Five Recommendations on Funding College Costs

I was recently sent a press release from Voyant that listed some of their thoughts on balancing college costs with general family finances. I asked if I could reprint some of these and they gave me the ok. So let's start with what they call five recommendations to help parents strike a balance between funding their children's education(s) and preserving their family's financial health:

• Cost of Attendance - Understand your school's total cost of attendance, which includes tuition, fees, room, board, books and miscellaneous expenses. These expenses can range from travel costs and furnishing a dorm room to purchasing a new wardrobe if your student is changing climates.

• 529 Plans - Actively manage your 529 plan investments - don't set them and forget them. If your plan is performing below average or has high expense ratios, look for greater growth and lower expense alternatives. Contrary to other types of investments, most 529 fund choices are fairly conservative. Keeping your portfolio diversified can lead to excellent returns all the way through college. 

• Loans - Shop wisely when considering a loan, as the right terms or interest rate can save thousands of dollars over the course of repayment. Home equity loans or lines of credit may offer lower rates and fees than federally-guaranteed Stafford loans (currently at 6.8 percent), but parents should carefully consider this option's impact on retirement and other financial goals. Families should also consider the total loan cost over time. Most education loans are deferred until six months post-graduation; however, interest starts accruing the day the loan originates. Borrowing $50,000 at 6.8 percent on a 20-year repayment schedule works out to a monthly payment of $381.67 - and adds $41,600.68 in interest over the full term of the note. In addition, some federally-guaranteed student loans have origination fees as high as 2.5 percent. 

• Get a Better Financial Aid Package - Consider your college acceptance letter a "bid" for your child's commitment - and an opportunity to negotiate for as much financial aid as possible.  Most colleges distribute financial aid packages that include grants, scholarships, work study and loan offers.
  If your child is offered $5,000 a year in assistance from College A, but only $2,000 from College B, find out if College B will match College A's offer. This strategy works especially well when negotiating with two comparable colleges.

• Explore Creative Alternatives - One option is to qualify for in-state tuition. If you are in the U.S. military, many colleges and universities will offer you and your dependents non-resident (out-of-state) tuition waivers. Another option is to work toward an earlier graduation date. Most colleges accept credits from advanced placement, community college, and summer courses taken during high school or academic breaks. Starting college as a sophomore could reduce undergraduate costs by 25 percent.

They also made the following comment which I thought was very interesting:

"At the rate things are going, parents of today's infants will shell out nearly $60,000 (including room and board) for a four-year public education and more than $140,000 for a private college diploma," said David Kaufman, founder and CEO of Voyant, Inc.

Frankly, this sounded a little low to me. Perhaps they're thinking that the parents will pay $60k and the kids will need to pay/take out loans for another $60k or so?

Comments

[TheJapChap]

That final number is quite low--I agree. I read somewhere that public colleges would run around 120k by the time today's infants are in college. The cost of private education would be far greater. It's crazy.

[Matt]

I wonder if he meant 60 and 140k PER YEAR. That sounds closer to the real number.

[Kiran]

I think that 60,000 sounds like the current price for a 4 year public school education.

Mine would have been in the low fifties without scholarships, and I graduated a year ago.

At my alma mater someone starting in the fall would pay around 15k for the first year (tuition, room and board).

My alma mater had back to back years of 9% tuition increases while I was there. Sticker price at a top fifty public university will probably be into the six figures by 2020.

College is expensive, I'm very very glad I had lots and lots of scholarships. My roommate (out of state) ended up with 6 figure debt. How many years does it take to pay off that when you make about 60k a year?

[Mike]

There's a great suggestion in Charles Givens' book "More Wealth Without Risk": rent out a house near the school, subdivide it, furnish it, live in one room and profit off the rest.

[Nick D]

I think $60k is low too. I can't help but get upset when I go to the financial aid office and try to talk to them about finances. They sit there and tell you that it should only cost such and such per year to go to school and then base your financial aid on that number. Only problem is the number is so ridiculous. Definitly something some goverment desk jockey came up with. Or maybe someone from the schools marketing dept trying to make the school look inexpensive when it really isn't. Sorry but that number is bunk.