COMMUNITY

Savingforcollege.com

College costs way more than parents think
http://www.savingforcollege.com/articles/college-costs-way-more-than-parents-think

Posted: 2017-10-24

by Kathryn Flynn

Imagine you're saving money for a family vacation. You think about possible destinations, travel requirements, and of course, total cost. You think about how much time you have before the trip, and how much you'll need to put away each month to reach the goal. Saving for a child's college education shouldn't be much different - but unfortunately for a large number of families, it is.

Although more parents are saving for college than ever before, many are doing so without a realistic goal in mind. According to Fidelity's College Savings IQ survey, 72% of parents said they were currently saving for college, but 45% admitted that they aren't sure how much they should be putting away. If this sounds like you, it might be time to rethink your strategy. After all, what good is a plan without a goal?

How much does college cost?

The price of a degree will vary, based on your child's age and the type of school they choose. For students currently in high school, four years of tuition, fees, and room and board are projected to be around $143,000 for a public school and $218,000 for private, according to College Board's Trends in College Pricing 2016 report. Yet, according to the Fidelity survey, when parents of high schoolers were asked what they thought the sticker price of college for their children will be, they were off by an average of $70,000.

Parents of preschoolers and younger also missed the mark. College costs have been rising about 3% each year, and if that trend continues, these families can expect to pay around $209,000 for a four-year degree from a public school and $320,000 for private. But those surveyed by Fidelity underestimated this amount by $110,000.

Ways to fill the gap

For parents of high school students, $70,000 may seem like an impossible amount to come up with over the next four years. But remember, parents rarely end up paying a school's sticker price. According to Sallie Mae's How America Pays for College 2017 report, in 2017, 35% of college costs were covered by scholarships and grants. Start by filling out the Free Application for Federal Student Aid (FASFA) as early as October 1st the year before your child begins college. Everyone should complete the FAFSA, even if you think your family income is too high to qualify for federal aid. The FAFSA is also used by schools, state agencies and other foundations to determine institutional financial aid as well as scholarship awards.

If you have younger children, you'll want to set a clear goal for how much you want to save, and enroll in a 529 plan if you haven't already. The earlier you start contributing, the more time your money has to grow tax-deferred. And as long as you use the money for college, you won't pay taxes on the gains when you withdraw. Tools like the College Savings Planner let you design a customized plan based on your family's individual needs, so you'll know exactly how much you should be putting away each month. If you can't commit to the monthly amount the calculator says you need to reach your goal, start by saving what you can, when you can. For example, when your child starts school and you're no longer paying for childcare, start directing the funds to your 529 plan.

No matter how old your child is, if your savings are coming up short, don't be afraid to ask for help. Most 529 plans make it easy for friends and family to gift contributions, either by mailing in a paper check or via electronic deposit. Some plans offer crowdfunding tools that can help you get the word out when there's a special occasion coming up, such as a birthday, holiday or graduation.

And just like you use credit card points and rewards to cover travel costs, there are similar programs available to help boost college savings. For example, Upromise is a free rewards card that allows you to earn cash back on everyday purchases that can be automatically deposited into a 529 account. Fidelity also offers the Rewards Visa Signature Card that offers 2% back on eligible purchases that can be put toward your college fund.

Want to test your 529 plan knowledge? Try this Pop Quiz from Fidelity

Imagine you're saving money for a family vacation. You think about possible destinations, travel requirements, and of course, total cost. You think about how much time you have before the trip, and how much you'll need to put away each month to reach the goal. Saving for a child's college education shouldn't be much different - but unfortunately for a large number of families, it is.

Although more parents are saving for college than ever before, many are doing so without a realistic goal in mind. According to Fidelity's College Savings IQ survey, 72% of parents said they were currently saving for college, but 45% admitted that they aren't sure how much they should be putting away. If this sounds like you, it might be time to rethink your strategy. After all, what good is a plan without a goal?

How much does college cost?

The price of a degree will vary, based on your child's age and the type of school they choose. For students currently in high school, four years of tuition, fees, and room and board are projected to be around $143,000 for a public school and $218,000 for private, according to College Board's Trends in College Pricing 2016 report. Yet, according to the Fidelity survey, when parents of high schoolers were asked what they thought the sticker price of college for their children will be, they were off by an average of $70,000.

Parents of preschoolers and younger also missed the mark. College costs have been rising about 3% each year, and if that trend continues, these families can expect to pay around $209,000 for a four-year degree from a public school and $320,000 for private. But those surveyed by Fidelity underestimated this amount by $110,000.

Ways to fill the gap

For parents of high school students, $70,000 may seem like an impossible amount to come up with over the next four years. But remember, parents rarely end up paying a school's sticker price. According to Sallie Mae's How America Pays for College 2017 report, in 2017, 35% of college costs were covered by scholarships and grants. Start by filling out the Free Application for Federal Student Aid (FASFA) as early as October 1st the year before your child begins college. Everyone should complete the FAFSA, even if you think your family income is too high to qualify for federal aid. The FAFSA is also used by schools, state agencies and other foundations to determine institutional financial aid as well as scholarship awards.

If you have younger children, you'll want to set a clear goal for how much you want to save, and enroll in a 529 plan if you haven't already. The earlier you start contributing, the more time your money has to grow tax-deferred. And as long as you use the money for college, you won't pay taxes on the gains when you withdraw. Tools like the College Savings Planner let you design a customized plan based on your family's individual needs, so you'll know exactly how much you should be putting away each month. If you can't commit to the monthly amount the calculator says you need to reach your goal, start by saving what you can, when you can. For example, when your child starts school and you're no longer paying for childcare, start directing the funds to your 529 plan.

No matter how old your child is, if your savings are coming up short, don't be afraid to ask for help. Most 529 plans make it easy for friends and family to gift contributions, either by mailing in a paper check or via electronic deposit. Some plans offer crowdfunding tools that can help you get the word out when there's a special occasion coming up, such as a birthday, holiday or graduation.

And just like you use credit card points and rewards to cover travel costs, there are similar programs available to help boost college savings. For example, Upromise is a free rewards card that allows you to earn cash back on everyday purchases that can be automatically deposited into a 529 account. Fidelity also offers the Rewards Visa Signature Card that offers 2% back on eligible purchases that can be put toward your college fund.

Want to test your 529 plan knowledge? Try this Pop Quiz from Fidelity

 

Reset email successfully sent.
Please check your inbox.

Close
page loadtime mark

Advertisement


close