Cost of Attendance vs. Direct Cost: Which Do You Need?

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Have you ever wondered why it cost so much to attend college? Just because it says it costs $50,000 to attend a college doesn’t actually mean it does. You see, cost of attendance and direct cost are both needed. A college uses what is called cost of attendance to assist in determining the amount of aid they can offer your child. But you will want to use direct cost when it comes to estimating your student bill and determining how much financial aid to accept.

The second part of our four part series on understanding your award letter is cost of attendance versus direct cost. In the previous blog post, we explained what an award letter is and defined the three sections of an award letter. Now let’s define cost of attendance and direct cost and find out why schools use cost of attendance and why you should use direct cost.


Cost of Attendance

In the first section of the award letter you will see the types of financial aid and amounts the institution is offering.  A college uses cost of attendance to determine how much aid to award or offer a student. Cost of attendance can be considered as a type of budget. Most of the time the categories for cost of attendance consist of;

Tuition & Fees
Room & Board (Meals)
Loan Fees

Some of these categories are set by the institution while others are determined by the average cost of living in the area in which the college is located. Loan fees are set by whatever the cost of the origination fee is at that time. The miscellaneous amount can be things like healthcare, childcare, or personal care.

Ultimately the school has determined the total of these categories as what they believe to be the cost to attend their institution. The cost of attendance is then used along with the information you and your child provided on your FAFSA to determine financial need.

There are scenarios in which you can contact your financial aid office to see if you can increase your cost of attendance. An example would be if you spend a large amount of money on dependent care, beyond the amount included in the cost of attendance. In this situation you will have to provide documentation to the financial aid office for such an adjustment.

Direct Cost

The second section of the award letter is usually information about the cost to attend the institution. Now just because the college has set the cost of attendance at a certain amount, doesn’t mean that it will exactly cost that amount to attend their college. For example your student may buy or rent textbooks from Amazon instead of the bookstore. Your student may live on campus and not move their car except on weekends. Again cost of attendance is considered a budget and if you have ever used a budget tool you know there are some categories you don’t use, which brings us to direct cost. Direct cost is what you will want to use when you are ready to estimate your bill.

So you have the award letter in hand and your student is eligible for a lot of different types of aid. Some of which are loans and you want to know if you need to borrow any loans and how much. In this scenario you would use direct cost. Direct cost consists of:

Tuition and Fees
Room and Board (Meals)

These categories are what will appear on your student bill. The direct cost total minus your award letter total will give you a better picture as to what it will cost your child to attend college.

You will, however, want to figure out how you will pay for books, fuel (if your student has a car), cell phone, basic necessities, and car insurance. Most of the time parents cover these costs or the student gets a summer job or a part-time job while in school. It also never hurts to apply for outside scholarships!     

As always feel free to leave a comment or question below.