For most parents, financial planning for college is an integral part of preparing for your child’s future. While most people recognize the importance of saving for their child’s education, many simply start saving without a specific goal.
Like anything in life, you’re more likely to be successful if you come up with a more specific end point. That way you can set a monthly or annual savings goal and keep yourself on track.
This article can help you estimate the expenses you will likely need to account for, which can get you started. Following that, we’ll address some strategies for reducing this cost.
Please note that all numbers provided are very general estimates only.
The biggest cost of a college education is usually tuition. This cost is fixed whether your child commutes to school or lives away from home. One of the most significant determining factors of tuition payments is where your child will attend school. If your child plans on attending a state college as a resident, they can expect to pay between $9,500 and $12,000 per year in tuition fees. Non-residents attending a state school can pay $18,000 to $24,000 in tuition, and those attending private universities may pay $35,000 and above per year.
Housing and Meals
If your child lives on campus they will have to pay for room and board, which averages between $10,000 and $15,000 a year for both public and private universities. This will often include dorm fees and a meal plan which can vary depending on your child’s choices. If your child plans to live in off-campus housing, such as an apartment, the amount will depend on the average rent in the area as well as the cost of utilities, groceries, etc.
Books, Lab Fees and Supplies
The cost of books, lab fees and supplies can range widely depending on the type of degree your child pursues. On average you should budget for between $1,400 and $2,500 a year to have enough to cover all the books, fees and supplies your child will need for class. Some colleges have a lot of material online for student use, but these often rely on access codes which will need to be purchased in addition to books.
If your child commutes to school for any distance, you will need to budget for their average cost of either public transportation or gas to and from school. If they drive themselves, they will also be likely to need a commuter parking permit to park on campus. For those who live on campus, they will need to purchase an on-campus parking pass and gas for when they come home or run necessary errands.
However, thanks to the prevalence of Uber and Lyft your child may not need a car at all, and it’s often much smarter to not involve a personal car. Additionally, many campuses offer transportation for areas in and around campus.
Throughout the year your child will need money for personal spending such as clothing, entertainment and other costs that may not be necessities but are often normal expenses. While the amount can vary, the average cost for personal expenses per student, per year can run between $2,000 and $3,000.
Strategies to Lower Your Costs
Adding these numbers up can be a sobering reminder that college today is downright expensive. Fortunately there are ways to lower the bill. There are always small ways to save, such as choosing used textbooks over new, for example, but there are two strategies that can help to mitigate some of the high costs of tuition.
Community College First
One significant approach is to have your child complete two years at a community college, then transfer to a four-year college to complete their degree. Tuition at community colleges can cost as much as 20% to an eye-popping 80% less than four-year institutions. This represents a tremendous cost saving and your child will end up with the same end result as spending the full four years at the final college.
As previously noted, going to college out of state can create additional cost. It can be far more affordable for your child to go to a state college in your state of residence than to cross the state lines.
Even better, your child living at home and attending a local state or community college provides a much less expensive option.
Wants Versus Needs
This country is experiencing a crisis of student debt. Whether you pay, or your child uses debt, remember: an education is just one tool of success. Many young people today are finding out that education alone is not necessarily the key to a strong income. If they had the chance, many would likely go back and go a more affordable college route.
This is where honest conversations with your child can help. College should be an exercise in preparing for a financially sound future, not a time to overspend (or rack up debt). Unless there’s a clear plan in place that makes sense, it’s usually best to look at this closely, to make sure no one is overreaching.
Financial advisors can help with this process too. At our firm, we’ve had discussions with our client’s kids to help them understand the costs to the family of going out of state. Often a professional perspective can help them understand the long term repercussions of college costs and why going the in-state or community college route can be a smart move. So feel free to ask your financial advisor to help…that’s what we’re here for.
Start Early and Use Tax-Deferred Options
By starting to save as soon as possible, you can get time on your side. Take your estimate and either using some financial software, or sitting down with your financial advisor, devise a plan to get to that amount in the future. As with most things, using an automatic withdrawal can help you stay on track to your set goal. By starting early, you can help get compounding working in your favor.
Fortunately our tax code also provides some ways to save more tax-efficiently. I’ll cover those in a future article.
*Please note that all numbers provided are very general estimates only. As always, consult a professional before relying on any information provided in general articles such as these.
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