My Child's College is Going to Cost How Much?!

Educating children about good financial behavior is one of the most popular topics on our blog and social media channels, not just because it’s so critical to do, but also because most parents don’t have the tools to know whether they’re doing a good job.  For most of us, all we have to go by is what we learned from our own upbringing, which in many cases is not enough!  Fortunately, there are some excellent tools to help you and your child plan for one of the decisions most critical to both of your financial futures:  saving for a college education. 

 

College tuition costs increase 5-6% per year, making it more important than ever to make sure you and your child have a clear perspective on what higher education costs and what covering the cost will mean to your finances.  Many people avoid discussing this with their kids because it’s such a daunting topic and they don't want to put undue pressure on their children when they are young; however, the pressure can be alleviated in the short-term and conflict can be avoided later if you and your kids have a realistic view of the expense of a college education and the benefits of the options that are available to them.

 

Two college questions to ask while the kids are still young 

 

1. How much is college actually going to cost? 

 

You must answer this question before your child approaches college age so you both have realistic expectations early on about what you are willing/able to pay for.  Your child also needs to see how much debt he or she might have to incur to fund the education they desire.

 

A handy way to do the math is with The Hartford’s Smart 529 College Savings Planner.  Though it might make my wife have a panic attack, I used this calculator to come up with the projections below about what it might cost to send my five-year-old daughter, Amelia, to whichever school she chooses to attend.

 

Today in 2017, annual tuition at Jefferson State Community College is $4,440 per year.  In-state tuition at the University of Alabama is $20,020, while out-of-state tuition at the University of Georgia is $39,460, and Harvard costs a whopping $63,025 per year.  Assuming an annual inflation rate of six percent, that means the total cost for Amelia's education at age 18 will be between $41,428 and $588,070, depending on where she goes to school, for which I will need to save between $133 and $1,892 per month to cover.

 

School	Cost in 2017	Estimated 4-Year Cost in 2030	Monthly Savings Required
Jefferson State Community College 2-year public school	$4,440	$41,428	$133
University of Alabama 4-year public school, in-state tuition	$20,020	$186,801	$601
University of Georgia 4-year public school, out-of-state tuition	$69,460	$368,190	$1,184
Harvard University 4-year private school	$63,025	$588,070	$1,892

 

 

2.  Is the cost of a particular school worth it for the experience?  Many people think it is unrealistic to expect that the current inflation rate will continue, but most of the admissions officers we've talked to don't see it slowing any time soon.  Parents and students continue to demand and gravitate toward schools that provide the type of high-end facilities that drive such inflation. 

 

But will there be a point at which it becomes too expensive?  How much can you afford to spend without sacrificing your retirement?  Is a degree from your school of choice worth the amount of debt you will have to take on to cover the shortfall in your savings? 

 

If you want to be a hedge fund manager, then an ivy league degree could be worth the expense because of the network you'll develop.  But otherwise, your alma mater is not the determining factor in what kind of job prospects you can expect after graduation according to one former Yale professor.  The kind of person you are and how you behave will have more bearing on the opportunities you will receive.

 

If you have the money, the ivy league experience may be worth it to you.  If so, consider yourself fortunate!  If not, you can get a great education that can take you anywhere at a less costly school.  Some of the most successful people we know went to state schools, while we know of incompetent Harvard graduates who have bankrupted companies.

 

The answer to this question will be different for everyone.  The bottom line is that you can only decide what your priorities are in light of the costs associated with your options.

 

 

 

RELATED POST: Your Child(ren)’s College or Your Retirement?