According to the College Board, the average annual cost of attending a four-year college in 2020 will be $46,368 — a 38 percent increase compared to today’s fees.
So how does an American family successfully address the challenges of saving for all of their financial needs — raising a family, educating their children, and retiring successfully?
There is no simple answer. But a recent study by Sallie Mae suggests families are struggling to find the solution.
The report, entitled “How Americans Pay for College 2013,” concluded that six out of 10 American families do not have a financial plan to pay for all years of college prior to the student enrolling, nor do they have a financial contingency plan should an emergency arise.
To help you gain control, try this four-step approach:
1. Prioritize Savings. Before you start saving for your children’s college education, make certain you have your finances in good order.
2. Dispel Four Myths About Saving for College
3. Establish a College Plan. To budget thoughtfully, have a good idea of the costs. Fidelity’s Keith Bernhardt insists that, “The time to access loan payments is long before senior year in high school.” I couldn’t agree more. Here’s how:
• Weigh in-state versus out-of-state expenses. According to the College Board, the average total for tuition, fees, and room and board for an in-state, public, four-year-college was $17,860. The average total for those same expenses at a private four-year college was $39,518 for the same period.
• Use a loan calculator. Several websites that provide you with college/loan calculator, including finaid.org.
• Review the cost of the colleges on your child’s top 10 list, and on a spreadsheet, calculate the cost for tuition, room and board, etc. This will enable you to see the full picture and make decisions rationally rather than emotionally.
4. Take control. After obtaining an idea of college costs, investigate the various college savings vehicles that you can invest in, including:
These are highlights of just some of the basic features of the best-known savings vehicles. Planning for college is very important, and complex, so families should make a savings plan based on their unique set of financial circumstances.