Closet_Gamer
Thinks s/he gets paid by the post
Good thread.
If I can add my own advice/perspectives, I think this is a place where one is better to be very conservative and not expect a lot of help. People have been saying for 20 years that college costs would stop going up. They haven't, a generation has been crushed by badly planned debt, and I wouldn't plan for this to resolve itself.
My suggestions:
1) Come to grips with the actual cost of university quickly.
A very good way to do this is to visit https://www.pa529.com/pdf/gsp/2019-20-Rate-Card.pdf
PA GSP is a 529 tuition plan that indexes your contributions to the type of college you're saving for. The value of the above PDF is that it shows their current view of a semester of tuition for a basket of schools in a given category. (e.g, community, state, private, ivy). Its a good barometer of the costs.
Room/Board tends to be about a 40% load on top of tuition. So if you're planning on sending your kid for 4 years (16 semesters) then the gross cost of tuition will be about 16*1.4 = 23 semesters of the tuition rate they list.
Take that number and compound it about 3.5% per year until your kid goes to college. That's a good approx of the gross cost of college.
Redo this calculation every fall when the new credit schedule comes out. Deduct what you have saved for college from 23*semester rate of type of university you're saving for and you'll have a sense of where you stand.
I did this every fall for a decade and it proved remarkably useful in keep track of where we stood and what our kids could afford.
2) Decide what you're aiming for
Get a specific dollar target or outcome you're willing to pay for. "We'll pay the first $100k" or "We'll pay for four years of a state school." Something that makes it tangible, calculable, and practical. It demystifies it and makes it easier to plan
3) Be upfront with your kid; help them plan
They need to know what the reality is. If they're mature enough to go to college, they are mature enough to participate in planning how it will be paid for including coming to grips with what you can contribute and understand that every $ above that contribution is on them.
We built financial models for each school, researched likely income post-grad for the degree she was going for, and built a prospective post graduation budget including the impact of debt payments.
Before long, she was spending as much time in the model as we were.
4) Merit Based Aid Only ... emphasize good academics.
If your kid has good grades and good SAT/ACT, most universities do kick some merit aid into the pot. Treat need based aid as unexpected gravy. Most of it is loans anyway.
Explain very clearly to your kid that they will benefit dollar for dollar on getting that merit aid up. It all goes to them b/c it comes "off the top" of what they're expected to contribute. We calculated that my daughter would get an extra $15k of merit aid from her target schools if she got her ACT up 3 points. She got it up 4 points. $15k just came off her loans.
5) Secondary Scholarships
We were in the camp of having hunted for scholarships but struck out and it being a poor use of time. YMMV.
6) Maintain a Declining Balance
Once your kid is in college, maintain a very clear declining balance on what you're paying and show it to your kid every time something is paid. DD1 is very, very aware that once it hits $0, the rest is on her. Every time something gets paid, she cringes. Surprise, surprise...she has two campus jobs and is very practical about the impacts of her choices. She's still enjoying college but she's working to keep her choices "in bounds."
You may have to occasionally remind them of reality tho, a constant source of humor in our house is when she says always eats at the dining hall because its "free" and she doesn't have to spend other money. A good instinct, but I do remind her that its not free...its just prepaid.
7) STEM
Perhaps this is a personal bias, but I would put the brakes hard on any kids who wants to spend big bucks on a liberal arts degree. The market for STEM skills is just much more certain. My $0.02
8) Don't eschew state schools
I went to a little ivy. That same little ivy would cost around $400k now. NFW.
As I look at my friends from college, I'm likely the second most "successful"...and the guy that went bigger than me had a family that could kick a few million into his start-up company. College is an investment and a launch point, not a life ticket...and most of my success came from risk taking and sweat, not my diploma.
DD1 is in a state school...I'm blown away by the quality of the teaching, facilities and staff support. If little Johnnie really is going to run the Mayo Clinic or sit on the supreme court then by all means send him to Harvard. But those life plans are usually just BS.
College is now likely the third most expensive thing we will ever buy behind retirement and houses. It takes a lot of planning and requires the "adult" part of our "young adults" to be front and center in the conversation. Help them plan and invite them into the process. They will rise to the occasion.
My $0.02
If I can add my own advice/perspectives, I think this is a place where one is better to be very conservative and not expect a lot of help. People have been saying for 20 years that college costs would stop going up. They haven't, a generation has been crushed by badly planned debt, and I wouldn't plan for this to resolve itself.
My suggestions:
1) Come to grips with the actual cost of university quickly.
A very good way to do this is to visit https://www.pa529.com/pdf/gsp/2019-20-Rate-Card.pdf
PA GSP is a 529 tuition plan that indexes your contributions to the type of college you're saving for. The value of the above PDF is that it shows their current view of a semester of tuition for a basket of schools in a given category. (e.g, community, state, private, ivy). Its a good barometer of the costs.
Room/Board tends to be about a 40% load on top of tuition. So if you're planning on sending your kid for 4 years (16 semesters) then the gross cost of tuition will be about 16*1.4 = 23 semesters of the tuition rate they list.
Take that number and compound it about 3.5% per year until your kid goes to college. That's a good approx of the gross cost of college.
Redo this calculation every fall when the new credit schedule comes out. Deduct what you have saved for college from 23*semester rate of type of university you're saving for and you'll have a sense of where you stand.
I did this every fall for a decade and it proved remarkably useful in keep track of where we stood and what our kids could afford.
2) Decide what you're aiming for
Get a specific dollar target or outcome you're willing to pay for. "We'll pay the first $100k" or "We'll pay for four years of a state school." Something that makes it tangible, calculable, and practical. It demystifies it and makes it easier to plan
3) Be upfront with your kid; help them plan
They need to know what the reality is. If they're mature enough to go to college, they are mature enough to participate in planning how it will be paid for including coming to grips with what you can contribute and understand that every $ above that contribution is on them.
We built financial models for each school, researched likely income post-grad for the degree she was going for, and built a prospective post graduation budget including the impact of debt payments.
Before long, she was spending as much time in the model as we were.
4) Merit Based Aid Only ... emphasize good academics.
If your kid has good grades and good SAT/ACT, most universities do kick some merit aid into the pot. Treat need based aid as unexpected gravy. Most of it is loans anyway.
Explain very clearly to your kid that they will benefit dollar for dollar on getting that merit aid up. It all goes to them b/c it comes "off the top" of what they're expected to contribute. We calculated that my daughter would get an extra $15k of merit aid from her target schools if she got her ACT up 3 points. She got it up 4 points. $15k just came off her loans.
5) Secondary Scholarships
We were in the camp of having hunted for scholarships but struck out and it being a poor use of time. YMMV.
6) Maintain a Declining Balance
Once your kid is in college, maintain a very clear declining balance on what you're paying and show it to your kid every time something is paid. DD1 is very, very aware that once it hits $0, the rest is on her. Every time something gets paid, she cringes. Surprise, surprise...she has two campus jobs and is very practical about the impacts of her choices. She's still enjoying college but she's working to keep her choices "in bounds."
You may have to occasionally remind them of reality tho, a constant source of humor in our house is when she says always eats at the dining hall because its "free" and she doesn't have to spend other money. A good instinct, but I do remind her that its not free...its just prepaid.
7) STEM
Perhaps this is a personal bias, but I would put the brakes hard on any kids who wants to spend big bucks on a liberal arts degree. The market for STEM skills is just much more certain. My $0.02
8) Don't eschew state schools
I went to a little ivy. That same little ivy would cost around $400k now. NFW.
As I look at my friends from college, I'm likely the second most "successful"...and the guy that went bigger than me had a family that could kick a few million into his start-up company. College is an investment and a launch point, not a life ticket...and most of my success came from risk taking and sweat, not my diploma.
DD1 is in a state school...I'm blown away by the quality of the teaching, facilities and staff support. If little Johnnie really is going to run the Mayo Clinic or sit on the supreme court then by all means send him to Harvard. But those life plans are usually just BS.
College is now likely the third most expensive thing we will ever buy behind retirement and houses. It takes a lot of planning and requires the "adult" part of our "young adults" to be front and center in the conversation. Help them plan and invite them into the process. They will rise to the occasion.
My $0.02
