By Dr. Jim Dahle, WCI FounderFinancial planner, author, and college savings expert Ann Garcia made a comment at the 2023 Bogleheads Conference that encapsulates something I've believed for a long time. She said, “College costs what you're willing to pay.” Basically, you can get a college degree for any price you want. I think that's spot on. Let's see if I can convince you.
Remember, we're discussing an undergraduate degree here, not medical or dental school or some other form of graduate education.
How to Go Broke Paying for College
On the upper end, one can pay a ridiculous amount for a college education. One of the colleges where I applied and was accepted was the University of Chicago, which now has the status of being the most expensive school in America. I chose to attend the dramatically less expensive Brigham Young University once I saw the sticker price in Chicago. That was 30 years ago.
Today, the University of Chicago has an annual cost of attendance of about $93,000 (including tuition, food and housing, and other miscellaneous expenses). Multiply that by four and you get about $372,000 in direct college expenses. But let's imagine someone requires five years to graduate. Now you're up to $465,000. And what if you paid for it with borrowed money at a rate of 5.5%? What if you let it ride for two years, then paid it off over the next 20 years? How much would you pay for that education? At that point, you're getting close to $900,000. For an undergraduate degree. I hope it pays really well.
This all assumes you're keeping your living expenses to less than what the college estimates they will be. It's not hard to spend more than that. At any rate, it's easy to spend a ton of money on college. While $900,000 is obviously an extreme case, I've run into plenty of white coat investors who are saving for and planning to spend on a college education costing $200,000-$400,000. For each kid.
How to Go to College for “Free”
On the other end of the spectrum is a free college education. How can you go to college for free? You can commit your time instead of your money. Most white coat investors are now familiar with the Public Service Loan Forgiveness (PSLF) program. If you work full-time for a nonprofit and make qualifying payments for 10 years, the remainder of your loans are forgiven tax-free.
Since it is possible to get those qualifying payments down to $0 (especially during pandemics), it is possible to never pay a dime for that college education. Could be Harvard. Could be the local community college. Same deal. All federal loans are forgiven after 10 years of payments. Other similar options include the Reserve Officers Training Corps (ROTC) for the military. In fact, you can go to school for two years with ROTC paying the bills before you actually incur a commitment. All you have to do is take a few ROTC classes.
Military academies also offer a free college experience in exchange for a commitment to serve. These are not the only “contracts” that allow you to get a “free” college education.
More information here:
Is Public Service Loan Forgiveness Worth It for Doctors?
Student Loan Repayment and PSLF in the Trump Era
How to Actually Go to College for Free
Those contract options aren't actually free. My “free medical education” via the HPSP program cost me half my salary for four years, plus two deployments. However, it absolutely is possible to go to school for free with no commitment whatsoever. Consider community college. Twenty states don't charge tuition for their community colleges. Maybe a student doesn't want the name on the diploma to say “community college,” but there's nothing keeping a student from doing two or even three years there before transferring to a university.
In addition to community colleges, plenty of other students don't pay tuition. I didn't pay tuition for my undergraduate education. I was offered a four-year tuition scholarship based on my GPA, ACT score, and other college application criteria. The only requirement was to maintain a 3.5 GPA in college, which was pretty close to a requirement for my career goals anyway.
Every school gives scholarships and every student qualifies for scholarships, but not every school will give every student a scholarship. Thus, school selection becomes a critical piece of getting a good price on college. A student is often left with a choice to go to a more desirable school and pay tuition or go to a less desirable school for free. Well, one of those options is free.
There are many state colleges and universities where acceptance is not particularly competitive. These schools want top-notch students for various reasons, including raising the average GPA and getting a higher ranking with folks like the US News & World Report. How do they get them? By offering them scholarships, both merit and need-based or some combination of the two.
An example is our flagship state university, the University of Utah. If a Utah resident qualifies for a Pell Grant and has a 3.2 GPA in high school, they are guaranteed a scholarship worth at least the value of four years of tuition and fees at the university. At the less prestigious Utah Tech University, you just have to be a US citizen or a permanent resident, not a Utah resident, to qualify. They use a matrix of GPA vs. ACT to determine who gets a full ride.
You can get a full-ride merit scholarship with a GPA as low as 3.2 or an ACT of 28. It also says a 3.6 and 32 is good enough, no matter how rich your family is. Even a 3.0 and a terrible ACT score gets you $1,000 a year. While $1,000 may not seem like a lot of money to you, sticker price tuition at Utah Tech is under $6,000. That means $1,000 is a big chunk percentage-wise. Welcome to Utah.
What about really competitive schools? Consider Harvard where 55% of students are on a need-based scholarship. Other Ivy League schools are similar. Why are the other 45% of students paying the full sticker price? Because they're willing to do so. Why is the sticker price so high? Because they're willing to pay. College costs what you are willing to pay, and there are plenty of people willing to pay sticker prices.
Moving Away from the Extremes
We've covered how to spend hundreds of thousands of dollars and how to spend nothing on college. Let's talk about some more realistic cases. Most people can afford to spend something on college. That might be from parental savings or cash flow. It might be from the child's savings, their summer job, or their in-school part-time job. Maybe it is even a little bit of student loans. However, when you put it all together with:
- Good school selection
- Scholarships
- Parental savings
- Parental cash flow
- Child savings
- Child cash flow
- Perhaps a few thousand in student loans that can easily be paid back within a year . . .
there's really little reason for someone to avoid going to college just because they can't afford it.
Let's talk a little bit more about school selection. Entirely too many students will choose a school for relatively silly reasons.
- “I like the buildings.”
- “The campus is pretty.”
- “My friend went there.”
- “They gave me a T-shirt.”
These are obviously dumb reasons to choose one school over another. Most 17- or 18-year-olds need significant parental guidance in choosing an appropriate college. While parents may not have total control over this decision, their influence is still real, especially if they're paying for some or all of the education. Choosing a school your family can afford is perhaps the most important aspect of paying for college. Keep in mind that you must look beyond the sticker price. You have to get far enough into the application and financial aid process to get the “real price” for your student; then you can make an apples-to-apples comparison.
A school with a $40,000 sticker price offering a $20,000 scholarship is exactly the same price as a school with a $20,000 sticker price offering no scholarship.
More information here:
4 Pillars for High-Income Families Paying for College
How Much Should You Sacrifice to Pay for Your Child’s Medical School Education?
What White Coat Investors Do
I've met white coat investors who are all over the spectrum concerning the school they attended and how much they're planning to pay for their children's educations. For many years, Katie and I just saved the amount for which we received a 529 tax credit, about $4,000 per kid per year. Then, when our eldest got into high school and started expressing a desire to go to medical school, we started putting in a lot more, generally the maximum gift tax amount for one parent [$19,000 in 2025]. We didn't feel it was fair to do it for the oldest without doing it for all of them.
Luckily, this also happened to coincide with some particularly high-income years for us so it was something we could afford. In retrospect, it may have resulted in 529s that are way too big for our children's educations. They all (including the youngest one) now have mid-six-figure 529s. The first only stayed pre-med at our alma mater ($6,000 per year for tuition) for about two weeks before making other plans. The two high schoolers are talking about staying in-state as well, which means tuition bills of $6,000-$12,000 per year. I'm skeptical that either will end up in an expensive professional program. Clearly, a significant chunk of our grandkids' educations has already been paid for with those 529s.
The Big Argument
The eternal argument when it comes to education is whether it is worth paying more for an education at a more expensive (and presumably more prestigious) institution. While everyone always seems to argue for whatever they did (either as a student or a parent), an impartial witness would conclude that the best answer is “it depends.” For some students and some jobs in some professions, pedigree does matter. But there are plenty of students, majors, professions, and jobs for whom it doesn't matter at all. The difficulty lies in knowing which one of those your student is in advance, and I don't have any good advice for that. An educated guess is probably as good as you're going to get. But if you have plenty of money, this doesn't seem like a bad place to spend/waste some of it, just in case.
What do you think? Do you agree that college costs what you are willing to pay? Why or why not?
I too was faced between chooising a free college education at a “good” state school and a “presitigious” private school, but chose the latter. I then went to a law school that all-but guaranteed that I’d end up with a ridiculously high paying job as long as I graduated. Both decisions saddled me with loans (although I did get some need-based grants). I’d say from a financial perspective, the first choice was wrong and the second choice was right. Personally, I at the time of graduation had no financial literacy but a fear of being in debt, ended up living a relatively (compared to peers, not the world, and certainly not MMM world) modest lifestyle and aggressively paying off debt, which resulted in my needing to figure out what I was going to do with that extra few thousand dollars a month, which led me to find out that I can just save/invest it and I don’t have to spend it and ultimately gaining some financial literacy over the years.
All that being said, I am conflicted between wanting my daughter to earn financial literacy the way I did by having some skin in the game of post-secondary education and the thought that she will not have as beneficial financial aid terms (likely none) as I did simply because I make and saved more money than my parents did.
Anyway, I’ve been saving in a 529 up to the state tax deduction (5000 single, 10000 married) since before I was even married and continue to do so, so she’ll have a war chest to do whatever she wants (with guidance from her parents of course) for better or worse. And hopefully she’ll have more financial literacy and awareness than I did at the beginning and ending of college and other school.
I thought this was a great article and exactly how we did college for our kids in the aughts. We came at it from the thought that smart kids are needed everywhere, and didn’t even look at the Ivys (they weren’t interested in them anyway). Both ended up at our state’s flagship university, got great educations, and are doing well in their careers in our state’s capital. We financed their educations by cash flowing, scholarships and a few thousand in loans for one, just like you said. And she paid it off before the 6 mos grace was over, just like you said. One of our kids was in a field where he was able to take advantage of many scholarships and fellowships for advanced studies. He came out of school debt free with a PhD. She came out with a CPA. We are proud of our kids. Keep preaching your common sense advice about college.
My wife and I both went to Duke in the early 80s. Cost all in was around $9000-12000. UNC’s was $4000-5000 or so (tuition was under $1000, basically free).
Come the 2010s and three kids graduating HS in 4 years the situation had changed. Duke was about $60000/yr, UNC was just over $20000. In inflation adjusted dollars, UNC cost in 2010 what I paid to go to Duke in 1981.
Needless to say once they were accepted to Duke we had a conversation. Basically it was “If we had one child you could go to Duke. But… (and I held up my fingers one at a time)
1) We need plan to provide for ourselves for 50 more years so you don’t have to.
2) I want to be debt free when I retire (no mortgage), and probably early.
3) I want y’all to graduate college without debt (having seen the struggles of friends with median incomes struggle with student loans)
4) I want to be a contributing member to the needs of my community, church, and the needs in the world in meaningful ways.
5) (This I called the trickle down). If there is more after this, I’m happy to pay for Duke or whatever you need, but I cannot promise it will be there. I guess basically this is legacy giving.
A few tears were shed. But we survived.
And side benefits have been that after attending state schools they have returned to Charlotte and all live fairly close.
Their 529s covered their costs with a little left to start funds for grandchildren.
Only downside is two are Carolina fans (1 ardently).
I think the great thing about this site is that if you follow most of the advice on the site you will be sound financially to then splurge on “luxuries” and still be fine financially. It allows you to prioritize those luxuries. Some individual’s luxuries may be heliskiing, buying new cars, buying/maintaining boats, traveling, or charities donations to religious organizations. Others may be splurging on their children’s higher ed experience.
When viewed as a luxury that you value and accounted for responsibly and when other aspects of your financial life are in order, who are we to judge if this brings joy?
Thanks WCI for all that you do.
Yes, it’s hard to be too prescriptive given that the high income of most people on this site allows A LOT of “screw-ups” along the way to financial success.
“You can afford anything but not everything.”
I had no or very little parental support for my own education and lived a version of WCI before it existed. But it was something that I did not want my children to have to do. I struggle with helping them vs them having skin in the game. A college degree does not guarantee them the type of job it did 30 yrs ago. I put small amounts of $ in monthly to a 529 (no state match or tax relief) for each as soon as they were born and they both had easily enough to pay for whatever college they got into. My oldest is interested in medical school so when it came time to choose college we had a discussion about choosing private vs an excellent public school education (and having $ leftover to help pay for med school). At this point he has graduated and is applying and still has 1-2 yrs tuition left in his 529. My daughter is freshman and is also in public university and has plenty of money to finish and do a semester abroad as she has always dreamed of doing. I’m an advocate of putting small amounts in from the start and letting time do its thing.
We put in about $40k, per kid, into 529 plan for the first 10 years, and then stopped contributing. Now it has appreciated to about $120k, per kid, and ready for college. Our mindset was to save enough to help our kids’ college expenses, but not necessarily cover 100%. Our kids know that’s all they have and they can choose their schools based on how much loans they want to take out. Stay in state…..probably no loans. Go out of state or private school….probably some loans. At least, they have some skin in the game.
This was a great post. I absolutely refused to fill out any FAFSA paperwork for each of our kids. Why give them our information when we would not have qualified for anything based on our income? Yet, merit scholarships were still available to each.
This varies by school/state. We did fill it out again this year for a nearly guaranteed $2,000ish merit scholarship from the state. It took Katie a half hour. The school did not require the FAFSA for their scholarships. It was easier than when I did it the last time since it pulls in your tax records automatically and it has a maximum investment amount you can enter in. If you have more than that, no need to figure out exact amounts.
I believe they recommend filling out the FAFSA each year, no matter what. In case there’s need based or merit scholarships/grants available from the school. Why not? You’ll never know. Our income has dropped dramatically since we went part-time and our kids will be starting college. If we get some aid….great. If not…no big deal. I would fill out the FAFSA.
The why not is because it’s a pain and because you have to reveal all your financial data.
It doesn’t take much in assets or in income by WCIer standards to not receive any aid at all.
The “they” who recommend it have no idea what your income is and are tayloring their advice to all parents. Once you have the FAFSA tell you your expected contribution is $999,999 per year you can be pretty sure you’re not going to get any need based financial aid. Bottom line is that your expected contribution is typically something like 1/4-1/3 of your income and a single digit percentage of your non retirement assets. More info here:
https://www.whitecoatinvestor.com/why-most-doctors-shouldnt-bother-with-financial-aid-planning/
Thanks for the link.
Our situation is unique and won’t apply to most here, but I’ll explain, just in case it might be helpful to someone.
We’re fortunate in that my spouse is a stay at home, and I have been able to go part-time. Our income is low enough to qualify for the ACA marketplace insurance subsidies, which I believe is under $125k for family of 4.
Since we get subsidies, FAFSA automatically excludes us from having to report assets.
Will this help to get more aid from schools? I have no clue. But it’s worth filling out the FAFSA. Also, the schools we’re looking at don’t do CSS profile.
I agree, at <$125K it's worth filling out a FAFSA (assuming there isn't a huge taxable account or 20 rental properties too). But I don't think that's the case for a big part of the WCI audience.
That is fascinating. So a little bit of planning and saving for a career break when oldest is a sophomore in high school can take giant taxable accounts and real estate completely off the table for financial aid calculations? If that holds until my kids are old enough, could bear investigation and consideration .
One more reason to FIRE. I assumed financial aid would be off the table with a large taxable account. Seems maybe not
Appreciate the information you provide especially for the education it gives to those who read/listen to your site.
You mention (briefly) that an ROTC commitment isn’t incurred until after 2 years of school. I believe this used to be the case, but that it was changed in the 1990s to signing a commitment before you started your Sophomore year (1 year of “free” school paid for by Uncle Sam, without a military service commitment).
Web searches confirm this, but there are conflicting statements, which makes it a bit confusing. (Speaking above from experience, as myself and my son were at NROTC programs, previously).
Thanks for the correction/clarification. I guess I’m old.
one of the now confirmed reasons to try to send your kids to Ivies plus is this, based on 2023 research paper by Chetty, Deming and Friedman https://www.nber.org/papers/w31492
“But Ivy-Plus colleges have a much stronger impact on students’ chances of ending up in the very top echelons of society. Students who attend one of the elite universities are 44% more likely to reach the top 1% of the income distribution. While the impact of an Ivy-Plus school is modest at the average, it is substantial at the tail end of student outcomes”.
They looked at waitlisted Ives plus students who did or didn’t eventually get in. Turns out, you’re much more likely to become a one-percenter if you did get in
Correlation is not causation. Maybe students who can get into an Ivy are likely to end up at the top of society no matter where they go.
That’s exactly what they were trying to address. Getting in from a waitlist into Ivy-plus is a random process. Presumably, all on the waitlist are equally good, that’s how they ended up on it. But those who finally got in, had an outsize chance of ending up in 1% vs. those who didn’t. So Ivies do give something that propels them up to the top it seems.
Or perhaps families with the connections to succeed also have the connections to get into Ivies without going to a wait list? Hard thing to study.
This is a great post!
My son is a national merit scholar with an ACT score of 36. He had the option to go to an Ivy League but I would have to pay 85k a year. He had an offer from University of Tulsa as a national merit scholar to get a free ride. Tuition, board and lodging, books all covered. They also give him 6k a year allowance. We took the offer.
I still don’t know if we made the right decision with him not going to Ivy League. One thing is for sure, my wallet is happy.
That was a no brainer. I believe you have made the smarter move.
We’ve got two under 3. Our plan is to max out gift tax limits for their first 5-6 years in their 529’s. This will get us the max state income tax break and maximize compound interest time and invest aggressively in 100% total stock market index. They should have around 130k in them by the time they are 6. Then let compound interest do its thing. Should end up with around 260k in todays dollars in each 529 by the time its time to pay for college. If it looks like they are going to professional school we can also add some additional money into their 529’s while they are in college if needed. Plan to tell them we will cover part of their education and they need to do their part to work hard and get scholarships and then have them be pleasantly surprised when they have no student loans at the end of their education.
You can just pay the tuition/send them money. College costs don’t HAVE to run through a 529.
For my state you get a 4-5% tax break on all the money you put into a 529. So makes sense to put it in, even if you spend it right away.
Agreed. Very state dependent though.
My parents didn’t make much, so I was able to graduate from Princeton debt-free. I was also offered admission to UChicago, and I’m pretty sure they provide generous need-based grants, with most students graduating without debt. That said, if a family earns what the average WCI family makes, they’d likely have to cover the full cost. I had classmates who were adopted by their siblings to qualify for full need-based aid, and others who became emancipated minors for the same reason.
https://financialaid.uchicago.edu/undergraduate/#:~:text=UChicago%3A%20No%20Barriers&text=Our%20No%20Barriers%20policy%20allows,prior%20to%20enrolling%20in%20college.
I think it’s good that they are offering generous financial aid. That will really help those from lower income households and/or lower middle class. I wish the tuition could be more “reasonable” to begin with though, and probably some of this very high tuition may be going to subsidize this very expensive financial aid? In an ideal world, the aid would come from endowments and donations, but that is probably not exactly how it works. In reality my White Coat Investor kiddo will likely be able to get into one of these private colleges that is academically competitive but then he’ll be subsidizing the education of others…I would not mind if it was additional $5-8k/year but would probably mind if I was paying an extra $25k/year of inflated tuition. I do like the analogy of this being a “want” and I would be willing to pay if my kid is willing to apply himself and get something “extra” out of going to such a college but not if he’s there to party or only for the “prestige”. There is also the ? of inflating tuition for the sake of inflation’s sake because colleges that cost more are perceived by some as “better”. I remember that a dean or someone from a private college wrote an opinion piece about this some years back, stating that basically they have painted themselves into this corner where they inflate the tuition about the true “cost of attendance” and then give out generous grants and even “Academic scholarships”. This is partly because if one is running a “prestige” private college and then starts holding down tuition but giving out less “scholarships” the students and parents actually started to value the education less and felt less “special” (for example people would rather attend a $45k/year college while being given a 15k/year “merit scholarship” than attend a school with 30k tuition).
We’re kind of pathetic as humans when you look at it that way. Probably part of the issue though huh?
The sticker price is definitely used to subsidize, and it’s mainly aimed at foreign students. It’s no accident that the % of student body at these schools has been shooting up over the years.
It’s not just a US problem – it’s become a problem in the UK as well, especially after they passed tuition caps for citizens in a misguided attempt to help control costs. Some of the elite schools are 25% international or something like that
Such an important perspective! College costs can feel overwhelming, but it’s all about understanding your priorities and what’s worth investing in for your future. The choices are personal, and finding the right balance between cost, quality, and long-term goals is key. It’s great to see conversations around making more informed decisions on education.