Planning for College Costs: A Roadmap

Whether you’re a parent, grandparent or student, the phrase “college tuition” comes with some degree of sticker shock. The good news is that preparing for college becomes much more manageable when you create a roadmap and plan ahead.

To effectively map out your plan, it’s vital you understand exactly what your goals are for college. The following action items are all stops along the way. By thinking through these issues, you’ll be able to identify your objectives and develop a framework for your vision.

Determine your timeline—and work backwards.

This is pretty self-explanatory. Who are you planning to send to college? Is it yourself? Your 16-year-old daughter? Your newborn son? All of the above? Just as the time horizon on your investments is important, the timeframe on your education goals is key.

The sooner you start planning for your education goals, the better. Planning ahead allows you to survey your options, estimate costs, and figure out what resources will be required to bridge any current gap.

By creating an Education Goal in BrightPlan you can set your target enrollment date, model current and future savings, get an investment plan, and see how your savings could grow if you invested them between now and the first day of class. The next important factor to consider is how the type of school you choose will impact your experience and your financial situation.  

Decide what “type” of school is right for you.

Each school has its own culture and traditions, making it difficult to set hard and fast rules for classifying them. That said, these are a few general “types” for your reference.

• Private – These schools typically are not funded by state and federal government funds. (They may receive some grant money.) Typically, tuition costs are higher at private universities, but their academic reputations, traditions, and charm draw students to them year after year.
• Public – State and federal government funding is provided to these schools. Tuition is typically lower and tuition rates can vary depending on your residency. This is due to state tax dollars partially funding the in-state schools.
• Liberal Arts – Schools classified as liberal arts schools tend to focus on general education across numerous disciplines. The goal of liberal arts school is to teach students the skills they need to learn on the job and think critically. These schools are often smaller than their counterpart, the research university.
• Research – Research schools’ larger atmospheres tend to lead to more divisions (think: school of business, law school, school of medicine, etc.). These schools provide students with more technical knowledge necessary to do their future jobs.
• Trade – There is a trend of students choosing to attend trade schools as the cost of traditional college tuition rises. Trade schools more specifically train (typically hands-on) students to do a specific trade. (Think: auto-mechanic, IT technician, hairstylist, etc.)

Do some soul-searching.

It’s easy to get caught up in the details of tuition planning, so don’t lose your “why” in the process. Ask yourself, “What is my underlying motivation for attending college?”

Maybe your mindset is similar to what mine was: You go to college because it is what you are supposed to do after high school. There’s nothing wrong with that mentality, and it’s worked out well for me thus far.

But if you want to effectively plan for college, you need to know what your end goal is. Do you want an undergraduate degree that will land you a job right out of college? Do you want a degree that will prepare you for a professional school (dentistry, law school, etc.)? Do you want a job that requires specialized training (registered nurse, hairstylist, etc.)?

It’s ok if your answer is “I don’t know yet.” That just means you have homework already: do your due diligence to talk to experts in the fields that interest you. Reach out to friends of parents, listen to TED Talks, read books written by professionals you admire. The sooner you understand your options, the sooner you can narrow down your focus and create a roadmap.

Be creative with funding options

There are numerous resources out there to help sort through the college funding challenge. While a blog post can't do justice to all of the options, here are a few key items to consider:

529 Plans - 529s are wonderful. Contributions to these state-sponsored education savings accounts grow tax deferred and withdrawals can be made tax-free if they are used to fund qualified education costs. Some states even offer state income tax deductions on contributions to their state-sponsored plan. The further in advance you begin investing for college in a 529, the greater the potential tax savings on the investment growth. 

Scholarships - Free money is everywhere – and scholarships are available for just about anything. Don’t underestimate the scholarship opportunities available to you. To get a rough estimate of your scholarship opportunities, check the Net Price of your college of choice. The Net Price tells you the actual price most students pay after receiving scholarships and grants.

Grants and Loans - The Free Application for Federal Student Aid (FAFSA), is a form the federal government, states and colleges use to award need-based grants, scholarships, work study and student loans. Grants and scholarships are free, but you have to earn the work study dollars and pay back the loans.

Part-Time Work - 70% of undergraduate and graduate students work during school. Getting a work-study job on campus or finding another job can build your resumé, jumpstart a future career, and minimize dependence on student loans.

Good Ol' Fashioned Savings – Save, save, save! Every little bit helps. By regularly setting aside funds or working extra hours between now and enrollment, you can see your education savings grow and reduce your dependence on student loans.

Planning for college can be complex, costly, and downright intimidating. The good news is that a successful outcome depends on two basic actions: identifying your goals and putting a plan in place to meet them.

Just by thinking through these aspects of your plan, you’ve already taken the most important step forward. A roadmap trumps sticker shock any day.