on you and your cosigner’s creditworthiness. Most students cannot get approved for a private loan on their own and therefore need a cosigner.
Simply put, private loans are less flexible, sometimes more expensive and come with fewer repayment options.
Avoid potential missteps of taking out student loans that could cost you more than you really need to borrow or pay in interest by taking a strategic approach to your student loans as early as possible. Schedule a pre-debt consultation today.
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