Paying For College:

With a 4- Year degree at a State University nearing $90,000, and $160,000 for a Private University, college costs are out of control. The average cost is rising at 6-7% a year, way above the average salary increase for most hard-working families. Paying for college is quickly becoming an epidemic in the United States. How will you pay for your child’s college? Thinking he or she will just have to deal with it themselves and get student loans like some have done in the past, will not work anymore. Each student is only allowed the following money in the Stafford Loan.

 

Freshman= $5,500

Sophomore= $6,500

Junior = $7,500

Senior= $7,500

 

That is all the money the student can get, UNLESS they qualify for Need-Based Financial Assistance, Merit-Based Financial Assistance or Private Scholarships. There is no Bank in the U.S. going to borrow money to an 18 year old for college with no collateral and no work history. Now Mom and Dad can step forward and Co-Sign some loans, but now it is all back onto the parents. So if you are thinking your student will just get some loans, the rules of the game have drastically changed. So how will you pay for college? Here is a couple of ideas.

 

1. Mortgage your house 30 more years

2. Take out huge 401k Loans

3. Spend all your assets for college that took 20 years to accumulate

4. Drain your retirement accounts.

5. Take out massive, hemorrhaging debt from the Federal Government.

 

It sounds ridiculous to read those out loud, but that is what parents do every day for college. If you are going to pay for college, you need to have a plan. The first part of that plan is to determine how much you will need for college. You do this by calculating your EFC.

 

Do this as early as you can so you have time to save money for college. Once your children hit high-school, saving for college becomes almost impossible. If you wait until the Junior year, or even worse, Senior year of HS to calculate your EFC, you quickly realize that the average families EFC is $17,000. Meaning the family has to come up with the first $17,000 before they get any financial assistance. If you’re a parent of senior you are in PANIC MODE. Why? Because you have not saved $17,000 in 18 years of their life, so what make you believe you can come up with it in 6 months. So when parents are in panic mode they tend to make unwise financial decisions. How you pay for college will follow you around for the rest of your life. Either in a good way or not so good way.

 

So what can you do about it right now? First, you need to decide what type family you are in the system by calculating your EFC early. Then you need to get your GPA and ACT scores to improve, pick the correct colleges, find scholarships, fill out all the papers, meet all the deadlines and come up with a plan to pay for your out-of-pocket college expenses. Your goal is to pay for college in the most tax-efficient, financial-aid efficient and cash-flow efficient manner possible. You will potentially need six figures for each child’s education. With so much at stake, doesn’t it make sense to start early and take control of the situation before it controls you?