If you have children, then you likely have many hopes and dreams for them. One of those hopes and dreams may be a college education. According to the National Center for Education Statistics, the average all-inclusive (tuition, room and board, fees, etc) cost in 2014-15 (the latest figures they have available) of a public 4-year college was $18,632 annually. While it may feel like rising tuition and fees are pushing that dream further out of reach, there are things you can do right now and in the future to help manage the costs.
Obviously, if your child has some time before they’re leaving your nest for college, you should start socking away some money. One of the best ways to do this is by investing in a 529 plan. It’s a tax-sheltered account that families can use to save money and the withdrawals are tax exempt when used for qualified education purposes (tuition, books, etc). There may be tax advantages to investing in your state’s sponsored plan, like a state income tax deduction. Do your research though. The plan fees may be high and not worth the deduction or the plan may not perform as well as other state’s. You are not required to use your state’s plan. We invest with Schwab and recently rolled over our children’s state-sponsored 529 plans into a Schwab plan. It was easy to do and is outperforming the Pennsylvania plan.
One of the more creative (and risky) savings plans I’ve heard was buying an investment property when your child is born. Rent it out and use the rent payments to cover the mortgage. If there’s anything left over each month, save the profit in an account for the child. When it’s time for college, you can (hopefully) sell the property to pay for tuition. Or if your child chooses to stay close to home, they could live there rent free and save on boarding costs. Like I said, risky and leaves a whole lot to chance, but to each their own!
It’s not as easy to earn from Upromise as it once was, but it’s still worth having the free account. You can add family members to your account so that their spending counts for your child as well. Upromise gives you back a percentage of your spending at local restaurants and retailers, as well as online shopping. Register your credit cards and grocery loyalty cards and the funds are automatically added when you make the purchase with a registered card. Your grocery purchases must be made at a participating store in order to earn cash back. You load Upromise’s grocery ecoupons onto your loyalty card, scan the card at checkout and the savings are added to your Upromise account. It used to be that you got money just for buying a certain manufacturer’s product, but now you must remember to log in and add the ecoupon to your card first.
Related: Get Your Cash Back
Show your child how much their degree will cost from each of the perspective schools they’re considering. Discuss how much he/she can save by doing what credits they can at a community college. Show them in-state versus out-of-state costs. After sharing how much you are able to contribute, give them a rough estimate of how much they’ll owe and what that loan payment will be over the standard 10-year repayment period.
Have them look at it as a business decision and try to remove emotion. It makes no sense to spend $80,000 on a psych degree. I’m sorry, it just doesn’t. Their first job will net them $23,000 a year in income (I speak from experience)—they’ll be in student debt for ages! And no, they shouldn’t rely on some student loan forgiveness program being there for them.
Some majors will almost require your child to further their education in order to earn a decent income or achieve the career they want. Make sure they’re looking at the whole cost and not just their undergraduate experience.
Beware of 3/2 programs (or 4/1 programs) as well. 3/2 programs give you the ability to earn your bachelor’s and master’s degrees back to back, but they don’t always guarantee savings.
I have a BS in psychology from a state university and an MS in counseling psychology from a private university. I spent 4 years at state and “2” years (took me 5 because I had 2 babies in that time, but you pay by the credit so time doesn’t cost you anything—except time) at private for less than some of my colleagues spent at a private 3/2 program.
One of my colleagues spent over 6 figures earning his 2 degrees. I spent half of that. Yes, he would have graduated a year sooner and been earning money before me, but even that difference accounted for, I still came out ahead financially. And now he’s paying all of that back on a $30,000 a year salary. Uh, mulligan please?!
Don’t assume your kid won’t qualify for anything. Have them apply for everything they can. Their high school guidance counselor can point them in the right direction to begin their search.
I got a leadership scholarship that covered partial tuition at a state university and I wasn’t an exceptional student. I managed to just barely graduate in the top 10% of my senior class so I was above average, but by no means top of the class. Don’t let your child sell their self short. Extracurriculars and character can really take them far.
You’re familiar with work study jobs for qualified students, but that’s not what I’m talking about. If it’s something that may interest you or even be possible, consider working for the college that your child is interested in. You’ll typically be offered free tuition for you or your child, though room and board is still a cost to factor in. I worked for the private university that I got my Master’s degree through. It saved me 3 semesters worth of tuition payments until I left to have a baby. That was a huge savings that I could basically calculate into my salary.
If your child is eligible, encourage them to take those Advanced Placement (AP) courses and subsequent exams. By taking the class in high school and scoring well on the exam, they can opt out of the course in college. There is a fee to take the exam, but it’s significantly cheaper than a college course so it’s worth the cost. Even if they don’t help your child receive college credit (some universities may not recognize them), the courses may help them receive a scholarship as AP courses are taken into consideration when making those decisions.
Once it’s time to go, there are still some ways to cut costs. Consider whether living at home and commuting is an option. If it’s not, look at room and board costs versus renting an apartment. I went to a branch campus and lived at home for a while. After that, I secured my own apartment. I lived cheaper, in my own space, without a communal bathroom and roommates, than I would have on campus. Had I decided to take on a roommate, I’d have obviously saved that much more.
Buy your textbooks used and look outside of the campus book store. Online bookstores will often have better pricing than your local store. There are also new options for renting them online through downloadable ebook form as well.
Just because the big bill arrived in the mailbox, doesn’t mean the whole thing has to be paid today. Many schools will allow you to make payments for a small enrollment fee. That fee, usually $25-$100, is far less than paying interest on a loan, so if it helps to spread the bill over 6 payments, then take advantage of that option.
Take a full course load. My first semester, I didn’t know any better and I listened to the advisor who recommended not taking more than 12 credits. He was afraid I’d be overwhelmed because my math course was a 4-credit advanced class. I listened and then realized after doing the math (how ironic!), I’d be behind on graduating if I did that every semester.
A bachelor’s degree is typically 120 credits. If you take only 12 per semester, it’ll take you 10 semesters, or 5 years, to graduate meaning that much more in tuition payments. Full time is considered 12 credits, but so is 18 credits. And guess what—it costs the same! If you can take 18 credits per semester, you’ll complete your 120 credits in 7 semesters, saving you one full semester of tuition and fees. You’ll actually have 126 credits that way, so two semesters you could back down to 15 credits, or your final semester you could take it easy with 12 credits while you job hunt! Just remember to average 15 credits per semester to graduate in 4 years. You don’t want to pay anymore for your degree than you have to!
There’s no reason to believe that one can’t graduate college without student loan debt, even today. My husband and I are both proof of that. Yes, we were fortunate that we had parents who could help us financially. But we also made smart choices; choosing a local, in-state school, not living on campus, etc. And we worked full time while in college to pay our share of the bill. It held us accountable and kept us focused. It wasn’t easy, but it was worth it. And most things that are worth it are never easy.
Do you wish you had a do over on your college choices or your student loans? Do you have a plan in place for your children’s education or are you just winging it? Would love to hear your thoughts in the comments!