Mo Vidwans
The old cliché says, “it goes by in a blink of an eye” and never is that cliché truer than when you realize that your child will soon be in college and that you may be the key bearer of most of the costs involved. Your child going to college, actually leaving the roost and spreading their wings is somewhat shocking in itself; much like when the 5-year-old goes to the kindergarten, actually sits in the class, trying to make some sense out of it all and his/her Mom is all upset sitting at home or work, not even able to enjoy a leisurely cup of coffee.
It is somewhat unfortunate if the parents were not planning for this day to arrive and then get surprised by it; that will not happen only if you, as parents, were prepared for it long before the actual time comes.
The idea of preparing for college expenses has been discussed in this column a few times but even those parents who follow the advice to start early and dutifully contribute to children’s 529 savings plans or other plans might find it a tall order to fund the full price of college. On average, in-state tuition plus room and board is around $25,000 this Fall, according to College Board. At a private and prestigious University, the tab could run up to $75,000 (granted their scholarships could bring it down somewhat).
The good news in all this pessimistic talk is that there is much that parents and students can still do to make college feasible. Many families just assume outright that they will be required or obliged to pay for the 100 percent of the college expenses. If they can, it is admirable, but most families should assume that a third of the cost should come from their savings, a third from the financial aid and the remaining third from the student’s hard-earned dollars or some other similar way. Students can also limit the toll by being savvy in search for the right school and working hard to earn some money on their own. This process can start at the age of 16 right after the Sophomore year in High School.
The real cost of college hinges on two factors; how an institution doles out the financial aid and how badly it wants a prospective student.
Absolutely imperative in this discussion is the fact that sooner the parents start thinking about getting ready for financial support the better off they are. Advance planning is not only essential, but also critical. Parents need to take stock of what they have saved or can save, determine what they are prepared to pay and start communicating that with the child. The impression parents should not give a child is either, “get in there and we will figure out how to pay” or that “forget about the higher schooling, we just can’t afford it.”
It also needs to be evaluated as to what the child is going to get out of college. Nobody should go to college just because everybody says they must go to college. I have known some students who decided college is not for them. They did many other things, some good and some bad, and then once they had good footing about what they like, dislike and in what profession they would be inclined to spend the rest of their life, that was a good time for them to get a four-year or may be higher degree. ‘Know thyself’ does not happen always at the age of 18. And, contrary to common belief, it is not necessary that all should have a college degree. Today, there are many non-degree professions that fetch good money and are begging for apprentices.
Increasingly, for cash strapped students, going to a community college is a sound strategy and not a last resort; most of the technical experience there is hands-on and inexpensive. After they graduate from Community College, they can then transfer to a four-year degree program. This makes much sense for so many. Nobody asks where you went to school for the first two years, but they would want to know where you graduated from.
It is hard to believe but according to the College Board, more than 70 percent of full-time undergraduate students receive grant aids of some sort. If this is necessary, then families should start thinking about the aid as early as the freshman year of their high school. Ideally those parents who wish to support their child, should start planning for it at the time of the birth of the child or even before that. Much careful financial planning is necessary because now suddenly you are looking in the future, at least 18 to 22 years, and that requires careful strategic thinking. This countdown to college can be a great catalyst to reviewing your household budget and understanding where the money is being spent right now and where some savings can be made. For this to happen both parents must be in sync with each other.
The student can also help. Other than the odd jobs they can do, there are many merit scholarships available and there are many scholastic achievements, like AP classes in high school, that will reduce their tuition burden in college, but of course the student must put in much hard work for this and needs to be focused.
Whatever you do, parents, I would strongly suggest against an early withdrawal from your retirement plan to pay for college. Students have very many alternatives for financing their education, but your retirement plan has none.
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Mo Vidwans is an independent, board-certified financial planner. For details visit www.vidwansfinancial.com, call +1 (984) 888-0355 or write to mpvidwans@yahoo.com.
