College planning falls into two categories: admissions and funding. In this article, we will be discussing the latter. Many families focus on metrics like GPA, Standardized Testing Scores, and rankings. Although these are important, we forget one important issue—cost. And tuition should not be confused with COA (Cost of Attendance). COA encompasses tuition, room & board, fees, books, miscellaneously fees, and some personal fees).
There are many strategies on how to fund college, but you need to create a plan. Whether you are a young family, middle age couple, or grandparents, a plan must be set in place. While setting up a college funding plan, you should consider things like safety of principal, growth, flexibility, liquidity, stress test, and an exit strategy.
The cost of tuition landscape has changed dramatically over the last 20 years. More families are realizing the cost of attending a four-year university is taking a big chunk of their retirement assets. The cost of attendance has risen over 200% the last two decades with no sign of slowing down (an increase of 10% per year).
Today, the cost of private schools like USC is $ 81,659, UC’s average $37,000, and Cal State’s average $27,000 PER YEAR. Over a four-year period, the cost is $100k -$320k, and if you have two children attending college, the cost is $200k – $640K. You can see why we have a national student debt dilemma. Student debt is over 1.7 trillion dollars more than car debt and credit card debt.
I am frequently asked if the cost of college will ever decrease, and the answer is: no. It never will. Why? Because we will always continue to value education, both banks and feds will always lend for education, and foreign students pay full tuition, which is very lucrative for universities and subsidize the cost to American students.
In 10 years, it is projected a school like UCLA will cost $52,000 PER YEAR (using 3.5% increase each year vs. historical 10%). If you are a parent to a high schooler or brand-new baby, or even a grandparent, it is imperative you start planning now and incorporate college planning into your overall financial planning strategy. The financial strategy is simple: obtain as much free money (available for all income levels) and develop a funding plan for the balance of net investment in your student’s education.
For younger parents, if you don’t have enough to contribute now, what you do have is time. With very little investment over a long period of time, compounding interest will yield a hefty amount of cash that can come close to paying for tuition. Setting aside anywhere from $300 to $500 per month for 15 years at 6% interest can yield a little over $100,000. Just remember: the shorter the time you save money, the more you will have to pay later.
If you are older parent with teens, you may have assets saved but not properly utilized. You may be invested in 529’s, UTMA’s, Cloverdale Educational Savings, etc., and these plans may be hurting you more than helping. Perhaps you have some assets in cash, vehicles, or securities where you may be unknowingly or unnecessarily losing money. These are all items to look into while saving for your child’s education.
The following is an example of how we maximized a client’s parents’ assets to help fund their education:
- Our client was accepted into NYU, and the cost was over $80,000 a year. The student received $45,000 in free money and net educational investment was $35,000. We used several different assets to pay for said amount. We uncovered a property the parents purchased several years ago that was their vacation home. This asset was used by the family only 60 days of the year. We were able to show our client’s parents how to generate passive income from that specific asset and use the proceeds to pay for their child’s education.
If you’re a grandparent and have an UTMA or money saved for your grandchild, do not send money directly to the university or to your grandchild. These actions can trigger unintentional tax, income, and financial aid consequences. There are better ways to go about helping your grandchild fund their education.
It is imperative to remember every family is unique and should seek advice from an expert in college funding. The team at College Assurity is ready to help you and your family plan your children’s educational endeavors.
If you like read more on how clients are paying for college, please visit College Assurity’s website at https://collegeassurity.com/blog/. We are also holding a workshop titled, “How to Obtain Free Money Regardless of Income,” on September 8th at 7pm at 25060 Avenue Stanford Ste 100, Valencia, 91355. You must register for this event, as seating is limited. To register, please go to https://collegeassurity.com/workshop/ or call 661-600-8247.