I had the privilege about 20 years ago to build a college cost calculator for a large mutual fund company. We added cool new features so someone could estimate how much it would cost for each of their children to attend mom’s college, or dad’s, or the school down the road. I didn’t have children of my own then but was still shocked to see how much it would cost a child of my own to attend the college I went to in 18 years. It was estimated that college costs would go up significantly faster than inflation. I thought this was incorrect but I didn’t have the information to dispute it.
I was wrong. College costs have gone up much faster than inflation. In fact, I saw a quote recently that if car prices had increased as much as college costs, the average new car would cost over $83,000. 1
I don’t need to bore you with the high cost of college or how much debt new college graduates carry. In this month of graduations, however, I do want to offer my three simple strategies for college planning:
1) Start saving early
If you’re pretty sure your child will go to college saving even a small amount each month can help in the long run. You can use a college savings vehicle like a 529 plan or another investment vehicle but starting early uses the leverage of time which is a great help. Grandparents may want to get in on this strategy too.
2) Consider alternatives
- Attend a community college for the first two years and transfer to a four year college
- Look for scholarships. New apps such as Scholly aggregate scholarship information to make this job easier.
- If your student wants to study a degree that is in demand, there may be financial assistance. Certain degrees like nursing sometimes offer jobs and tuition forgiveness
- The military still pays for part or all of college or graduate school, even medical degrees, if that is of interest.
3) If in debt at graduation, make a financial plan
It’s hard enough to find a job and get life started without a mountain of debt to pay off. Make a decision right away or help the college graduate in your life make the decision to pay off the debt within 10 years. Make a plan with a budget and have extra payments come out of a bank account automatically to accomplish this goal. It’s easier to make financial sacrifices when you’re young and just starting out than later when you may have your own children to save for.
Kristin Rodriguez
Source
1 – Investment News, “College Debt a Burden to All,” May 2, 2016