Before their children are even born, parents start doing everything in their power
to make sure their kids have as many opportunities for success as possible. Parents
understand how much of an influence learning and education will have on their kids’
futures. Anticipating how to pay for a child’s college education can be frightening
today without even considering the changes to come in the future.
The cost of higher education has increased for years at rates well above inflation.
Even, historically lower cost state-run universities are reviewing their expenses
and have begun to raise their tuition rates as well. Rates are also rising at 1
to 2 year technical or trade schools.
What are the average costs? A four-year public college or university averages approximately
$3510, including tuition and fees annually, while private institutions average $16,332.
On a more positive (and lower costing) note, almost three-quarters of college students
attend a four-year college where tuition costs are less than $8000 a year. Of course,
these averages do not include room and board or books and supplies. Overall, a four-year
college education can end up costing as much as $100,000 or more and for parents
trying to figure out how to pay for all of this, it can be unnerving.
Parents may have difficulty developing a plan for college savings but all of these
price ‘variations’ can make it even more difficult. For a more realistic
perspective, parents should to consider what schools your child may attend, and
begin planning from current cost information from those institutions. Granted costs
may continue to rise between now and when your child enters college, but this information
will give you an approximate total goal. Recognize that these figures can be intimidating.
Higher education costs
continue to rise at rates
well above inflation.
Stay Calm!
The sooner you start, the less of a burden it will be and the better battle plan
you’ll create. (Again, when you start early, you’re looking at maintaining
savings programs over 10 to 18 years, not just one or two.)
There are many different ways to save and invest to pay the cost of education. The
World Wide Web has numerous websites with tuition saving and college investment
calculators. These calculators can assist you in determining how much its going
to cost to send your child to college and how much you’ll need to regularly
save to get them there. (Try
http://moneycentral.msn.com/planning/home.asp).
One of the most highly advocated methods of saving for education expenses involve
Section 529 plans. In 1996 Congress authorized Section 529 investment plans. These
plans offer flexibility, control, and tax and financial aid advantages. The funds
can be used for college expenses in any state, at any accredited college. If one
child does not use the funds (drops out or is not interested in college) another
member of the family—including cousins, nieces or nephews—can be named
as beneficiary or recipient.
Unlike other college savings plans Section 529 plans do not transfer control of
the money at the age of majority to the beneficiary. The donor or saver retains
control over the funds until they are needed. The plan funds can be used for a wide
variety of expenses but all must relate to higher education. (So there’s no
risk that the recipient will use the funds for some other purpose such as to buy
a car or boat as with some other programs.) Section 529 plans are not considered
a student asset when financial aid is determined and currently are completely tax-free
at the time of withdrawal if used for qualified educational costs.
Most importantly, do your research early, consult a financial advisor, and get
started.
As every parent knows: kids grow up before you know it!!