Saving for college is top of mind for most families focused on improving their child’s future prospects. At the same time families are convinced sending their child to college is in his or her best interest, college costs have risen 1,120% in the last 30 years. Read that again: 1,120% in the last 30 years! Realizing this reality, most families experience three negative feelings: price shock, anxiety regarding inadequate cash flow for saving, and frustration in a general lack of solid guidance on how to move forward.
Do you know what college costs in today’s dollars?
If I know one thing, it’s that most families do not have a realistic picture of how much college costs. This becomes real when a family sits down to review their financial aid letters from a college. Quite frankly, it’s not their fault. College cost has inflated at a faster clip than other sectors of the economy.
Luckily, there is an easy way to start that doesn’t involve saving a dime. In fact, it’s the most important part of the process. That’s right, there’s a step before saving that’s incredibly important. It’s creating your college funding strategy.
What is a college funding strategy?
An college funding strategy is a clearly-defined, specific plan as to how college will be funded. What percentage of college costs will be paid from savings and current earnings at the time of enrollment? Will the student be responsible for contributing, either through scholarships or working through college? Will a family limit their financial exposure by eliminating tuition above a certain price point or restricting the search by geography or type of school (public vs. private)? As you can see, there’s a lot to define before saving can ensue.
Why should I write down my college funding strategy?
A documented college funding strategy also makes clear parent and student expectations for the college experience. For example, will the child attend a parent’s alma mater, only pursue majors that clearly lead to gainful employment, or graduate in four years? Write these directives into the strategy and communicate them to all parties involved. This process – if it fosters a spirit of open communication – can take a lot of the guesswork out of the upcoming college and scholarship search process.
Where will the money come from?
A lot of families ask at this point, where will the money come from? Generally speaking, families can expect to pay for college from four general categories: scholarships and grants, current earnings, savings, and loans. To get a full picture of the flow of money through higher education, and how much your family can expect, contact us today. We can help you develop a college funding strategy, too.