Whether you’re a parent, grandparent or student, the phrase “college tuition” comes with some degree of sticker shock. The good news is that it becomes much more manageable when you create a roadmap and plan ahead.
To effectively map out your plan, it’s vital you understand exactly what your (or your student’s) goals are for college. The following action items are all stops along the way. By thinking through these issues, you’ll be able to identify your objectives and develop a framework for your vision.
Determine your timeline—and work backwards.
This is pretty self-explanatory. Who are you planning to send to college? Is it yourself? Your 16-year-old daughter? Your newborn son? All of the above? Just as the time horizon on your investments is important, the timeframe on your education goals is key.
The sooner you start planning for your education goals, the better! (But admittedly, the process becomes more complicated, too.) It is relatively simple to estimate college costs if you are sending someone to school next year versus sending someone off to school in 10 years—and even more-so if you are 18 years out from enrolling your student.
Decide what “type” of school is right for you.
Each school has its own culture and traditions, making it difficult to set hard and fast rules for classifying them. That said, these are a few general “types” for your reference.
- Private – These schools typically are not funded by state and federal government funds. (They may receive some grant money.) Typically, tuition costs are higher at private universities, but their academic reputations, traditions, and charm draw students to them year after year.
- Public – State and federal government funding is provided to these schools. Tuition is typically lower and tuition rates can vary depending on your residency. This is due to state tax dollars partially funding the in-state schools.
- Liberal Arts – Schools classified as liberal arts schools tend to focus on general education across numerous disciplines. The goal of liberal arts school is to teach students the skills they need to learn on the job and think critically. These schools are often smaller than their counterpart, the research university.
- Research – Research schools’ larger atmospheres tend to lead to more divisions (think: school of business, law school, school of medicine, etc.). These schools provide students with more technical knowledge necessary to do their future jobs.
- Trade – There is a trend of students choosing to attend trade schools as the cost of traditional college tuition rises. Trade schools more specifically train (typically hands-on) students to do a specific trade. (Think: auto-mechanic, IT technician, hairstylist, etc.)
Do some soul-searching.
It’s easy to get caught up in the details of tuition planning, so don’t lose your “why” in the process. Ask yourself, “What is my underlying motivation for attending college?”
Maybe your mindset is similar to what mine was: You go to college because it is what you are supposed to do after high school. There’s nothing wrong with that mentality, and it’s worked out well for me thus far.
But if you want to effectively plan for college, you need to know what your end goal is. Do you want an undergraduate degree that will land you a job right out of college? Do you want a degree that will prepare you for a professional school (dentistry, law school, etc.)? Do you want a job that requires specialized training (registered nurse, hairstylist, etc.)?
It’s ok if your answer is “I don’t know yet.” That just means you have homework already: do your due diligence to talk to experts in the fields that interest you. Reach out to friends of parents, listen to TED Talks, read books written by professionals you admire. The sooner you understand your options, the sooner you can narrow down your focus and create a roadmap.
Create a plan for funding your education.
College is expensive. How are you supposed to fund it? There are numerous resources out there to help sort through the college funding dilemma! There is no way for me to consolidate all of it here, but instead, I want to mention a few key things you need to know about funding your education costs.
529 Plans - Contributions to 529 Plan accounts grow tax deferred and can be withdrawn tax-free if the withdrawals are used to fund qualified education costs. Some states even offer state income tax deductions on contributions to their state-sponsored plan.
Scholarships – Free money is everywhere – and scholarships are available for just about anything. Don’t underestimate the scholarship opportunities available to you.
Basic Savings - Save, save, save! Every little bit helps. By specifically setting aside funds, getting a part-time job, or earmarking an account, you can easily see your education savings grow.
Planning for college can be complex, costly, and downright intimidating. The good news is that a successful outcome depends on two basic actions: identifying your goals and putting a plan in place to meet them.
Just by thinking through these aspects of your plan, you’ve already taken the most important step forward. A roadmap trumps sticker shock any day.
For additional resources tailored to your specific situation, click on the link below to take our 2-minute Financial Wellness Analysis to access resources focused on the areas of your finances that matter most.
This material has been prepared for informational purposes only and should not be used as investment, tax, legal or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal and accounting advisors.