The Price You Pay For College - Part 3

"According to 2019 NCAA data, nearly 8 million high school students play sports. Just 480,000 however, play in college. Not bad, right? Well, only a little over 180,000 of those athletes get scholarships, and most of them do not get a full ride. So it's only a bit over two percent of high school athletes who get any discounts based on their sports skills, and schools don't necessarily guarantee that the scholarship will last until graduation. Moreover, many schools in Division 1, the most competitive group of schools that have the most money to offer, are state universities where any partial scholarship merely offsets the higher out-of-state student price tag."

So the bad news is, it's unlikely your kid will get a substantial athletic scholarship to offset the cost of education. The good news is, I do feel optimistic that most families can effectively plan and save for college. Conventional water cooler talk could lead some to believe college is getting out of reach. How many times have you heard, 'it's going to be so darn expensive, I don't know how we're going to swing it. I'm going to be working forever!'

I don't think that mindset necessarily reflects today's landscape. Sure, there are schools out there that will send an acceptance letter but charge full boat. But if you're paying $70k a year, it's probably a choice. It's not like there aren't any really good alternative solutions, assuming cost is a major factor in the decision.

So don't get discouraged. Set some educated guesses about where you'd like to be, and be a little less wrong each year. Consider a very simple, straightforward plan like noted below.

"The most calming formula for planning is one that Kevin McKinley, a financial planner in Eau Claire, Wisconsin, shared with me many years ago, although I later learned that the financial aid expert Mark Kantrowitz had been suggesting a similar version of it for a while as well. McKinley has three kids, including two in college, so he knows whereof he preaches. He suggests thinking in fractions. Take a family aiming to send one child to a state university or a private one that offers plenty of merit aid. Their all-in cost in today's dollars might be $100,000. McKinley would have them divide that into three quarters. The goal would be to save one-quarter of the total, $25,000 through regular deposits as the child grows up. Then they'd pay $25,000 of of their current income during the four years of college, with the undergraduate working part-time during the school year and full-time during the summer. The remaining $50,000 could come from debt, with the student borrowing a bit more than half that total from the federal government and parents borrowing the rest from home equity or through a federal PLUS Loan or a private lender."

Note - assuming a 5% return on your money for 18 years, you'd need to save ~ $75/month to hit that $25k savings bogey. That's a really doable number for most people! Don't be paralyzed by the uncertainty surrounding how much you'll ultimately need. Just start.

There's helpful nuggets like this throughout the book. Go ahead and give it a read.

--

^Source:

^{The Price You Pay For College (Ron Lieber)}

^{The content in this article was prepared by the article’s author. Voya Financial Advisors, Inc. does not endorse its content, and the views expressed may not necessarily reflect those held by Voya Financial Advisors, Inc.}