Can we afford college | On Financial Success


Q: We have one daughter heading to college next fall with another likely to attend in a couple of years. We don’t have any college funds or savings, so how should we go about paying the bills?

A: You should be commended for your desire to help your children start life with a strong education. Although many parents cannot afford to pay for college, most can at least help. Here’s a checklist to determine how prepared you are to cover your children’s expenses.

  • You have no credit card debt
  • You invest enough in your 401k to receive the maximum company match
  • You have no car loans
  • Your retirement accounts (IRAs, 401ks, pensions) are growing at the pace required to retire someday

If the first three statements are true, you may be in a position to help with tuition or their living expenses. Otherwise, you probably should focus on creating and following a written budget, paying down your debts, and investing for retirement. There are many ways to pay for college, but only two options in your golden years: live off a nest egg, or keep working to pay the bills.

College doesn’t have to be expensive

A college degree is one of the surest ways to raise your children’s income potential, but that doesn’t mean a degree has to cost a lot. Here’s the three biggest costs you need to discuss with your children.

Moving out vs living at home. The decision to live at home or flee the nest will probably have the biggest impact on your children’s expenses. Walk them through the bills they’ll be responsible for if they choose to move out on their own. Rent, food, utilities, and internet access will cost them thousands—month after month. Living on campus might be cheaper, but room and board will still cost eight to nine grand a year.

Community college or straight to university. Community colleges are a wonderful option. There’s often one near home, the tuition is affordable, and many students find the transition easier than heading straight to a university. With an average annual tuition cost of $2,361, community college tuition is almost four thousand dollars less than the average public university’s tuition.

Private vs public university. The decision to attend a private university or an out-of-state university can add thousands to the bill. At $6,185, a hard working student could pay for his or her public university tuition with a good part-time job. But, out-of-state tuition at an average cost of $16,640 is probably beyond most students’ reach. Even more expensive, the cost of an average private university comes in at $23,712 a year—before considering room and board!

Choices, choices, choices

Although college will be expensive, your children’s decisions will determine how expensive. Keep in mind that almost two-thirds of full-time undergrads receive grants and/or tuition wavers.

Pursuing scholarships is another option. Make sure you don’t overlook the smaller scholarships because they often only receive a handful of applications.

You’ll also want to include your second child in your college discussions. The sooner children start thinking about college and it’s implications, the better prepared they will be.

And finally, don’t sacrifice your financial health by helping more than you can afford to. You won’t be doing your children any favors by spending money you either don’t have or can’t afford to spend.

This article was featured in the Carnival of Personal Finance hosted by MoneyNing.

Source: College Board
Photo by Dimitry B.