As financial advisors, our firm’s focus is on the financial side of college planning. Parents usually come to see us when they have already attended so-called “High School College Nights”. They may have worked with specialists who help with the completion of college applications. Their kids may have already spent time with mentors training to take SAT and ACT exams. All of that is what I refer to as “the first half of the story”, but still the parents have no idea how to pay for college or where the funds will come from. We provide them with “the other half of the story”, how best to fund their upcoming college costs.
The cost of college is not normally a one-time event, but can last for years as each sibling goes through the process. For example, in families with three children, this equates to at least 12 years of college expenditure. Assuming the average price of college today is about $45,000, for that family with three students, a sticker price of $540,000. is staring them in the face. Few, if any, families that I know have put aside that kind of money for college. Almost every parent has been “thinking” about it, but thinking about it does not equal saving for it.
When we work with families who are in need of college planning help, we explain that our responsibility is to guide them financially from the present to their retirement, but along that road there will be a number of “bumps”, the largest being their cost of college. It is important to craft strategic financial plans that will reduce that “bump” to a “pimple”. The earlier that planning begins the better. We have made that recommendation on this site and many others frequently.
Nevertheless, it is never too late to begin the process, even if the student is already a Junior or Senior in high school. There are still strategies available to help reduce the parent’s
Expected Financial Contribution (EFC), such as reducing the amount of “countable ” assets or taking advantage of free, guaranteed scholarships. Indeed, even the tax form used can make a difference for many families on the lower income spectrum.
The hope for all is that parents should not need to sacrifice their retirement assets to help pay for college. There are financial experts such as ourselves throughout the country who have the specialized knowledge to help families avoid costly mistakes in the admissions process. It is important for them to find and select the right college the first time, one that is affordable and appropriate for each student. Transferring colleges after a year or so because it has become too costly is not a good thing. Credits and financial aid can be lost in the process.
I repeat once again that it is essential for families to learn about the funding side of college as early as possible and to begin a savings program. The more they know, the more they can save on college. The result: more money for retirement.