Do you have a plan to pay for your child’s education? If not, you may be feeling a bit panicked. After all, a college degree these days is as essential as a high school diploma used to be 40 years ago.
Yet, without a plan, you may wonder how your child will ever be able to afford college. Consider that the average in-state tuition at a four year college is $8,655 per year. This doesn’t even include the cost of room and board!
When I went to college, I earned my bachelor’s and then my master’s. My parents had no money to pay for college, so I paid through work study, grants, and student loans. Fifteen years after I received my master’s degree – just last fall – I finally finished paying off my student loans.
I don’t want the same for my children, but my husband and I have not yet started saving for their college educations. Our first priority was paying off my student loans and saving for retirement. We knew we needed to take care of ourselves first, so as not to burden our children later in their lives.
I talked to some personal finance bloggers about their plans for paying for their children’s college education. Here’s how they plan on handling the expense of college.
Receive Free Tuition from a Parent’s Employer
Our own college plan is rather simple now.
My husband’s career field has him working at a college as a researcher. Any of his children who attend that college will get free tuition. This is a great opportunity for our children to have their education paid for in its entirety.
If a child decides to go to a different college, we’ll respect that, but we likely won’t be able to help contribute for anything beyond basic living expenses. If, after the child graduates, we have extra money, perhaps we’ll help pay down his student loans.
Pay a Portion of College
Miranda Marquit is a journalist and popular personal finance writer. She also blogs at Planting Money Seeds. Miranda and her husband have one son who is 10. She and her husband save for college in multiple ways.
“We use Upromise, the college savings program from Sallie Mae,” she says. “It’s connected to the credit card we use for online purchases. The money is transferred to a connected high-yield savings account (you can also put it in a 529 plan). My son also saves 20% of his income (money from birthdays and gifts) in his own high-yield savings account. But the real effort is the money we set aside each month in his 529. We invest each month in a plan that invests in a low-cost index fund.”
Miranda and her husband have agreed that their son will be responsible for paying his own college tuition, which she hopes will influence his decision about which college to attend. She and her husband have talked to their son, “encouraging him to do well in school and develop extracurricular activities.” She and her husband plan to pay room and board as well as miscellaneous items like car insurance and books.
Take Advantage of the G.I. Bill
Lazy Man, the blogger behind the popular personal finance blog, Lazy Man and Money, has a different plan to pay for college. His wife is career military. Since she, herself, never used her G.I. Bill, they have four years of paid tuition and a portion of board that she can use for her children. Now the parents of two young boys, Lazy Man and his wife plan to give each child half of the GI Bill.
That leaves 50% of their college unpaid. Lazy Man and his wife do contribute to a 529 plan, and tentatively plan to pay half of the unpaid tuition. That leaves each of their boys to fund 25% of their college education, which Lazy Man feels is important. He wants his children “to pay some of the way to teach responsibility.”
Encourage Kids to Save
Linsey Knerl is a freelance writer for many personal finance sites such as Wise Bread. She is also the blogger behind 1099 Mom and Lille Punkin’. In addition, she is a mom to six kids, all of whom she homeschools. Linsey acknowledges, “I have six kids. There is no way I can pay for all their college.”
However, she does plan to encourage her kids to take college level math and science classes while still in high school, giving them early college credit. (When taking classes at the community college while in high school, her children are eligible for a 50% discount on tuition!) She and her husband will also pay room and board if their kids go to college nearby and continue to live at home.
In addition, her younger children are required to save 30% of their allowance and 30% from the jobs they work as teenagers. She talks candidly to her children about the ROI (return of investment) on certain college degrees and hopes that they’ll choose majors that can lead to jobs that pay well.
Don’t Forget Your Own Retirement
All three of the bloggers each said that saving for their own retirement is their first priority. As the old saying goes, “You can take out loans for college, but there are no loans for retirement.”
Miranda puts it best: ” I think that it can be a bad thing if parents put their retirement at risk to set money aside for a college fund. Our retirement fund contributions are about 2.5 times what we contribute to our son’s 529. As selfish as it sounds, it’s more important to make sure that you are on firm financial footing. You can’t help anyone with anything if you can’t take care of yourself.”
College expenses increase every year. As these four families illustrate, it takes creativity and disciplined savings to get your children through college without burdening them excessively with student loans.
How are you planning to pay for your children’s education? What portion of their education do you plan to pay?