Being Prudent about the College Decision

Written by: Martin X. Shields

As we approach the beginning of another school year, the discussion will begin for juniors and seniors in high school about the potential direction they will take for college. What has always been an important decision has taken on additional weight given the dramatic college tuition increases seen over the past 20 years. According to The College Board, the ten year inflation rate for college tuition is approximately 5 percent. As illustrated in the graph below, assuming a similar inflation rate going forward, the annual cost of tuition, room and board will start to reach heights were it will be hard to fathom how most families could pay for them.

 

Source: The College Board

Based on this information, it becomes imperative for families to be much smarter consumers of higher education and not simply drown themselves in debt and not save for retirement in order to pay for these expense. Below are several points for families to consider regarding college.

 

* Approximately 50% of all students take 6 years to complete college so the magnitude of expenses is usually greater than expected. For many families, having your student attend community college for 1-2 years is a great way to gain college credits, get a better idea on the correct major and have the student gain more maturity to help insure the correct school is selected.

 

* To prepare your family for this rising expense, it is best for parents to begin funding 529 plans as early as they can when the child is born. New York State will provide a state income tax deduction up to $10,000 per couple for contributions made to the NYS 529 plan (www.nysave.org).

 

* When selecting schools, finding one that best fits a student’s personality and interests is much more important than simply attending the school with the highest ranking or perceived prestige.

 

* Discussing college and the associated expense with students as early as middle school helps prepare them to take the correct approach to their academics and sets their expectations on what schools might be a possibility.

 

* For many schools with big prices tags, there is frequently a sizable amount of financial aid that can be provided so it is important to evaluate school expense after financial aid has been considered.

 

* For many students, graduate school will also be needed so limiting the amount of debt a student takes on for undergraduate is vitally important. Also, for many fields, the scholastic ranking of the graduate school can be more important than the ranking of the student’s undergraduate.