“I’d compare college tuition to paying for a personal trainer at an athletic club. [Professors] play the roles of trainers, giving people access to the equipment (books, labs, our expertise) and after that, it is our job to be demanding.”

– Randy Pausch, The Last Lecture

Money Magazine recently published their annual university ranking, The Best Colleges For Your Money.

I read through it and have a number of thoughts to share.

College is expensive…but don’t let that scare you

Let’s not sugarcoat it. Accounting for inflation the cost of tuition, room, and board has more than doubled since 1971. If you’re looking at a private non-profit university, the cost has nearly tripled.

The number one spot in the 2018 study went to one such private university: Princeton.

Their estimated 2018-2019 tuition? $67,700 per year. Among the top 10, Stanford University ranked highest in total cost at $70,800. For most of us, those kinds of price tags are enough to cross elite schools off the list entirely.

I say don’t do that.

While the average annual cost of the top 10 schools came to $44,000, that cost dropped to $17,000 after factoring in the average level of financial aid received.

That’s only 38% of the retail price!

The college conversation should really center around value, which is part of what makes Money Magazine’s ranking so useful. College is an investment, and the return on investment has to be worth the cost.

Bard College in New York, ranked #717, costs $5,000 more on average than Princeton, but graduates make an average of $21,000 less per annum in their early career.

Price does not equate to value, but value is usually worth the price.

Also keep in mind that roughly two-thirds of full-time students pay for tuition with the help of grants and scholarships. Some of these programs take family income and number of children in college into consideration, but many are performance based.

In other words…your student is going to need to do their part, too!

So don’t knock anyone off the list based on sticker shock. But make sure your children know it takes a combination of scholarships, grants, and loans to reach that level of aid.

Start saving early

Whether your child decides on a pricy private school or a practical public university, you have to have a plan for paying for college. Yes, even if you only plan on paying part of the total cost.

Bottom line? The earlier you start saving, the better.

Of course, as a young married couple, you and your spouse may find it challenging to start saving. However according to Fidelity’s Annual College Savings Indicator, 52% of parents with children in 10th grade+ say that, thinking back over the past 10 years, they could have saved more each month, with a median amount of $200 per month.

And the reality is, catching up later may prove an even bigger challenge than you think.

For example, if I wanted to send my daughter to Baylor right now, without financial aid I would need to have saved about $220,000.

To reach that goal starting 18 years ago, (assuming a 7% return), I’d need to have saved $510 per month for all 18 years.

Let’s suppose I waited until she turned 10? The monthly need jumps up to $1,271. So, starting early can make it much easier than waiting.

Start now if you didn’t start early

So what if your child is already 10 years old? 15 years old? Even 18 years old?

Start today. Don’t put it off any longer. You may not be able to save as much as you need, but something is still better than nothing.

If you’ve still got a few years ahead of you, a 529 plan can be a good place to park these funds. 529s come in two sizes; the education savings fund and the prepaid tuition plan.

An education savings fund is similar to an IRA, in that you can usually choose from a variety of investment options and your contributions grow tax-deferred and are even withdrawn tax-free if you follow the rules. A prepaid tuition plan on the other hand allows you to purchase credits at participating universities that can be exchanged for future tuition.

Ideally, if you have at least 5-10 years ahead of you, using the education savings plan to invest in a high-growth strategy may help your savings reach their full potential.

If you don’t have that kind of time, prepaid tuition credits grow at the rate of education inflation, historically 4-6%, which means that if your child already has a university in mind, the prepaid tuition plan could provide a boost without as much risk of the stock market.

Taking advantage of tools like this could mean the difference between reaching your college savings goals and going bust!

Do whatever you can, and no matter what, don’t let discouragement put you off from taking action that can make a difference.

Go the extra mile to get the aid

Student debt is a big problem in our country. 44 million adults in the U.S. carry student debt, averaging over $37,000 upon graduation. To give you a sense of the scope of this issue,  students loans are second only to mortgage loans in size of total debt held by Americans.

So, it’s worth the investment of time to find alternatives to borrowing for college. If you aren’t able to cover the majority of tuition costs with your own savings, then scholarships and grants are a must.

We touched on this in the first point, but getting scholarships requires more than just getting good grades. It means identifying all of the options out there and figuring out which ones your child qualifies for.

In short, you need to research!

Speak with your child’s high school counselor and search your high school website. You may find local niche scholarships that not many know about.

Don’t forget to do a simple web search. Several sites exist just to help your child find money for college. For example, www.fastweb.com claims they have over 1.5 million scholarships that you can search.

Many scholarship programs are competitive, and many have more applicants than funds available. The process of filling out applications can be tiresome and frustrating, but keep your focus on the long term.

And don’t forget the most important application of all: the FAFSA.

I’m sure you’ve been told time and time again how important it is to fill out the Free Application for Federal Student Aid (FAFSA), but I’m going to tell you one more time. Do it.  In 2012 about 2 million students who did not fill out the FAFSA would have qualified for Federal Pell Grants totaling as much as $9.5 billion (about $4,700 each).

That’s money those students missed out on simply because they didn’t submit the form. Don’t let that be you!

Once you’ve completed the FAFSA, and you have a clear picture of the scholarship funds and savings that will be available to you, THEN decide how much student loan debt, if any, you should take on to make your child’s college aspirations a reality.

“Education is the passport to the future, for tomorrow belongs to those who prepare for it today.”

– Malcom X

College can be some of the best years of your children’s lives…but it probably won’t be cheap. Hopefully, it can be the first step toward getting them off your payroll and into the working world without breaking your bank as a parent!

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Are you Financial Adviser Compatible? Take the QUIZ here to find out. Byron W. Ellis, CFP®, CLU®, ChFC®, CRPC®, is a CERTIFIED FINANCIAL PLANNER™ professional and Managing Director with United Capital Financial Advisers, LLC, a Financial Life Management firm. The information contained in this article is intended for information only is not a recommendation, and should not be considered investment advice. Please contact your financial adviser with questions about your specific needs and circumstances.

© Byron Ellis