College Planning

​One of the biggest milestones in a person’s life is the decision to start a family (or not).  With the arrival of that cute bundle of joy comes a whole host of other experiences and adventures.  But in the back of almost every parent’s mind is ‘how am I going to save for college’?  And while it usually feels like it is an eternity away - we all know the saying ‘the days drag and the years fly’.  Before you know it they are taking SATs and doing college tours.  There is good reason that this concern is one of the many, many issues we worry about as parents; college can be extremely expensive, and the costs continue to increase dramatically over time.

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​One of the biggest milestones in a person’s life is the decision to start a family (or not).  With the arrival of that cute bundle of joy comes a whole host of other experiences and adventures.  But in the back of almost every parent’s mind is ‘how am I going to save for college’?  And while it usually feels like it is an eternity away - we all know the saying ‘the days drag and the years fly’.  Before you know it they are taking SATs and doing college tours.  There is good reason that this concern is one of the many, many issues we worry about as parents; college can be extremely expensive, and the costs continue to increase dramatically over time.

For a long time, making decisions about college included matters like: 

• what school is the right size and location
• what school is affordable (and, if not, how do we swing this)
• what school does he/she want to go to
• what programs are a better fit for his/her current goals  

Times are changing.  We are advocating that parents dig deeper to learn the financial health of the institution in question, as well as their ability to flex in times of uncertainty (think pandemic). College campuses across the country are plagued with financial strife compounded by the coronavirus. 
 
Much like health care in this country, there is no consistency with regard to cost, requirements, and student success in the collegiate universe.  There are three college systems in the US: public, private, and for-profit.  Each state regulates funding, tuition, and requirements for their public institutions.  Each private and for-profit university has its own lawmaking and budget office.  

There are excellent resources available like edmit.me, which provide a great deal of helpful information, including financial health and ability to provide online education. (see below)


College Facts

Here are some good reasons to start saving for college early.

• Only 41% of college students graduate in 4 years 
• Since 2008-09 college tuition has increased by 25.3% for private schools and 29.8% for public institutions
• The average public school tuition in Illinois for in-state residents is $13,620 (5th most expensive state)
• Total average price for a 4-year degree
  • $87,800 for a public 4-year institution (in-state rate)
  • $153,320 for a public 4-year institution (out-of-state)
  • $199.500 for a private non-profit 4-year institution
• 17 states offer tuition-free college for residents (specific requirements vary state to state)
• a third of developed countries offer college free of charge to their citizens. (And another third keep tuition very cheap—less than $2,400 a year)
• Women are leading the way in enrollment, as well as student debt

Prior to Saving for College

This may sound intuitive, but it is important to accomplish the following before you start saving for your children’s college fund:
Pay off your own debt (this includes things like your credit card debt, your own student loan debt, etc.)
Set up an emergency fund of 3 to 6 months of expenses to cover any unexpected costs
Put 15% of your income toward retirement savings through your employer-sponsored retirement plan, like a 401(k) and/or a Roth IRA. 


Saving for College

There are many ways to approach saving for college. We encourage clients to enlist help and explore resources.  Some parents assume the burden themselves.  If you are lucky, grandparents (and other family members) can be a wonderful source of funding.   

Others perceive value in having their student be held accountable for some of the cost.  There is much to be said for having ‘skin-in-the-game’ as well as providing your child with the opportunity to learn more about finances and handling money.  This may also motivate them to look for scholarships and grant opportunities for which to apply.  Seventy percent of college students have education debt before they graduate.

  We suggest thinking of college funding in buckets:

•  Parents/Grandparents Contribution
  • 529 Plans
  • Gifting
• Child’s Contribution
  • Earnings
  • Grants
  • Scholarships
• Financial Aid

When your children are young, we encourage saving as much as possible in 529 plans.  As your kids mature, start them with their own college savings account/529 accounts.  Future earnings like babysitting money and birthday gifts can be added. These deposits are also deposits into their self esteem buckets! 

Source local opportunity.  A child of one of our clients contributed more than 25% of his out-of-state tuition as a result of a caddy scholarship awarded to caddies who worked consistently throughout high school and college summers.


Resources
nces.ed.gov
The Atlantic
Collegevine
Valuepenguin
Educationdata
Edmitme.com
Fastweb.com