The Number New College Students Need to Know

What’s the most important number for a new college student to know? Is it the Expected Family Contribution calculated based on a family’s Free Application for Federal Student Aid? The number of credit hours needed to graduate? The time the library closes? While all of those are important, the critical number that a student needs to know is the HCC, the “hourly cost of college” or the total amount it costs a student for each hour of school.

Why does this matter? Let me give you a personal example. When I was a freshman at Georgetown University, I had an early morning French class three times per week. The professor was quite strict, and students who were even a few minutes late were locked out of class.

I was an immature 18 year old who spent many evenings my first year of university at fun, social events instead of getting to bed at a reasonable hour. It won’t come as a surprise that I missed my fair share of morning French classes because I did not arrive on time. What exactly did that cost my family even when I didn’t go to class?

Calculating the Hourly Cost of College

Using the credit hour method, the hourly cost of college is calculated by dividing the annual total tuition, room and board, books, fees and other charges by the total credit hours taken per year. Take Georgetown as an example. What would it cost a student who skips an hour of French class today? According to the university website, the total cost of undergraduate attendance in 2016 is $69,770. I did not receive any scholarships, but if any kind of direct aid applied (not loans), you would subtract it from the total.

A student needs at least 120 credit hours to graduate, and it typically takes at least 15 credit hours per semester or 30 credit hours per year. $69,770 divided by 30 is $2,325.67 per credit hour. You’ve paid for it regardless, so if you skip a class, you don’t get what you have purchased. That’s a pretty expensive hour to blow off!

An alternative method is to divide total college costs by the amount of total hours a student spends learning. At my alma mater, students are expected to spend at least 30 hours per week studying for a semester of 14 weeks (12 weeks of classes plus 2 weeks of exams). $69,770 total annual costs divided by 28 learning weeks per school year divided by 45 hours per week is $55.37 per learning hour. In this scenario, it’s not just skipping a class that’s an expensive waste of money. It’s avoiding the library when you should be studying to hang out playing Frisbee on the lawn.

Neither methodology for calculating the HCC changes if a student attends school close to home or goes to a public university or a less expensive private college. There’s an hourly cost of college no matter the school, and it’s important that students know what it is in order to avoid or moderate behavior – like showing up late for French class – which wastes huge amounts of money.

Borrowing Increases Your HCC

Many families who send their students to a university don’t pay the full cost of education out-of-pocket. If your student is borrowing to finance part of the cost of higher education, their HCC will increase. Remember, student loans are not financial aid. They are a financing mechanism, which increases the total cost of education.

Let’s examine what would happen if a student borrowed $20,000 at 6% interest to finance some of the annual costs in our example above. The loan will be repaid monthly over a ten year period beginning after graduation, with total interest paid of $6,645. Using the conservative method of calculating HCC in this scenario, borrowing the $20,000 increases the HCC by $221.50 per credit hour. Using the “learning hour” method, it increases the HCC by $5.27 per learning hour.

Most students aren’t used to thinking of the school experience as a consumer experience, something for which there is a clear financial cost and benefit. By helping your student calculate and understand their HCC, you are teaching them an important lesson about the relationship between their personal behavior and money. In the financial behavior change process, awareness and assessment usually lead to action (going to class instead of sleeping in) and thus are critical first steps for future financial success.

How about you? What was your hourly cost of college?  Email me at [email protected] or follow me on Twitter at @cynthiameyer_FF.

 

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