Saving for College

College Savings Plans(or, How to Earn a Mortar Board Without Bankrupting Your Future)

A recent federal study says that it will cost an average of $233,000 to raise a newborn to age 17. But, as any parent of a college student will readily tell you, that’s just the beginning. Today, one year in a moderately priced private college or university can easily cost $20,000-$30,000. While state schools will often be less expensive, many of the more elite private universities cost much more. Any way you attack it, college costs are a major challenge for most families.

But, despite the doom and gloom, there is a silver lining. College can be affordable for the typical family if they research wisely and start planning early. While the above numbers are accurate, it is also accurate to point out that many 4- year colleges charge less than $8,000 annually for tuition. And, while there are plenty of high priced exceptions, the College Board reports that, on average, college is attainable for most families. The average cost for an education at a 4-year public college or university (including tuition and fees) is around $5,000 per year. The average cost at private schools is higher but at around $17,000 per year, still affordable for many families.

A Family Affair

That’s why I encourage parents to start early and make college planning a family affair. I believe there are several reasons why this makes sense. First, children need to understand the financial gymnastics that are going to be required to get them into college. They need to understand what loving parents do for their children. Not only does this re-enforce their awareness of your love for them, it also helps equip them to be better parents themselves.

But, there are other, more immediate benefits to bringing the kids into the college planning process. For one thing, it helps acquaint them with what things really cost in dollars and sacrifice. I believe there are 2 ways to accomplish this: First, young people need to be engaged in frank conversations about college costs; and second, they need to help pay some of those costs themselves. Recently our son who has just finished his freshman year told me, with some dismay, how many of his friends aren’t studying and doing what they need to do to succeed at school. With no prompting from me, he went on to say that, since most of his friends hadn’t had to work to go to college, they simply didn’t appreciate it.

There are lots of well-meaning parents who set their kids up for needless struggles in adulthood by not encouraging them to carry part of this burden. While every parent agrees that it’s easy to spoil a child, not every parent recognizes when he or she is doing it. By paying for every cent of a college education, along with all the incidentals like off-campus apartments, all cloths and food, gas money, cell phones, and date money, we can easily begin rewarding a slothful lifestyle. I believe that the early years are the best time to teach the principal: Anything that’s worth anything is going to require an extraordinary level of effort. The college years are a great time to begin learning that sometimes you have to do things you hate (i.e. hard physical labor) to achieve a future lifestyle that will be more comfortable.

A college degree alone doesn’t necessarily mean that the individual is truly educated. A total education involves other things like character, gratitude, and an appreciation for hard work.

11 Steps to Successful College Funding

In keeping with my philosophy of approaching college financing as a life-long educational and character-building project in its own right, I believe there are 11 steps to success that should begin very early. In our family, we have viewed college, education, and character building in a holistic way. College without education means very little, and an education without character means even less.

1) Start saving early. We believe it is important to start the college savings
discussions early. By the time our kids are 8 or 10 years old they have already heard us talking about the importance of college, and the need to save for it.

2) Take the college entrance exams as often as possible. Scores on your children’s ACT and SAT tests may have a direct bearing on their eligibility for academic scholarship money. We have learned that it makes sense to take these tests several times during the high school years. Often, the first time or two a child takes one of these tests she is unnerved, anxious, not at her best. By taking it several times, generally the scores go up and improve the possibility of getting a better academic scholarship.

3) Be a good student, make good grades. Remember, the occupation of a high school student is high school. It behooves that student to make the best possible grades since they will impact scholarship awards.

4) Hunt for scholarships like bears hunt for honey!

5) Take some of the basic college courses early at a local junior college. Some students have found that they can save a lot of money (compared to costs at more expensive private colleges and universities) by taking some of the required courses at hometown junior colleges during their senior year in high school, or during the summer after graduation.

6) CLEP out of as many courses as you can. Many colleges allow students to take special tests to see if they understand course work well enough to be credited for, or CLEP, out of those classes. By clepping out of one 3-hour course in a college that charges $500 per semester hour a student can save $1,500 of tuition costs plus books!

7) Consider starting college a year later. This has helped lots of young people save (instead of borrowing) money for there college education.

8) Stay at home, save the cash.

9) Don’t buy the largest meal plan. Some colleges offer various meal plans with their room and board offerings. We have found that kids usually won’t eat 21 meals a week in the school cafeteria. You may find that you can save some serious dollars by purchasing a smaller meal plan that allows for 10 to 15 meals weekly.

10) Get a job. There is no disgrace in working your way through school. Personally, I never let school get in the way of the education I got with various jobs during my college years. During those 4 years (while carrying a full college load) I had some of the most meaningful work experiences of my life. I worked everywhere and did a little bit of everything. Among other things, I worked as a disc jockey at 2 radio stations, booked shows, started a wedding photography business, worked at J.C. Penney, helped manage the college diner, started a radio jingle production company and an ad agency in my dorm room. All in all, I learned about as much (if not more) from my extra jobs than I did at school.

11) Make schools compete for you. There are a lot of colleges out there and, their survival is preconditioned on them getting a certain number of freshmen students enrolled each fall. Competition is stiff. If you have made good grades then lots of good schools will probably want you on their campuses. So, why not let them compete to get you?

How To Do It

There are 4 primary ways to come up with the dollars for college:

1) Scholarships and grants. This is the gold standard. While grants can be hard to get, and scholarship eligibility varies from school to school, there is no better way to get an education. The single greatest advantage with grants and scholarships is that they generally don’t have to be repaid.

2) Loans. As we’ve already said, while loans can be easily gotten, the downside is: Loans simply defer the expenses into the future, someday they have to be repaid! The College Board estimates that, in 1998-1999, approximately 58% of all financial aid came in the form of loans. That was up from 47% in 1992-1993.

3) Work while in school. There are a lot of advantages to this plan as long as the job doesn’t interfere with the primary reason for being in school.

4) Plan ahead. For most families, saving and planning ahead is the key to success.

The book, No Debt No Sweat! goes into further detail on the 11 Steps to Successful College Funding, and also discusses the 4 most popular ways to save for college (529 plans, Educational IRA’s, UGMA’s or custodial accounts, and traditional investments.

There is also a section on how to teach your kids about cash and character. In that part of the book you will learn the:

3 Rules for Teaching Kids About Money
The 10/45/45 Rule
What About Allowances?
Portable Outhouses: The Road To Riches

No Debt No Sweat Christian Financial Management

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