Education Center » Catching Up » Keeping up with the cost of college

Keeping up with the cost of college


To help keep college expenses under control, you may want to employ some down-to-earth strategies.

While some well known public figures like Bill Gates, Steve Jobs, and even Ellen DeGeneres made it big without a college diploma, for most people, an advanced degree is the first stop on the path to success. In fact, degree holders earn about double what people who only have a high school diploma make.1

However, in the United States, the price for that prestigious diploma is often incredibly high. Low-income families feel the bite the most, with college costs consuming 40% of their yearly income, up from 29% in 2007. But with the cost of attendance averaging $19,000 at a state school and $44,000 at a private institution, even middle and upper income families are feeling the squeeze.2



Average student debt, per student.

The reason? Higher education costs have risen at about twice the rate of inflation, but most wage earners’ salaries haven’t kept pace. On top of that, grants and scholarships aren’t growing in lockstep either. Even with the staggering price tag, college attendance is at record levels.3 Unfortunately, so is student debt, averaging about $29,000 per student. Consider the following strategies to help keep your costs from going sky high as well.

Take it two years at a time

Consider this — a two-year community college costs just a third of what a state four-year school costs and a tenth of what a private college costs.4 If students aren’t quite sure what they’d like to study or aren’t ready for the rigors of a traditional college, starting at a community college and then transferring can be a smart way to go. They’ll be able to get their prerequisites out of the way and sample lots of different disciplines before settling on a major.


The best part is your son or daughter can still list an impressive, four-year school on his or her resume because for prospective employers it’s not about where they started, but where they ended up that counts.

Many community colleges have guaranteed transfer programs to affiliated universities for students who maintain a certain grade point average. In California, for example, almost half of bachelor degree holders in science, technology, engineering, and mathematics at its famed University of California system started at a community college.

Be a homebody

Room and board accounts for roughly 25–50% of the total cost of college, so living at home can significantly trim the college tab. If the best option for your family is to have your college student living at home, encourage him or her to get involved with internships, school clubs and other extracurricular activities to stay connected with classmates outside the lecture hall.

Search in your state of residence

When living at home isn’t practical, take a look at state colleges and universities, where tuition, fees, and room and board for in-state residents averages $19,000 a year versus almost $44,000 for private institutions.5 If your child chooses a public college in another state, be sure to see what’s required to establish residency, so that you can take advantage of lower, in-state tuition.

Buy a home away from home

Note to first graders: Apply for college scholarships!

Kidding aside, don’t wait until your student is composing his or her college essay to think about scholarships. You can begin researching and applying for scholarships years before — even when your kids are still in elementary school.

Ethnic and cultural organizations, corporations, and service societies all have opportunities for kids as young as six to earn college scholarship money. Your children might be required to write an essay, make a drawing, or create a science project. One well-known peanut butter company even has a contest for the most creative peanut butter sandwich — and the award isn’t peanuts.

Since housing makes up such a big part of the college cost, consider purchasing a home in your child’s college town. With a couple of roommates helping to pay the mortgage, your outlay could be less than it would be for on-campus housing or renting an apartment. Better yet: Because of the strong demand for housing in college towns, your investment is likely to hold its value when you’re ready to sell.6

Get the 411 on loans

If your child is among the seven out of 10 students who needs a loan to get through college,7 make sure he or she (and you) understands everything that’s involved. Because student loans come in several different varieties, it’s important to explore your options:

  • Subsidized federal loans – These should be your first choice because interest does not accrue while your child is still in school or during periods of deferment. The loans have flexible repayment options, including income-based plans and loan forgiveness for public sector work.
  • Unsubsidized federal loans – These loans are largely the same as the subsidized version; however, they accrue interest while students are still in school.
  • Private loans – Interest rates on private loans are typically adjustable and there are few repayment options. They often require a co-signer, so make sure you understand that your own credit rating will be affected if your child skips out on the loan.

Mind your ROI

Of course, college should be a time for young people to explore their interests and align their career choices with their passions. But market forces should also come into play. The reality is, some professions pay more than others. If your child has taken on significant debt to get through school, a job in an in-demand sector will make it much easier to pay off faster and live debt-free than one in a low-paying field.

Learn more and take action

  • How much should you be saving for college? Let this tool at the Education Center help you estimate future education expenses and determine whether you’re on track with your goal. Use College Planning Tool >
  • Merrill Edge® can help you understand college costs, explore 529 plans and other college savings accounts, and help you balance college savings with other life priorities. Go to Merrill >

1 Source: U.S. Census Bureau,

2 Source: The National Center for Public Policy and Higher Education,

3 Source: U.S. Department of Education, Institute of Education Sciences, National Center for Education Statistics,

4, 5 Source: The College Board,

6 Source: CNN,

7 Source: The Institute for College Access & Success,

Merrill Lynch may include links to third party sites as a convenience. Merrill Lynch has not endorsed or approved the content on any links that are not owned or managed by Merrill Lynch, and does not monitor or maintain any of the site’s information. When you visit the site from this link, you are agreeing to all of its terms of use, including its privacy policies.


42286FFD (JCF*******803)