A mom wonders how do we pay for college? She shares how, even with savings, she doesn’t know how she and her spouse will pay for their child to go to college. To answer her question, Jessica calls in some help (her favorite financial planner) and then shares her own thoughts on the balancing act that is saving for college while also trying to pay for life now.
Ask Jessica is an advice column for women in midlife. We cover all things related to midlife from changing bodies to career transitions to parenting teens to sandwich generation challenges to shifts in marital or life partnerships and everything in between. My hope is that in sharing these questions and answers I can women as we face the midlife journey together. Got a question or challenge you would like me to address? Fill out this form to submit your issue! Want to see the answers to other questions, check out our archive here.
HEY JESSICA: My spouse and I each have steady jobs and think of ourselves as upper-middle class. We save for emergencies (few months expenses), medium term (new roof in 10 years), and long term (retirement). We also put away a few hundred dollars a month for college, but it feels silly. There’s NO WAY we will be able to afford the astronomical college tuition. But we also don’t want our kid to finish school with exorbitant debt that will follow him for decades. We’re not alone, right? Why aren’t more people talking about this? How do we pay for college?! ~Comfortable But Worried
DEAR COMFORTABLE BUT WORRIED: Now, I may know a lot about cooking, life balance, relationships, and mental health, but money is not a topic I consider myself an expert in. It’s actually something that causes me to feel anxiety, just like you, Comfortable But Worried. And, since I want this advice column to include really good, sound advice, from time to time I will call on experts to help me in answering your questions. For this doozy of a question that I know so many of us are thinking about (even if we aren’t talking about it openly), I reached out to one of my entrepreneurial besties: Certified Financial Planner and Founder of Fearless Finance (an hourly, fiduciary, on-demand financial planning provider), Lori Atwood. Not only have I known Lori for over a decade, but I have also used her amazing services myself. And if anyone gets it, it’s Lori. Below you will find Lori’s advice on the finance-side and then my thoughts on how to navigate the worries that accompany the question of how do we pay for college? So, without further ado, here is what Lori had to say:
Saving for college is hard for anyone and for some people it feels like a mountain that is impossible to climb. The numbers are eye-watering, but the key is starting early and being consistent. What I recommend to young parents is that they put away $500-600/month for a baby/toddler and while I know that is a lot of money, especially when paying for daycare, it matters a lot down the road. That $500/month is actually $6K per year and if you invest that $6k/year into a 529 where the gains grow tax free, you should have about $150k at college graduation (5.5% gains over 16 years).
As a planner and parent, I am looking for parents to have HALF of a private college tuition by high school graduation. I don’t recommend trying to save $300K by high school graduation because:
1) it feels too overwhelming and feeling overwhelmed makes people want to give up;
2) your child could go to state school and typically in that case $125-150K will cover the entirety of it; and
3) it’s always best to pay as much as possible from current income to avoid inflation, market, and fee risk.
That few hundred dollars you save each month should be growing (how to invest it is another conversation) and the goal is about HALF of what your child will spend over his/her college career. The remainder should be paid with parental current income, child income (summer jobs should generate $2-4K/year), and the child’s subsidized student loans if he/she qualifies.
Please continue saving. Don’t give up. Your funds are growing and EVERY LITTLE BIT helps.
OK. So, Lori gave the good, sound financial advice and for those of you who can afford to save what she suggested (or even a fraction of it), please follow what she suggests! But, if her recommended scenario is either not what you did and your kid is now older than preschool (like mine, who are in 8th and 10th grades) or the amount she recommended saving is outside your realm of reality, PLEASE do not freak out! I can promise you that my family, for instance, was not able to do what Lori suggests and are still feeling (relatively) OK about paying for college.
As my eldest gets closer and closer to applying for college, there are a couple of things that I have been trying to keep in mind:
- Times have changed and, while where you go to college is important, the reality is that graduate school of some sort might also be in your kids’ future, so undergrad isn’t necessarily the end-game it once was.
- More than prestige, the most important thing is that you are able to find a college that is the right fit for your kid. Will they be happy there? Will they feel welcomed, comfortable, challenged, and able to grow and mature in the environment of the school? That should be the goal way more than the school’s name or reputation. (BTW, if you’ve got driven kids who have high expectations of where they will end up for college, or if a prestigious school is important to you, I encourage you to keep this perspective in mind, especially as the college application process gets more and more competitive and crazy with each passing year!)
- While coming out of undergrad with no debt would be lovely, for many people a more realistic goal is to simply try to decrease the amount of debt they will have. Saving as much as you can is great, but it’s also important to minimize the stress of making yourself miserable in order to reach a specific goal.
- Retirement is important, too! While paying for college for your kids is wonderful, making sure you have enough to retire on is, in many ways, more important. After all, you deserve a comfortable retirement and burdening your kids with supporting you could be harder on them than paying off school loans.
So, in short, don’t go for perfect here, go for good enough. And if this all feels really scary, talk to someone! Reach out to Lori and her team at Fearless Finance for hourly, on-demand financial planning or talk to another financial planner who can help you to make sense of your specific financial situation. You’ve got this!