College Costs What You’re Willing to Pay

By Dr. Jim Dahle, WCI Founder

Financial 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? 

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