It now costs an average of $21,447 a year to attend an in-state public college, and over $42,000 a year for a private college. To make matters worse, these costs are rising rapidly. During the past decade they rose 5.6% per year faster than inflation. (1) Thats a nasty combination, particularly if youre the one paying the bill.
If youre a student paying your own way this extra cost could jeopardize your ability to get ahead of debt at an early age. If youre a parent paying for your childrens education the additional obligation might set you back on your path to financial freedom, perhaps by years.
This expense is too big to accept without looking for ways to reduce it. Here are a few ideas to consider.
Break it down then look at the big pieces
One way to attack the problem is to break down the total cost and look for savings opportunities in some of the individual components, ideally the bigger components. As shown in Table 1, college cost can be cut in half by attending an in-state public school. Something to consider.
Also look at housing and meals. Commuting to school can save thousands even tens of thousands over four years.
There are trade-offs that come with these choices of course, and you cant put a dollar value on all the considerations. Still, its good to have the options at your disposal.
TABLE 1
Average Cost of U.S. College Education, 2011-2012
(Source: The College Board)
*Other Costs include transportation and personal expenses
Consider the Community College + 2 Plan
Heres another approach for your family to consider: Attending a community college the first two years and spending the last two years at a 4-year college. As you can see in Table 2, the cost of community college is only about one-third that of the cheapest 4-year college alternative (in-state public college). Over two years that adds up to a savings of about $25,000 and possibly as much as $65,000.
TABLE 2
Average Annual Cost of Community College*. $8,400
(Source:U.S. Department of Education(3))
*Inflation-adjusted 2010 cost of $8,085. Includes Tution, Room and Board.
For their value, and also because of their respectable academic standards, community colleges are now widely viewed as an important part of the higher education mix. Again, another option to consider. One caution, though: Do what you can to ensure community college course credits transfer to the subsequent college. Which leads us to our next consideration.
Whatever you do, avoid the 5-year plan!
Did you know the average time it takes students to graduate college is now five years instead of four? (3) This is a bona fide trend and the average is even starting to inch toward 6 years. Adding an extra year or two to a college education carries with it a number of costs, both direct and indirect.
The direct cost, of course, is additional tuition and fees. This amount to a 25% 50% price increase on a $100,000+ purchase. Ouch! (Not surprisingly, colleges arent discouraging this activity; theyre more than willing to accept the additional revenue.)
Indirect costs, also known as opportunity costs, include the following:
Lost salary by delaying the start of a job by 1-2 years
Falling a year or two behind, right at the starting gate, in the race to get ahead financially after college.
So Id like to make a suggestion: If at all possible, avoid the 5-year plan!
To help win this battle, parents who pay the college bill have a weapon in their arsenal. Its called a financial disincentive. It works like this: Inform your matriculating student that you will cover college costs for years one through four. Anything after that is their responsibility. That places the financial burden back on them if there are any delays. Five years? Then the last year is on them. Four years and 3 months? They pay the extra 3 months. That includes paying you for room and board if theyre living at home.
I recommend this approach based on observational research and countless discussions with other parents. Our findings? Its remarkable how responsive our children are to achieving a goal if there is a financial cost to them should they fall short.
Be advised that this weapon is most effective when used preemptively, so the arrangement should be agreed upon during their high school years, before they choose a college. Doing so will allow them to take it into account when making a college choice. Once in place, it could help to sharply reverse the 5-year plan trend, at least in your household.
For more information please visit our website : https://www.cashflownavigator.com
If youre a student paying your own way this extra cost could jeopardize your ability to get ahead of debt at an early age. If youre a parent paying for your childrens education the additional obligation might set you back on your path to financial freedom, perhaps by years.
This expense is too big to accept without looking for ways to reduce it. Here are a few ideas to consider.
Break it down then look at the big pieces
One way to attack the problem is to break down the total cost and look for savings opportunities in some of the individual components, ideally the bigger components. As shown in Table 1, college cost can be cut in half by attending an in-state public school. Something to consider.
Also look at housing and meals. Commuting to school can save thousands even tens of thousands over four years.
There are trade-offs that come with these choices of course, and you cant put a dollar value on all the considerations. Still, its good to have the options at your disposal.
TABLE 1
Average Cost of U.S. College Education, 2011-2012
(Source: The College Board)
*Other Costs include transportation and personal expenses
Consider the Community College + 2 Plan
Heres another approach for your family to consider: Attending a community college the first two years and spending the last two years at a 4-year college. As you can see in Table 2, the cost of community college is only about one-third that of the cheapest 4-year college alternative (in-state public college). Over two years that adds up to a savings of about $25,000 and possibly as much as $65,000.
TABLE 2
Average Annual Cost of Community College*. $8,400
(Source:U.S. Department of Education(3))
*Inflation-adjusted 2010 cost of $8,085. Includes Tution, Room and Board.
For their value, and also because of their respectable academic standards, community colleges are now widely viewed as an important part of the higher education mix. Again, another option to consider. One caution, though: Do what you can to ensure community college course credits transfer to the subsequent college. Which leads us to our next consideration.
Whatever you do, avoid the 5-year plan!
Did you know the average time it takes students to graduate college is now five years instead of four? (3) This is a bona fide trend and the average is even starting to inch toward 6 years. Adding an extra year or two to a college education carries with it a number of costs, both direct and indirect.
The direct cost, of course, is additional tuition and fees. This amount to a 25% 50% price increase on a $100,000+ purchase. Ouch! (Not surprisingly, colleges arent discouraging this activity; theyre more than willing to accept the additional revenue.)
Indirect costs, also known as opportunity costs, include the following:
Lost salary by delaying the start of a job by 1-2 years
Falling a year or two behind, right at the starting gate, in the race to get ahead financially after college.
So Id like to make a suggestion: If at all possible, avoid the 5-year plan!
To help win this battle, parents who pay the college bill have a weapon in their arsenal. Its called a financial disincentive. It works like this: Inform your matriculating student that you will cover college costs for years one through four. Anything after that is their responsibility. That places the financial burden back on them if there are any delays. Five years? Then the last year is on them. Four years and 3 months? They pay the extra 3 months. That includes paying you for room and board if theyre living at home.
I recommend this approach based on observational research and countless discussions with other parents. Our findings? Its remarkable how responsive our children are to achieving a goal if there is a financial cost to them should they fall short.
Be advised that this weapon is most effective when used preemptively, so the arrangement should be agreed upon during their high school years, before they choose a college. Doing so will allow them to take it into account when making a college choice. Once in place, it could help to sharply reverse the 5-year plan trend, at least in your household.
For more information please visit our website : https://www.cashflownavigator.com
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