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College Tuition: Consider the Long-Game

  |   Education Funding

Cost. It’s the First and Most Overwhelming Thought When it Comes to Planning for College.

We’ve all seen the statistics. The average annual sticker price for undergraduate college tuition, room and board, and fees at a public four-year university in 2016 was $20,090. For a private university, that annual cost increases to $35,570. It’s no surprise that graduates leave with more than just a degree; on average, they also have outstanding loans of more than $37,000. How do families even start planning for such a large expense?

Approach College Tuition with the End in Mind

Unfortunately, education planning often happens in a vacuum. Families do their best to start planning and saving but they don’t really have a clear understanding of the end goal, and they often let college savings override other priorities. For example, saving for college should never come at the expense of paying for basic living expenses, building an emergency fund, or saving for retirement. On the flip side, some families decide that saving will come later…after the next family vacation, kitchen remodel, or new car purchase, only to realize that college is just around the corner.

Instead of focusing only on how to get your child to school, think ahead four (even five) years to graduation and consider the critical questions below:

  • How much can she expect to earn in a degree in her field?
  • Will graduate school be required?
  • Can she live at home to save on expenses or will rent need to be paid? What about a car purchase?
  • As parents, how much can we realistically help (and, frankly, how much do we want to help) after college?
  • What are the various loan repayment options?

These questions are particularly important because as parents, we generally don’t do a great job of sharing family financial information with our kids. As a result, they often don’t understand the potential impact significant college debt can have on their future. Whether it’s a spreadsheet, or just numbers scratched on the back of an envelope, talking it through will go a long way when it comes to explaining the long-term impact of a monthly loan payment, especially when it’s $350 deducted from a first year job salary or fixed income of a parent.

Debt is Debt

While it is true that college debt is generally “good debt” (because it is an investment in the future), it’s still debt. Given the numbers involved, a strategy for managing that debt has to be part of the education planning process well before the student packs her bags.

Want to know more? Bookmark our blog. We will be writing about education funding for the entire month of September, starting next week with our Financial Fact or Fiction series about financial aid.

Think you’re ready to get started or talk more personally about a funding plan for college tuition? We can help you get started, just give us a call or drop us an email.

AUTHOR - Tammy Wener

As co-founder of RW Financial Planning, Tammy oversees the financial planning process for all clients and manages the day-to-day operations of the firm. She truly enjoys getting to know her clients and is not shy about asking questions. Tammy has 15+ years of experience in the financial planning and estate planning fields and has worked with a broad range of clients including: couples simultaneously planning for financial independence, caring for their parents, and saving for college; newly widowed and divorced women looking to become more financially literate; young couples just starting out; families juggling the demands of a child with special needs; and financially independent individuals and couples exploring “what comes next.”