Incoming freshmen at Auburn University in Alabama will soon have a big choice to make: whether to live on campus in a dorm or off campus in an apartment. The university has housing for only about 60 percent of its freshman class, so the beds are allotted on a first-come-first-served basis.

This dearth of on-campus living space has spawned a lucrative market for local real estate developers. Massive apartment complexes with amenities like swimming pools, computer labs, and gyms have sprung up near Auburn's campus, and many other college towns have seen similar expansion.

But off-campus living can often be steep for students and parents who are already straining to pay tuition. Next year's dorm rate at Auburn is $2,730 to $2,860 per student, which includes utilities, basic cable, and telephone service. At nearby Auburn Crossing, students can share an apartment for around $300 each monthly, or $3,600 for a 12-month lease. Another option close to campus is a two-bedroom duplex for about $700 a month.

Many students naturally prefer apartment living to the typical stark, cramped, outdated dorm room. But the off-campus figures don't include the other necessities of living, such as food, furniture, electricity, and transportation. And those additional costs can be jarring. In a 2002 Washington State University study, off-campus students underestimated their expenses by 25 percent to 50 percent. "It's more expensive, but that doesn't seem to be a problem for most students," says Bob Ritenbaugh, Auburn's interim assistant vice president for auxiliary services.

City life. It may be more of a problem for students at schools in large cities. At Boston College, for instance, room and board is $6,000 to $8,000 per year, depending on the residence hall. By contrast, an off-campus studio apartment in Boston averages $950 per month.

With mortgage rates low, many parents are becoming landlords. Real estate in most college towns is enjoying healthy growth, and with rising enrollments, a reversal is unlikely. Buying such places, dubbed "kiddie condos" by some agents, can be a lucrative investment. "If they've got the money for the down payment, without question it always makes sense to buy," says Gail Lyons, broker-owner at Boulder (Colo.) Real Estate Services.

Take Nancy and Darrell Walker. Last month they bought a $119,950 townhouse near the University of Kansas in Lawrence, a three-hour drive from their home. When their son transfers to the college this fall, he will live there with two rent-paying friends. "Our agent said local real estate is going up 5 to 8 percent a year on average," says Nancy Walker. With another son still in high school who expects to follow in his brother's footsteps, the Walkers figure they'll own the property five to 10 years. -Megan Barnett