Regardless of who’s paying the college tuition bills (or who’s stressing over them), they’re certainly not getting any smaller. Tuition for the 2018-2019 school year weighed in at $35,676 for private schools, and $9,716 for in-state for public universities.1 That means that for four years of college, families will spend somewhere between $38,864 and $142,704—without room, board, books and any extras.
Yes, those numbers are staggering, but you don’t have to cover everything—most parents pay an average of 23% of their child’s college costs, according to Sallie Mae,2 and fewer parents are stressed about footing the entire bill. According to a new study by Fidelity, just 49% of parents say tuition is solely their responsibility, down from 56% in 2016.3 Instead, parents want their children to take on a greater share of responsibility and expect their kids to have set aside an average of $15,385 by high school graduation, up from $12,431 in 2016.4
"As your child approaches high school graduation and adulthood, it’s time to lay all your cards on the table—don’t hold anything back about what’s required financially to give them a college experience."
In turn, students are taking their new burdens quite seriously—according to Chegg’s State of the Student Report, finances are the main stressor for 62% of all students, and the greatest source of social pressure for 37% of students is to spend more money than they can afford.5 The good news is that there’s a lot more families can do to maximize their savings and ensure that college money stresses don’t become a burden for everyone. Let’s take a look.
1. Have a family meeting and discuss your financial expectations.
As your child approaches high school graduation and adulthood, it’s time to lay all your cards on the table—don’t hold anything back about what’s required financially to give them a college experience. Talk to them about what you’ve done to save and how much you’ve put aside. Knowing how many years you’ve worked to save may be a good reminder that their tuition dollars are not to be wasted (i.e., classes should be attended and grades should be maintained).
If you don’t have much saved, that’s okay. Let your child know whether or not you’re able to set aside a portion of your paycheck to go towards their education. Also, encourage them to apply for any scholarships and grants that may be available to them. Nearly half of all students received some kind of scholarship in 2017, according to Sallie Mae,6 and if they get a small financial aid package from a school they’re interested in, it may be possible to negotiate for more. Just ask.
You should also encourage your child to work during college if possible, which can be an excellent resume builder as well as an essential stream of income. In 2017, students had enough income and savings to cover 11% of their college costs, or around $2,600, according to Sallie Mae.7 If your child seems daunted by the prospect of paying for their own tuition, help them identify a specific portion that they’re expected to cover—technology, food or books may be a manageable place to start.
2. Look into 529 plans that the whole family can contribute to (and make sure you’re educated on the new tax law changes).
If right now you’re asking “What’s a 529 plan?” you’re not alone. According to the Fidelity study, 34% of families with advisors haven’t discussed 529 plans, and 50% of parents admit they don’t know the best accounts for college savings, or how much to save each month towards tuition expenses.8 Short answer: 529 plans are the best vehicle around for educational savings. Not only do they offer tax advantages, they can also cover more than one family member’s educational costs, so if one child gets a scholarship, the money in the account can easily fund another child’s college years (or your own graduate degree). Another great thing about a 529 account is that everyone in the family can contribute to it anytime, giving monetary gifts in lieu of presents on birthdays or holidays.
Note that due to law changes earlier this year, parents can now use funds from their 529 plans towards private education costs in grades K-12. If you or your spouse plan to use money that was previously earmarked for college, make sure everyone in the family is in agreement. As with any investment account, when you take money out early, you’ll miss out on growth over the life of the plan.
3. Visit your top colleges early on so you can complete your financial picture.
Families used to tour colleges during their child’s senior year of high school, but that’s no longer recommended from a financial standpoint. Visits that take place during a student’s sophomore year or the first semester of their junior year can enable families to get an early handle on the likelihood of available scholarships, and the expected tuition costs. For example, a student attending an in-state public school will spend in four years what a student at a private institution will spend in one, and families need as much of a heads up as they can get, so they can discuss loan options if necessary. While no one hopes to be saddled with thousands in student loans, they’re often essential—last year, students and parents took out loans to cover 27% of college costs, according to Sallie Mae.
If loans are part of your strategy, make sure you, your financial planner and your child all sit down for a discussion about how loans work—that they must be paid back with interest, and are in no way “free money.” Remind your child that working during school is a great way to make the loan repayment process even quicker.
Kathryn Tuggle contributed to this article.
Investing involves risk, including possible loss of principal.
The opinions and forecasts expressed are those of the author and individuals quoted and should not be construed as a recommendation or as complete.