If you are a parent you know that higher education is expensive – so how do you plan to pay for college for your kids? For this episode of the podcast, I’ve invited my friend Brody Rosenfeld to join me to discuss this issue. Brody has experienced his own college funding struggle first-hand, including graduate school – and he’s also walked alongside clients in making plans to pay for their children’s college. Together, the two of us have some ideas about how you can begin to plan for the typical college expenses and even offer some ways you can save for college tax-free. Please, join us for this conversation.
Outline of This Episode
- [0:21] Brody Rosenfeld’s experience paying for his own college education
- [2:42] My experience and the benefit of the G.I. Bill, plus grad school expenses
- [7:49] Why is college so expensive?
- [11:30] The first steps toward saving for college
- [12:56] The 529 Plan to save for college tax free
- [16:22] How less expensive schools can be a huge benefit
- [18:30] The G.I. Bill is a huge benefit to consider
- [19:07] Federal loan forgiveness programs
Why IS college so expensive in the United States?
Many of us funded our own college education with student loans, and the proof of that fact can be seen today in the existence of over $1.6 trillion of student loan debt. That student debt has a dramatic impact on the economic potential of new grads – causing them to delay or even postpone indefinitely the financial decisions that drive our overall economy. For example – every $1000 in student loan debt lowers a person’s likelihood of homeownership by 1.5%. It’s a problem that impacts an entire generation of Americans.
But the question remains, “Why is college so expensive in the first place?” Three factors play a part in the answer…
Legislation – changes in the economy – the high demand for college education
Listen to this episode to learn how each of those plays into the cost of a college education and how you can begin to address the issue effectively.
Paying for college outright requires a plan
The task of entirely paying for even one student’s higher education is astronomical these days. The average public school education costs $20,000 per year and the average private school education can be as much as $47,000 per year. Deliberate planning is necessary if those costs are going to be handled apart from taking on student loan debt.
Brody and I recommend that you start planning by defining your contribution level to your child’s education. Are you going to pay all of the cost as their parent? Will you only pay some of it? Will the child be required to work for scholarships and grants or work their way through school at least on a part-time basis? These questions and many more need to be a vital part of any planning you do. Listen to learn more of the things you should be asking.
Have you heard about the benefits of a 529 plan to pay for college expenses?
Savvy parents and students are open to all kinds of options when it comes to paying for college. One of the most beneficial ways to go about it – especially if you are starting early – is to use the government’s college savings plan known as a 529. Currently, there is $328.9 billion invested in 529 plans and the number is only going up.
What’s so good about a 529 plan? It enables you to deposit funds into the plan and direct them toward investment accounts. All of the growth is tax-free – which enables you to keep much more of the money you earn to use for college expenses. Under a 529 plan, you can contribute $15,000 per year, per person to build your investment nest egg. There are also options to contribute even more all at once through what is known as a “superfund” plan. Listen to find out more about the 529 and get your college savings underway!
Why a community college is a better option than you may think
Some people have a negative impression of a community college education, but Brody and I recommend you take another look if you’re one of those people. We both experienced community college and felt our experiences were good. But more importantly, the education you get at a community college is typically just as good as a higher level or 4-year school and will cost far less. Many people get their basic curriculum requirements out of the way at a community college and then transfer to their “dream school” to focus on their chosen area of study.
One of the things I like to explain is that nobody is going to ask or even care what community college you attended. They are only going to care about the college you graduated from, so if you can save money and still get the education and graduation credentials you need, why not do it?
I hope you listen and take to heart the advice Brody and I share on this episode. A college education is possible if you plan early and get started.
Resources & People Mentioned
Connect with Brody Rosenfeld
- Brody at Foundation Financial Planning
Connect With Ryan A. Hughes and Bull Oak Capital
- Podcast (at) BullOakCapital.com