The College Board reports that full-time students at in-state public schools typically paid almost $20,000 for tuition, fees, and room and board during the 2015-2016 academic year. On average, students at private institutions typically paid almost $44,000 for tuition, fees, and room and board. As college costs continue to rise, younger students probably will pay even more when they arrive on campus.

Now for the good news. The above numbers are all published costs, sometimes known as the “sticker price.” The College Board also provides net prices, which may be more indicative of actual outlays by parents and students. The average net cost for public institutions falls from nearly $20,000 to just over $14,000. Among private schools, the average net price drops from almost $44,000 to $26,400.

Discounts and taxes affect the net prices

What accounts for the huge differences between published and net prices? The College Board estimates grant aid and education tax benefits in determining the net price. Grant aid is mainly discounts from a college’s published price. Higher education tax benefits are the amounts a family saves from tax credits and deductions.

Example: Alan Burns attends a private college where the published tuition is $30,000. His room and board plan costs $10,000, so the total cost is listed at $40,000. Alan receives financial aid that reduces his tuition bill to $22,500. His parents also get $2,500 of higher education-related tax savings. Considering the $7,500 reduction in tuition and the $2,500 in family tax savings, this method puts the net price of Alan’s year of college at $30,000, not $40,000.

The College Board numbers for net prices are estimates. Some students will get more financial aid than others. And some families will save more in tax from education-related benefits.

Calculate the cost of higher education carefully

Many colleges offer net price calculators on their websites. Working through several of them can be a practical way to compare actual costs at different institutions. However, the numbers you’ll receive are based on estimates of financial aid. These net prices don’t take possible tax savings into account.

In addition, check to see if a school’s net price calculator counts loans as financial aid. Loans will reduce the current cost of higher education. But they will probably have to be repaid, with interest.

The Bottom Line

Don’t be intimidated by the costs of college. There are many ways to fund higher education expenses. Over the next two articles, we will be discussing financial aid and tax credits and benefits to help offset these costs. Also, read our past articles, Grandparent Aid for College Costs and The 529 plan: A tax-smart way to fund college expenses.

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