College Affordability Free-falls
Posted 05 Dec, 2008
With the economy currently in recession, it is only natural for families to become even more concerned about the high cost of college–and they have good reason to worry. It seems that as the economy turns downward, college costs are spiraling upwards.
College By the Numbers
The New York Times recently reported some staggering figures related to the affordability of higher education. Below are the highlights of their findings, which come from a biannual report published by the National Center for Public Policy and Higher Education:
- Between 1982 and 2007 family incomes increased by only 147%, while college tuition rose by a jaw-dropping 439%!
- As of 2007, the cost of a 4-year public college was 28% of the median family income.
- For that same year, the cost of a 4-year private college was 76% of the median family income.
- Colleges in states like Florida and Washington are expected to increase tuition by 15 to 20% for the upcoming school year.
What This Means for Today’s Families
Most families will find these figures shocking–imagine paying 28% to 76% of your income out-of-pocket for your child’s college education! And what about families who have more than one student in school at any given time?
If costs continue to rise in this manner, what will it be like for families whose students won’t attend school for five, ten, or fifteen years?
There are two things families need to think about in this critical time: early preparation and constructing a personalized comprehensive college plan.
Early Preparation
If you still have a good amount of time before your children will need college funds, it is important to get started saving NOW! Even if you can only put aside a very small sum each month, over time it can build to a respectable amount. For a painless way to save, set up an automatic monthly contribution from your checking account where you won’t likely notice any effect on your monthly cash flow.
Be sure you educate yourself before you begin saving! The appropriate college savings vehicle will all depend on your individual circumstances. Get professional advice from someone that has true expertise in explaining the differences of all the college savings options such as the Coverdell, 529 Plan, custodial account, etc. and when it is appropriate to use each.
Constructing your Personalized College Plan
There are ten critical steps to constructing your comprehensive college plan - let’s discuss the first four. Step 1 is estimating how much you will need for future education costs. Next, determine what funds you currently have available to earmark for future college costs. Step 3 involves determining the projected shortfall (the difference between Step 1 and 2.) Step 4 is figuring out how the heck you are going to fund the projected shortfall! (I’ll cover the next six steps in a future post.)
You’ve probably already thought about three potential ways you can fund your student’s college years:
- Out of your own pocket
- With grants from the government (if you can qualify)
- With a merit or athletic scholarship
What many families don’t know is that there are many other ways to creatively pay for college! Families I work with are always surprised to discover there are literally dozens of strategies they can combine to reduce costs. Tactics such as creating new income tax deductions (which we call “tax scholarships”), building academic competitiveness to help students get offered discounts , and optimizing cash flow to help efficiently pay for college and fund other financial goals (such as retirement!) as well.
As you read more and more troubling articles about the rising cost of college, don’t panic-instead, take action to learn what to do because, remember, knowledge is power!
All the best,
Deborah Fox
Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.
photo: going down by lusi
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Related Posts
With the economy currently in recession, it is only natural for families to become even more concerned about the high cost of college–and they have good reason to worry. It seems that as the economy turns downward, college costs are spiraling upwards.
College By the Numbers
The New York Times recently reported some staggering figures related to the affordability of higher education. Below are the highlights of their findings, which come from a biannual report published by the National Center for Public Policy and Higher Education:
- Between 1982 and 2007 family incomes increased by only 147%, while college tuition rose by a jaw-dropping 439%!
- As of 2007, the cost of a 4-year public college was 28% of the median family income.
- For that same year, the cost of a 4-year private college was 76% of the median family income.
- Colleges in states like Florida and Washington are expected to increase tuition by 15 to 20% for the upcoming school year.
What This Means for Today’s Families
Most families will find these figures shocking–imagine paying 28% to 76% of your income out-of-pocket for your child’s college education! And what about families who have more than one student in school at any given time?
If costs continue to rise in this manner, what will it be like for families whose students won’t attend school for five, ten, or fifteen years?
There are two things families need to think about in this critical time: early preparation and constructing a personalized comprehensive college plan.
Early Preparation
If you still have a good amount of time before your children will need college funds, it is important to get started saving NOW! Even if you can only put aside a very small sum each month, over time it can build to a respectable amount. For a painless way to save, set up an automatic monthly contribution from your checking account where you won’t likely notice any effect on your monthly cash flow.
Be sure you educate yourself before you begin saving! The appropriate college savings vehicle will all depend on your individual circumstances. Get professional advice from someone that has true expertise in explaining the differences of all the college savings options such as the Coverdell, 529 Plan, custodial account, etc. and when it is appropriate to use each.
Constructing your Personalized College Plan
There are ten critical steps to constructing your comprehensive college plan - let’s discuss the first four. Step 1 is estimating how much you will need for future education costs. Next, determine what funds you currently have available to earmark for future college costs. Step 3 involves determining the projected shortfall (the difference between Step 1 and 2.) Step 4 is figuring out how the heck you are going to fund the projected shortfall! (I’ll cover the next six steps in a future post.)
You’ve probably already thought about three potential ways you can fund your student’s college years:
- Out of your own pocket
- With grants from the government (if you can qualify)
- With a merit or athletic scholarship
What many families don’t know is that there are many other ways to creatively pay for college! Families I work with are always surprised to discover there are literally dozens of strategies they can combine to reduce costs. Tactics such as creating new income tax deductions (which we call “tax scholarships”), building academic competitiveness to help students get offered discounts , and optimizing cash flow to help efficiently pay for college and fund other financial goals (such as retirement!) as well.
As you read more and more troubling articles about the rising cost of college, don’t panic-instead, take action to learn what to do because, remember, knowledge is power!
All the best,
Deborah Fox
Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.
photo: going down by lusi
Subscribe in a reader
Subscribe by Email
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