My husband and I have drastically different opinions when it comes to paying college. He feels that college is too important and we should do whatever it takes to help our son pay for undergraduate school. I feel college is too expensive and too many kids go to college just because it seems to be the thing do. I’m willing to save some to help my son pay for college, but at the end of the day, if he wants to go, he needs to figure out how to pay for it. I’m sure the correct solution lies somewhere between our two philosophies. Whatever your position is on education after high school, another place that we 40-somethings are spending lots of money is on our kids’ college.
Some of us are writing checks for college for older kids, others of us are socking away as much money as we can for college planning for younger kids. If paying for college is taking a big bite out of your budget its might be time to reconsider financing college.
If you haven’t read the first three parts of this series now would be the time to do that. Before you even think about college you need a realistic grip on your current budget, you need a plan for eliminating debt and you need to have some money tucked away for emergencies. It is irresponsible to start saving money for college when you don’t have a solid understanding of your finances. Your kid might be able to pay for college, but your financial well-being will be in jeopardy. They can take out loans for college. You can’t take out a loan for retirement!
If you’re like the average American, when the dust clears you will find that you can help your kid some with college, but you’re not going to be able to pay for 100% for 4 years. So, how do you plan for this massive expense?
- Set your child’s expectations. Have a talk with your child now about whether or not they even want to (or should) go to college. There are trade schools and community colleges that can move your child toward their career goals without the expense of a full four-year college. And if they do want to do the full four year thing, make sure they are choosing a major that’s going to provide them with an income they can live off of so they aren’t coming back home .
Also, set your child’s expectation about what kind of schools they should look at (private vs. public, in state vs. out of state). We’re pushing public state schools in our house because Ohio has some really good state schools that can compete with the private (more expensive) schools. Do your research so you can talk with your kids about the advantage of in-state schools. This doesn’t mean to shoot down your kid’s dream of going to Yale or MIT, but it does mean giving them a reality check: “going to Yale means finding Yale-money.”
- Set up a college savings account. There are a lot of options for saving for college. A very popular one is the “529 Plan” offered in a number of states. Basically, you create an account and save in away that is exempt from federal taxes. The money can be used for college, graduate, professional and trade school. Here is a great article from U.S. News to help you understand the 529 College Plans (http://money.usnews.com/money/personal-finance/mutual-funds/articles/2014/09/03/the-ultimate-guide-to-understanding-529-college-savings-plans)
- Help your student develop a skill. When we think of sports scholarships, we instantly are drawn to football and basketball because they are the most popular sports. However, there are scholarships for a wide variety of sports including golf, bowling, rowing, swimming, lacrosse, etc. Talk with your student about pursing a lesser known sports to set up scholarship potential down the road.
- Scholarships. Scholarships. Scholarships. There are all kinds of scholarships out there. I have a student who applied for a scholarship that was only for twins. There are scholarships for left-handed people, scholarships for women, scholarships for people from a certain neighborhood, scholarships for specific hobbies, scholarships for music, etc. To be considered for many scholarships all you have to do is fill out an application and write an essay. It’s time-consuming, but its worth the effort. It’s never to early to start look.
Don’t let saving for college derail your financial plans. Create your budget. Pay off your debt. Have emergency funding. THEN figure out how much you can afford to put aside for college. Whatever that number is, work with it.