Updated: Aug 5, 2020
College is expensive, no matter how you look at it. But the data shows that getting a college degree can be a meaningful career boost for today’s children, so what are we to do?
To start, let’s take a good hard look at tuition costs. On average, an in-state 4 year college degree costs around $25,000 a year with tuition, books, room, board, and others costs. That’s $100,000 today. Now according to the National Center for Education Statistics, college tuition is rising about 5% on average each year. So a baby just born today will need in 18 years $240,000 to cover their 4 years. If we broke that down and assumed an 8% interest rate on the investments, that is $535 per month that you’ll need to set aside – per child.
How can we get up and over this large obstacle? By taking one step at a time!
Step 1) Figure out what you can start saving, and begin small. If you are able to take $100 per month and set that aside in a 529 account, that child would have more of a head start than if you didn’t, so begin there.
Step 2) Learn about all your options for cutting down the length of time they are in school. For example, many states have dual-enrollment programs where students can enroll in community college courses during their junior and senior years of high school so that they graduate with all of their prerequisites complete. Another option is advanced placement (AP) courses where they can receive college credit if they score high enough.
Step 3) Learn about what schools are out there that may be cheaper. For example, College of the Ozarks gives every accepted student a scholarship to cover their tuition because they have a mandatory work study program. School choice can make a big different on the overall cost.
Step 4) Encourage your kids to develop their academics and talents so they may be able to qualify for scholarships. Getting high test scores frequently results in scholarships being offered immediately. Sports are great but also highly competitive. There are scholarships for other areas, such as band on unique instruments, that are often overlooked.
Step 5) Research grants and scholarships. There are lots of online opportunities for students to write an application and be awarded small scholarships. Take the time and you might find that those scholarships add up.
Step 6) Instill a work ethic in your kids. Encourage them to roll their sleeves up and do some work in some shape or fashion. By doing this, they might be open to working throughout their school experience to help minimize tuition costs.
Step 7) Don’t be afraid to plan to cash flow. Often, parents are extra worried about the tuition costs, but the reality is that 18 years after your child is born you will probably be in a better financial position than you are at their birth. If you have a career with a good growth trajectory, you may be able to pay for it as they go.
Overall, college is expensive, and it is only getting more expensive. Don’t get overwhelmed thinking about it! Start putting a plan together today and you too can make it up and over that obstacle.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Andrew Cremé and not necessarily those of Raymond James. There are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover education costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state.