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Course: Financial Literacy > Unit 9
Lesson 2: College, post-secondary education, and trainingWhat are the different types of costs associated with college, postsecondary education, and training?
When going to college or learning after high school, there are different costs to think about, like direct costs for things like tuition and books, and indirect costs for things like housing and food. Some costs are fixed, like application fees, while others can change, like course materials or entertainment, and these costs can be different for community college, four-year college, technical school, online programs, or apprenticeships. Created by Sal Khan.
Want to join the conversation?
- If you have to go so deeply in debt to ultimately get a higher paying job, is there any difference in income if so much of your paycheck is going into paying your education loans?(2 votes)
- In the short term, it is probably better to go into a skilled trade directly out of high school through an approved apprenticeship program at a labor union or trade group. You will not incur the debt that a college student does, and will likely be in better financial shape in your late 30s than someone who has gone to college and incured student debt. HOWEVER, when the college graduate, earning more in her first job than you do, gets her debts paid off, her accumulated earnings from late 30s through to retirement will put her well ahead of you.
It's up to you whether you choose to play the short game or the long one.(4 votes)
- Will there ever be tips in this course for people with disabilities? There's a lot of good advice here but it all seems to assume that you're employed and not disabled.(1 vote)
- You have identified a serious defect in this course. To begin the process by which it can be repaired, learn from the instructions that you will find here: https://support.khanacademy.org/hc/en-us/articles/227013768-How-do-I-request-new-features-or-content(2 votes)
- How does it work to apply for student grants if I'm not applicable for financial aide or scholarships? What if a person is considered very low income? How could that affect financial aide or grants for that matter?(1 vote)
- Grants are offered to you because you are a human being. Scholarships may have certain requirements.
Work-study requires that you put in so many hours per month.
Loans require that you promise to pay them back.(1 vote)
- If you have to go so deeply in debt to ultimately get a higher paying job, is there any difference in income if so much of your paycheck is going into paying your education loans?(1 vote)
- You have to look long-term. Do the numbers for what your income will be 10 years after completing the program, compared to what they would be if you hadn't taken the program. Let the numbers tell you how to proceed.(1 vote)
- Is college worth the debt?(1 vote)
- Like all things, "that depends".
"College" can mean many things. So can "debt".
The earnings gap between college graduates and those with less education continues to widen. In 2023, median income for recent graduates reached $60,000 a year for bachelor's degree holders aged 22–27. For high school graduates the same age, median earnings are $36,000 a year. That's $24,000 per year.
The average college debt of 2023 graduates was $38,290.
So, if you are "average" (most of us are), the difference in your earnings will pay off the debt within 2 years.
Keeping those numbers in mind, decide for yourself.(1 vote)
Video transcript
- So let's think about all
of the costs of an education. So the first thing that
most people think about is the actual tuition that you would pay. If you go to a standard four-year college, it could be tens of
thousands of dollars a year. If you go to a community college or you go to a state university, it could be a good bit less so it's something to think about. And there's other forms of what
I would consider education, things like apprenticeships,
co-op programs where you might even be able
to make a little bit yourself. I guess you could consider
that negative tuition, but that's the first thing. It's just how much are you going to pay for someone to help train you and for someone to help educate you? The next cost, and I'll
try to go roughly in order, are probably things that
you're gonna need to live wherever you are getting educated. And I know you might be thinking, "well, I'm gonna have to
live someplace regardless. I'm gonna have to find food. I'm gonna have to have a place to stay." But if you decide to go to college, let's say, in a more expensive city, then those expenses could be a lot more. And also, certain
colleges and universities have certain rules about where
you are or aren't allowed to stay, or you might
want to stay on campus which might have certain costs with it. So I would definitely consider what's often called room and board, which is where do you live and how are you getting your food to be a pretty substantial cost. Another cost, and I'm trying
to once again, to go in order of of magnitude of cost,
is the opportunity cost. What else could you be doing with that time that you're
putting into that education? You could be getting
some type of other job. So there is the opportunity cost of lost income when you
go get an education, especially when you think about
things like graduate school. You could be out in the job
market there earning money. And then beyond that, there's
all sorts of smaller expenses, but expenses that still can add up. I definitely had sticker
shock when I went to college and I saw how much textbooks cost. And this was about 25 years
ago, almost 30 years ago. Yeah, I'm getting old, but they can easily cost
hundreds of dollars. I remember, I always tried to see if I could check it outta the
library or share a textbook with a friend to avoid
some of that expense. I know now there's some rental textbooks and digital textbooks
and open source textbooks which might hopefully help with that cost, but that could be really
a significant expense. Things like textbooks or lab materials or all of these other things that might not be included in tuition. And then on top of that, once again, you're going to wanna do all the things that any reasonable person would wanna do when they're living, which is
not just have a place to stay and have food, but maybe
entertainment, some travel. And that could change dramatically, if, let's say, you are
going to go to college in a different city than where you live and you're gonna travel back and forth, maybe on a plane. That can get reasonably expensive. And then obviously,
entertainment and travel in a bigger city, and say New York, it's gonna cost a lot
more than if you live in a small town or decide to
go to college in a small town. So that's, I would say, the space of all of the places where
you could spend your money. But I wanna really make sure
that this doesn't scare you because when you oftentimes
just add all of those together, it can be tens of thousands
of dollars a year. In some cases can even approach, you know, approaching six
figures in a given year, but you really don't know what
your costs are going to be until you apply and you figure out what kind of a financial
aid package you get. Many of what you would
call the sticker price of a lot of universities is what they would charge
someone who's not coming in with a scholarship, who's
getting no financial aid. So these are usually going
to be more affluent people are going to usually
have to pay those costs. But if you come from a
less well-heeled family and those numbers look scary to you, it actually turns out that sometimes some of the more expensive universities are the more generous
ones with financial aid. I'll just use myself as an example. The college I wanted to go
to when I was in high school, at the time, this was in the nineties. It cost even then with room
and board and everything, it was over $30,000 a year, which was more than twice what
my mom was making that year. So I was like, "there's no way
I'm gonna be able to do it." But my sister went to a
similar type of school that had similar type of tuition and she got significant financial aid because my mother did
not make a lot of money. We were on free and reduced lunch when I was in high school. They saw that. And my mom's contribution, even though the sticker
price was, you know, 30 something thousand dollars, my mom's contribution was
something like $1,500 a year. And then I did accumulate some debt. So, you know, I accumulated
about $30,000 in debt over four years, which
is still a lot better than it could have been over
a hundred thousand dollars. But you still have to be
careful even with that to make sure that you're
going into something that you feel confident
you'll be able to be employed. It's something that you'll
enjoy being employed in and something that you can
really put the effort in to get those jobs so
that you're in a position to pay back the debt and the investment in your education pays off. But I encourage you, you
know, look at the spectrum. One, be aware of the costs. Be aware of what the
different outcomes would be and then think about, okay, do I want to live
in a big city, small town? There might be cost implications there. Do I want to go to a private school? Do I want to go to a state university? Do I wanna spend maybe two years at a community college and then transfer? These are all potential options that affect the cost equation, but they also have other
trade-offs as well. So it's more nuanced than you think, but I think especially if you come from a lower income household, there's probably more
options than you realize. In many cases, you should
at least try to apply for some of these more
aspirational schools if that's interesting to you and see what they offer
you, you might be surprised.