Parents and students are often shocked by college costs, especially late in high school, when there’s little time to generate significant amounts to help cover these costs.
It’s well known that postsecondary institutions charge tuition, and that there’ll be expenses for books and class supplies and room and board while students attend college. There are other charges, too. But it’s the total cost that seems to catch families by surprise.
So let’s look at the most recent data about the average cost of college attendance for an academic year (fall through spring). And for a sense of how these costs grow, look at what they were 10 years ago:
Yes, over the last decade the average cost of a year at college rose 25% at public 2-year institutions, 38% at public 4-year universities, and 36% at private 4-year universities.
At this rate, if today’s 8-year old begins college in 10 years, her freshman year will cost approximately $22,000 at a public 2-year, $35,000 at a public 4-year, and $69,000 at a private 4-year institution.
She may be able to reduce expenses by, for example, living at home while taking classes. But she’ll still encounter 5-figure costs:
Sallie Mae’s most recent How America Pays for College report indicates that nearly 90% of 2016-17 families know their children are college-bound in preschool. But in 2016-17 only 13% of college parents had 529 plans to help cover postsecondary expenses and just 8% could devote parental savings to these costs.
The result? Sallie Mae’s report indicates that, in 2016-17 alone, 33% of undergraduates borrowed an average of $8,835 in federal loans and almost one out of 10 of college parents took out Federal Direct Parent PLUS Loans, at an average of $10,226 per loan, to help pay postsecondary expenses.
Many of today’s postsecondary parents lost their jobs, income, and savings during the 2007-09 Great Recession. This really limited what they could save for college.
But in general, Americans are now better off. Unemployment in March was 4.1% — less than half the March 2010 rate of 9.9%. And U.S. Median Household Income has risen steadily to be almost 20% higher than in 2010.
If you’re enjoying job security and prosperity, now is the time to start saving all you can for college — even if it’s only a small amount.
Ah, you may ask, but won’t my savings reduce my child’s eligibility for federal student aid? Yes. But the reality is that 62% of that aid comes in the form of loans.
So every dollar you save today can help your student — and you — reduce college debt in the future!
Next Wednesday: Why 529 plans are the best way to save for college.
Until then, contact College Affordability Solutions at (512) 417-7660 or firstname.lastname@example.org for free consultations about issues related to financing your child’s college costs.