I’ve been reading about state after state slashing spending budgets because the money simply isn’t there. Over the past few years, as part of the government bailout of states, banks, automakers, homeowners struggling with mortgages and pretty much anyone else that WASN”T responsible (at the expense of those who were), part of the stimulus spending bill included Billions of dollars in aid to states. Well, rather than get their ducks in a row, most states immediately blew it, leaving huge year over year gaps in their budgets, forcing huge cuts to spending this year when those federal dollars dried up. As a result, many state colleges, once known as bargain educational opportunities for in-state students, are now fast approaching the same tuition as private schools.
Here’s just a snapshot of some state school tuition increases this year, compliments of CNN, but I’ve spared you the ridiculous slideshow:
- Arizona nearly doubling from $5,037 to $10,035.
- California state schools seeing an increase 40% since 2008.
- Florida has increased tuition 15% for 3 years in a row now.
- Washington – 16% increases for state schools
- Nevada 13% increase
- …and more.
How to Save for College
There are a few key considerations to make sure you give your children a good shot at college success:
- Time is on your side (if you start early!) – If you actually start saving upon birth, 17 years is a long time to save to avoid student loans, even if $100,000 in today’s dollars sounds daunting. However, depending on whether you pick a top 529 plan, how low the fees are, whether you get state tax deductions and whether you do a pre-paid vs an investment plan will all be factors in the outcome. Personally, I’ve actually been splitting our investments between the investment plans and pre-paid tuition plans because we might continue to see high single digit increases (which the tuition plans are “SUPPOSED” to keep up with) and anything can happen to equities over the next several years.
- Consider the ROI of the Degree – Parents and kids don’t want to hear this, but the golden age of “anyone can make it in America” is over. We actually need to compete now. And that means competing millions of ambitious graduates from other English-speaking countries who want to eat our lunch – and now can, with the connectivity the web brings and an ever-shrinking world. So, it’s important that there’s a realistic assessment of what kind of money that degree is going to earn upon graduation so they’re not left with college debt for life.
- Pursue your education online – This is, hands down, one of the best ways you can cut down on college costs. Online schools now offer several degrees that are known to lead to financially rewarding careers, such as an MA in Economics, Strategic Communication, or a Master of Public Administration and Policy. Additionally, you receive 24/7 access to your work as well as constant contact with both instructors and fellow students. Not only are your traveling and housing costs cut down to zero, but the flexible scheduling gives you the opportunity to better yourself at any time in your life, from any location.
- Set it on Autopilot – Ask yourself, how much would you have in your 401(k) right now if you had to make those payments voluntarily when you saw fit. Surely not as much as you have in their now. When money is being automatically deducted from your paycheck or a designated bank account that you keep topped off, you’ll be guaranteed to hit your savings targets (or thereabouts, depending on your investment returns). But all too often, people think they’ll use a tax refund or a bonus to put toward college savings and it doesn’t happen. I have steady payments set up coming out of my savings account and I always make sure there’s a few thousand dollars in there to cover a few months’ worth in case I forget to resupply it one month.
- Know Your Number – I think many people are in denial over what college is going to cost. I’m working under the assumption that to fully fund a state school education (if the kiddos want to go to a pricey private school or get an MBA, they can share the burden at that point), it will be at least $20,000/year in today’s dollars. I have 3 kids. So, we’re talking about a quarter million dollars I have to save. That’s a house! So, I have a firm plan set up with my monthly contributions slowly increasing each year and then jumping when my wife finally goes back to work to ensure we hit our goal. But all this discipline and sacrifice doesn’t mean anything unless you’ve confronted what the anticipated costs will be first.
How Are You Handling College Costs for Your Children?