How Much Does it Cost?

By D. Sherwin Hibbets, Director of Regulatory Affairs, FAME

This material is presented for informational and educational purposes only and should not be considered to be giving legal advice.

When students are interested in attending school, naturally they look for one that offers academic programs that prepare them for their career ambitions. But, once they have found one that offers the academic program they are interested in, there is always a question that soon follows. That question is: “How much does it cost?” The answer given in response to that question may, at times, be less than clear. This is sometimes accentuated by the varying purposes of those discussing the cost of attendance (COA). For example, admissions personnel want to give an accurate picture of costs a prospective student will incur when meeting with a prospect, but may focus on direct costs to be paid to the institution. On the other hand, a financial aid officer likely conveys more broadly the costs a student will experience and works to help them find the means to persist to graduation once admitted, while encouraging discretion in borrowing to avoid large sums of student loan debt.

Deciphering the question

Naturally, a student is interested in the direct costs applicable to the educational program; things such as tuition, required fees, typical amounts charged for required textbooks, and so forth. But, the reality is that the various costs a student incurs as they attend school include a broader scope of expenses than just those charged by the institution directly. In order for a student to attend school, it is helpful for them to have a place to live, along with the necessary utilities. And, most students still have not overcome the basic necessity for food, so there is a cost for those vital commodities as well. Likewise, it is important for the student’s well-being (as well as being appreciated by classmates, the faculty, and staff) that they are able to accommodate the basic expenses required for personal hygiene and laundry. Further, it is essential for students to be able to actually arrive at the location of their educational study. Therefore, it is important that the cost of transportation be considered in the costs related to pursuing their academic goals. So, we see that the amount that it will cost a student to attend school is beyond the direct costs of tuition, fees, books and possibly supplies. The cost of attendance (COA) also includes those other less specific, but necessary, expenditures that may vary from school to school, or by region of the country in which the student and school are located. These other indispensable components of living while going to school are commonly called the “indirect” costs of attending school.

While schools may be reticent in their desire to discuss these indirect costs with students, it is important to keep in mind that the U.S. Department of Education (ED) has made it clear that they are to be included in discussions about, and in the awarding of, Title IV Federal Student Aid.

This insistence is simply a result of the way the law itself is written in U.S. Code, Title 20, Chapter 28, Subchapter IV; Part E, Section 1087ll.¹ The specifics of this section of the law are highlighted in the 2016-2017 Federal Student Aid Handbook, Volume 3; Chapter 2.² It is important to note, however, that ED is prohibited from regulating this section of the law. Therefore, the legislation itself is considered self-interpreting. Yet, it is very clear that when awarding a student Federal Student Aid, the institution must include both direct and indirect costs when determining the COA and the resulting need (as defined and described elsewhere in Section 1087 of the law). ED further notes the prohibition of awarding aid to meet only direct costs in the 2016-2017 FSA Handbook, Volume 3³; Chapter 5, page 3-90; and, Chapter 7, page 3-142, as well as in its Dear Colleague Letter GEN-11-07⁴.

In light of the law’s specific definition of costs associated with attending school, the indirect components of a student’s COA (or, as some refer to it, the cost of living expenses) include allowances for room and board, personal expenses, and transportation costs, among other items for consideration in special circumstances and varying enrollment statuses. Both, the direct costs (tuition and fees), and an allowance for books and supplies, along with the other indirect costs (room, board, personal expenses and transportation costs) make up the COA for Federal Student Aid purposes. Therefore, in general discussions about a COA, you will routinely see the COA broken down and discussed in terms of six (6) standard components. These consist of:

• Tuition and fees
• Room and board (i.e., rent and food)
• Books and supplies – This component may also include pertinent kits that contain equipment or material required for use in the academic program to complete the program’s requirements. Examples may include cosmetology kits, mechanics’ tools in automotive repair programs, musical instruments for music majors, equipment for nursing students, (e.g., stethoscope), and so on.
• Miscellaneous/personal
• Transportation costs
• Loan Fees (for those students who obtain a student loan)

Each participating Title IV-eligible school is responsible to ascertain and provide the complete, accurate, and reasonable COA information made available to students, and that is used in awarding (“packaging”) students’ financial aid.

There are several categories of living circumstances for which the cost of attendance figures will vary. The two main categories are 1) students – dependent or independent – who have no dependents and physically live with their parents and, 2) independent and dependent students, not living with their parents. Other possible COA budgets include dependent students living “on campus” (when an institution provides contracted housing and/or meals) and students who live in housing located on a military base for which a basic allowance for housing is provided. If your institution is one that has “on campus” living opportunities, it stands to reason that the school itself would already have the figures applicable to the cost of housing and/or meals that it contracts with the students to provide.

For military personnel that receives a basic allowance for housing, the indirect costs in the COA budget would include an amount for board (food), but not room (rent/mortgage).

A more detailed explanation of the COA components is available in the Federal Student Aid Handbook as well as in the National Association of Student Financial Aid Administrators’ (NASFAA) Monograph Number 24, “Developing the Cost of Attendance.”⁵ (NASFAA membership is required to access the Monograph.)

Determining an appropriate COA

For many schools, the determination of the figures to use for the COA comes through information gained, potentially, in a variety of ways. As stated earlier, schools have ready access to the data components of the COA that are charged directly by the institution. In review, these include the amounts it charges for tuition, fees, books, and required supplies (and equipment).

Beyond the direct institutional charges, the school must also determine the “appropriate and reasonable amounts” to use for the indirect cost components of the COA. These costs, sometimes referred to as the “cost of living” (COL) expenses are vital to a complete and compliant Title IV COA. This leads to the question of how to determine appropriate and reasonable figures to use for the indirect COL components of the COA.

The determination of appropriate and reasonable figures for the COA does take a commitment of resources. The greatest resource required is likely time to research the data. Researching the data needed may include various activities and resources like surveying and/or interviewing students, reviewing local, regional, and possibly national, economic data.

A review of local, regional, and national economic data sources may be a useful tool in your COA development.

Such sources can be helpful in ascertaining the appropriateness and reasonableness of the figures you incorporate in your COA. In essence, the external sources help validate the figures a school has determined. In some locales, the local county extension office may provide “Family Living Programs” that may offer resources related to budgeting and more localized spending patterns. An example is the University of Wisconsin-Extension at http://fyi.uwex.edu/financialcapability/budgeting⁷. A link to find a local county extension office anywhere in the United States is Find Local Cooperative Extension Office in the U.S.–UC IPM.⁸

Historically, many institutions may have utilized The College Board’s annual “Living Expense Budget” information as the source for the COL parts of their COA budgets (available on The College Board’s website.)⁹ While it is true that The College Board does provide helpful information each year related to national and somewhat regional data, based upon the 24 metropolitan statistical areas (MSAs) in the United States, this information likely may not provide data specific enough to your geographic area, unless your institution is within one of the specific MSAs for which data is provided. For example, one of the MSAs is for New York, Long Island, and northern New Jersey. If your school is in the metropolitan New York City area, the data provided for this MSA “may” be applicable for use in your COA. However, if your school is in upstate New York in a more rural area, the data for the New York City MSA would not likely be able to be utilized at face value as the cost of living in New York City is generally higher than the costs in more rural areas. Likewise, if your school is in Los Angeles or San Diego, CA, the figures that College Board provides for those MSAs “may” be applicable to your school and students. The bottom line is that unless the institution is situated directly within one of the 24 MSAs for which data is reported, it may be difficult to utilize such data “as is” since the institution’s students may have significantly different cost experiences for its students. While The College Board data may be good and useful as a comparative tool, schools may find it more beneficial to utilize other more local sources of cost data for building their COA budgets. After reviewing the data made available by any outside organization, the Financial Aid Administrator still has to decide if the figures are appropriate, reasonable and applicable to the school’s COA. It may well be determined further research is needed, or a survey of student expenses of the school’s actual students is necessary. “The frequency of the review and research, the methods used, and the final determination of component costs remain matters of local institutional control. COA research is a fundamental part of a responsible administration of student financial aid and must be considered essential to the accountability of FAAs as stewards of financial aid funds.”¹⁰

A school may choose the option of determining the indirect cost of living components of a student’s COA based on a survey that it has conducted of its students’ actual local expenditures. If a survey or interview method of research is utilized, careful thought should be given as to what types of questions might be asked. Questions should be developed to determine expenditures necessary for a modest¹¹ but appropriate and reasonable COA budget. Those schools who anticipate using the figures based upon their students’ actual local expenditures should begin surveying their students in time to have responses gathered and compiled in time for implementation of award processing for the applicable award year. The student survey should be for their current term or period of enrollment. The period for which a student is asked to report their expenditures should be based upon a weekly expenditure pattern (preferred), or a monthly basis. The survey that a school may give to its students to complete should consist of at least the following basic categories:

• Rent
• Utilities
• Food costs (up to an amount to provide a nutritionally adequate diet)
• Transportation (to and from campus; and also taking into consideration whether use of public transportation is available)
• Clothing
• Laundry and cleaning
• Personal hygiene and grooming
• Recreation

Some institutions may choose to greatly expand the scope and specificity of their survey data elements for use for other financial literacy-type purposes, e.g., workshops on financial management, budgeting, or debt management, etc.

The method of conducting an institutional survey of students’ expenditures is the choice of the school.

A survey could be as simple as listing on a form typical expense items a student may incur on a monthly basis and asking the student to record their typical monthly expense amount for that item.

Certain schools may utilize such tools as SurveyMonkey®, SurveyGizmo, or SoGoSurveyor, etc., to develop their survey instrument.¹² Other schools may elect to develop their own survey within their own web portal. Supported by actual data from the institution’s own students allows a school to detail specific amounts to include for its students in the indirect components of the COA.

Distance COA distinction?

For institutions that may offer academic programs by “distance” or “online,” the question may arise as to how to calculate a COA for such students. It is important to keep in mind that the law is very specific that the mode of instruction (i.e., in a physical classroom or in a virtual “online” classroom) does not, in and of itself, impact a student’s COA. In fact, the law specifies that you may not make a distinction in the cost of attendance for a student attending in a physical classroom versus one attending via distance education (i.e., “online”).¹³ However, you may adjust students’ COA on an individual case-by-case basis with appropriate documentation to exercise professional judgment. (See “Professional Judgment” in the Application and Verification Guide of the Federal Student Aid Handbook.)

As to how to determine the COA for distance education students that may be “living” in any state in the country or anywhere in the world, you may find it necessary – or at least advantageous – to do a survey of student expenses to have data upon which to base your COL components of your COA no matter where the students may physically reside.

Documented COA

As with most all topics in student financial aid, documentation is crucial. An institution should maintain in its files the data used to develop the COA budgets’ appropriateness and reasonableness. Compliance auditors and federal program reviewers will desire to review the documentation upon which a school has based its COA budgets.

An accurate description and dissemination of the total components of a student’s COA are basic to answering his or her question about how much it costs to go to school. And, accurately collecting, and using, the COA data elements defined in the law is crucial to the compliant and appropriate funding of students as they pursue their educational goals.

Resources

1. United States Code, 20 USC 1087ll: Cost of attendance, Title 20-Education, CHAPTER 28-Higher Education Resources and Student Assistance, Subchapter IV-Student Assistance, Part F-Need Analysis, http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1087ll&num=0&edition=prelim#sourcecredit (accessed on May 24, 2017).
2. 2016-2017 Federal Student Aid Handbook, Volume 3, Chapter 2, page 3-34; U.S. Department of Education, https://ifap.ed.gov/fsahandbook/attachments/1617FSAHbkVol3Chapter2.pdf (accessed on May 24, 2017).
3. 2016-2017 Federal Student Aid Handbook, Volume 3; U.S. Department of Education, https://ifap.ed.gov/fsahandbook/attachments/1617FSAHbkVol3Master.pdf, (accessed May 24, 2017).
4. Dear Colleague Letter GEN-11-07, U.S. Department of Education, https://ifap.ed.gov/dpcletters/GEN1107.html, (accessed May 24, 2017).
5. Monograph No. 24, “Developing the Cost of Attendance;” (Washington, NASFAA, 2014), https://www.nasfaa.org/uploads/documents/ektron/aaba2f1c-e0d0-4ff0-bd11-b75cf0beeb43/de0499b7954e491b8db81895834a061012.pdf, (accessed May 24, 2017).
6. 2016-2017 Federal Student Aid Handbook, Volume 3, Chapter 2, page 3-34.
7. The University of Wisconsin-Extension, “Financial Capability for Helping Professionals,” http://fyi.uwex.edu/financialcapability/budgeting, (accessed on May 24, 2017).
8. The University of California, Division of Agriculture and Natural Resources, “Find Local Cooperative Extension Offices in the U.S.”, http://ipm.ucanr.edu/GENERAL/ceofficefinder.html, (accessed on May 24, 2017).
9. The College Board “Living Expense Budget 2017-2018,” https://professionals.collegeboard.org/higher-ed/financial-aid/living-expense (accessed on May 24, 2017).
10. NASFAA, op. cit., p. 3.
11. 2017-2018 Federal Student Aid Handbook, Application and Verification Guide, Chapter 5, page AVG-110, https://ifap.ed.gov/fsahandbook/attachments/1718AVG.pdf, (accessed on June 2, 2017).
12. The author does not endorse or vouch for the quality or usefulness of any of the listed survey options. The named surveys are simply listed as some examples of the types of online survey tools available. Those survey names with a registered mark (®) are the property of those entities. A school may conduct an Internet search for any number of other possible survey options.
13. 2016-2017 Federal Student Aid Handbook, Volume 3, Chapter 2, page 3-37; U.S. Department of Education.

SHERWIN HIBBETS serves as FAME’s Director of Regulatory Affairs. In his current role he represents career schools and colleges at program reviews and eligibility certification visits, as well as conducts site visits and training events at institutions. He is a past President and Director of several state financial aid associations, as well as Director of Financial Aid at the university level. He further served as a member of the National Association of Student Financial Aid Administrators’ (NASFAA’s) Task Force on Professional Excellence. Sherwin’s knowledge and training talents have been recognized by a broad range of higher education associations and organizations as he is often called upon to present at conferences and training programs across the country.

Contact Information: D. Sherwin Hibbets // Director of Regulatory Affairs // Financial Aid Management for Education, Inc. (FAME) // 954-772-5883, ext. 289 // shibbets@fameinc.com // www.fameinc.com