A primer on planning for college funds
By Julie Filby
CNS photo/Mike Crupi, Catholic Courier
As college prices continue to rise rapidly and challenging economic conditions persist for many families, putting a plan in place to save for college can be intimidating.
Tuition, fees, room and board at a public four-year school run about $17,000 per year on average, in-state; and nearly $39,000 per year for a private four-year school, according to the College Board. In the past 10 years, in-state tuition and fees at public universities have increased on average 5.6 percent per year beyond the rate of inflation.
“Don’t let the sticker shock paralyze you into inaction,” offered Scott Middleton, a father of three who just finished supporting his third child through college. “College expenses can be daunting, but it shouldn’t prevent you from doing what you’re able to do within your means.”
Middleton, parishioner of St. Frances Cabrini Church in Littleton, is a principal and director at Innovest Portfolio Solutions, an investment management firm in Denver. He and his wife, Kathy, spent the last eight years helping their children with college expenses. Daughter Hannah, 26, started at the University of Northern Colorado in Greeley in 2004; then son David, 24, attended Franciscan University of Steubenville, Ohio; and their youngest son John, 21, finished at Red Rocks Community College in Lakewood this year.
“My wife and I made it a priority over the years to do what we could to help with the process,” he said, adding that his parents also helped, as well as a partial scholarship for one of the children.
Most families pay for college using a combination of savings, loans, work-study and financial aid.
“It’s important for parents to realize there are resources beyond their own savings,” he said. “Such as loans, grants and scholarships.”
At the same time, these sources are much less predictable. According to financial data provider Morningstar fewer than 0.3 percent of students win full-ride scholarships or need-based full-ride grants; while about two-thirds of undergraduates receive some kind of financial aid, including student loans.
“It’s helpful for parents to focus on what they can influence,” he said, “which is their own contribution.”
Starting to save as early as possible helps ease the burden.
“The sooner you start, the more it’s going to help over the long term,” said Middleton. “Alternatively, the longer you wait, the tougher it is.”
Saving sooner allows more time for money to potentially compound and grow, depending on investment returns. Families may consider hiring an investment advisor or enrolling in a college savings vehicle, such as a tax-advantaged 529 plan, with automatic monthly contributions deducted from their checking account.
“Setting up automatic contributions to college savings accounts are a great way to instill discipline and get started,” Middleton said. “After a while those contributions can be increased as personal budgets allow.”
Sacrifices, such as deferring items like entertainment and travel, may be a consideration for some families planning for the long-term.
“Decide what your priorities are, make sacrifices and trust in the Lord,” he said.
He also suggested encouraging other family members—such as grandparents and the children themselves—to make saving a priority.
There are many online resources available for applying for scholarships, grants, loans and work-study opportunities such as www.fastweb.com, www.scholarships.com and www.fafsa.ed.gov (Free Application for Federal Student Aid). For information on financial aid, visit www.finaid.org; and to learn about Colorado’s CollegeInvest 529 Savings Plans, visit www.collegeinvest.org.
For the 2010-11 academic year, the Knights of Columbus awarded scholarships totaling more than $1.5 million to more than 600 students attending Catholic colleges or universities. For more information visit www.kofc.org/scholarships.
This article is not meant to provide specific investment advice for any individual.