Paying for College
When my son was about four years old, he announced he wanted to become a paleontologist. Since then, he has also considered designing roller coasters, marine biology, and a career as an artist. With each new twist in his vocational desire, I hear the distant sound of a cash register opening – and it is getting closer.
I am not the only parent who wonders how to fund the hopes and dreams of my children. Most Americans will rank saving for their child’s college as important as saving for retirement. Research says that up to one-quarter of Americans will actually use their retirement savings to pay for on-going education for their children. The good news is that it doesn’t have to be so threatening.
At present, an undergraduate, who is studying a four-year course at an in-state public college, is likely to pay around $7,500 per year in tuition. That is cut to about a third for two-year courses. Of course, private colleges are going to be more, and there are costs associated with living away from home besides the course fees. This gives us a ballpark figure to work toward. Then, it is simply a matter of starting.
It sounds simple, but the sooner you start, the easier it will be. If you only consider the fees when application letters are being sent out, then you are in for a very steep rise in outgoings. However, if you plan ahead, you can tuck away considerably smaller sums over a long term and still see a pretty plaque on the wall and letters after your little one’s name. Some schemes even allow for you to begin before a child is born and then attribute the savings to them once they have a legal identity!
With a workable budget in mind, and enough years ahead to make it feasible, one of the more important elements to then consider is taxation. It is a tricky field at the best of times, but an important one to get your head around. Both Coverdell education savings accounts and 529 College savings plans grow tax free and have no tax burden on withdrawals as long as they are for paying education costs. If you want your fledgling Einstein to be able to access all the money you set aside without losing a chunk in tax, then setting it all up right is vital.
What sometimes concerns me though is how much engineering design school will cost in 2020 if the rollercoaster idea takes off. If I can’t afford it now, I hate to think what it will be worth then! Thankfully, many colleges allow you to pay in advance at the current rate, effectively paying for tomorrow’s college today, and some 529 plans allow you to ‘lock in’ the cost of education if you keep it in-state.
Still, the thing to remember is that you are not alone in the struggle or in footing the bill. There are plenty of resources to help point you in the right direction, from financial advisors to friends who have “been there and done that.” What is more, there are grants and financial aid available to most students, with over 150 billion dollars paid toward undergraduate studies in the 2009 – 2010 year. So encourage your kids to dream big and start small in resourcing those dreams. You never know; they might name a dinosaur after you.