13-Aug-2004
(Adapted from “Up, Up & Away in Online Investing Hacks.”)
For parents, the numbers are hair-raising. Like an out-of-control Mack truck, college costs increase every year at a blistering pace, and the increase accelerated in 2003. At the same time college tuition is skyrocketing, a college education influences future earning power more than ever. If little Suzy can’t afford to go to college, she’ll earn $1,000,000 less than the average college graduate during her lifetime.
So what can you do to help your kids go to college without landing yourself in the poorhouse? Start planning as early as possible and start by figuring out how much college is likely to cost. If the numbers seem impossibly high, don’t worry—there are a number of cost-saving strategies you can try.
The first step to calculating the cost of college is to know what you’re dealing with—unfortunately, tuition is only the beginning. Before you move on to building a college savings plan, make sure you add up the costs for each of the following college expenses that apply:
• Tuition: A lump sum or per-credit hour charge for educational instruction.
• Fees: Varies depending on the college and your child’s major. There are some fees that all students must pay, usually including student activity fees, but others are optional.
• Room: Another variable charge depending on whether a student lives on or off campus. Some colleges require all students or all freshman to live on campus.
• Board: Meal plans for students choosing to eat on campus. Most schools offer meal plan options.
• Books and supplies: Course materials, including books, study guides and lab workbooks.
• Transportation and travel: The cost of traveling between home and school. For commuters, these expenses include insurance, car maintenance and parking; for resident students living away from home, these include travel home for holidays.
• Medical expenses: Most students remain on their parent’s insurance while attending college, but there could be some extra expenses.
• Personal expenses: As your scholars see it, this covers spending money for frills such as laundry and phone charges and for essentials like pizza and DVDs.
Don’t forget about sneaky pre-college expenses, which might include application fees, campus visits, testing fees, testing prep fees, moving costs if your kid will live on campus, new clothes, furniture and other supplies.
The good news is that there are colleges for every budget, so anyone can afford to get a college education. There’s a huge difference in cost between community colleges, four-year public universities and private four-year universities. For more information, visit the College Board’s Web site at www.collegeboard.com.
Although community college and four-year public college costs run far less than private school, costs at these cheaper alternatives are rising the fastest. Hardest hit are students at four-year public universities; legislators pinched by falling revenues cut education budgets, increasing tuition an average of 14.1 percent. Students at the University of Missouri swallowed increases of 19.8 percent; their neighbors at Kansas State University took a bigger hit with hikes of 25.1 percent in 2002 and 20.3 percent in 2003.
Tuition rose at community colleges by an average of 13.8 percent and by 6 percent at private four-year colleges. Historically, college cost inflation has outpaced the general cost of living, running between 5 to 8 percent a year. When it comes time to prepare a savings plan, count on annual increases at least this high going forward.
The actual costs
By now, you might be throwing your hands up in the air and kissing the idea of saving enough for college good-bye. Take heart; there is some good news about college costs. The big secret about college costs is that few actually pay these outrageous amounts, especially the full freight on a four-year private school. Only 8 percent of all college students attend schools with tuition of $24,000 or more.
Most college students—nearly 70 percent—face tuition bills of $8,000 per year. Parents typically pay one-third of college expenses from savings, another third from current income, and the last third from loans.
You can use a number of online calculators to figure out how much college will cost and how to save to meet the expense. The best calculators are at:
• College Board: www.collegeboard.com/pay
• Motley Fool: www.fool.com/calcs/calculators.htm
• FinAid: www.finaid.org/calculators
• Saving for College: www.savingforcollege.com
• Educational Services Foundation: www.esfweb.com
If money is tight, consider these cost-saving strategies:
• Start your child off with two years of community college.
• Help your child get a head-start on accumulating college credits by taking advanced placement classes or actually enrolling in college classes through the local high school. By placing out of college classes, your child earns credits toward graduation without paying tuition for those classes.
• Thoroughly investigate financial aid options; For the 2003 and 2004 school year, more than $105 billion in financial aid was available for college students.
• If you’ve been fired, downsized or have hit other financial rocks after your child is enrolled, ask the college about emergency financial aid or loans.
• If your heart is set on an expensive private school, really make sure that it’s a much better option than your state university with the US News college ratings at http://www.usnews.com/usnews/edu/college/cohome.htm.
• Consider military scholarships if you’re truly strapped, your child has an interest, and/or he or she is interested in careers such as medicine or law that require extensive and expensive post-graduate education.
