Before You Root for Your Favorite Teams during March Madness, Do You Know How Much These Colleges Cost?
It’s time for March Madness basketball. Yep, when everyone fills out their brackets and watches some of the best college players in the country go head-to-head. But did you ever realize how expensive some of these schools are? Well, hold onto your pom-poms because it’s getting expensive out there and the real March Madness is in College Costs.
That’s going to leave a mark
College tuition and fees have increased at roughly two times the rate of inflation.1 The average cost of a private four-year college education is now $197,000.2 But it can be much more expensive than that. For example, here are a few teams you’ll be seeing this year, and what their schools cost.
Cost per year:3
• Duke: $69,291
• Notre Dame: $66,604
• Princeton: $62,494
• UVA: $58,024
• UCLA: $56,856
• UVM: $52,322
• UNC: $46,940
Even if you’re not looking at Division I schools, it is expensive. According to the annual College Board Trends in College Pricing 2016, the average four-year in-state public university is at about $25,000 per year in 2016 (up from $16,000 in 2010). And the average private college is about $45,000 per year compared to $37,000 in 2010.
These kinds of costs can set off a different kind of March madness as parents begin to wonder, “Um, where is that money going to come from?”
Scholarships and loans
All students are eligible for federal direct loans, up to $31,000 to cover up to five years of undergraduate education. Some families can get Pell Grants and most can get private loans. But if you make too much, it’s increasingly difficult to get ‘free’ money. “We generally hear that schools attempt to meet the full need for students from families whose household adjusted gross income is below $75,000,” said Joe DePaulo, the founder of College Ave,4 which offers private student loans to families who find themselves in this funding gap. “As family income increases, aid declines. Very little is offered once incomes approach $200,000,” DePaulo said.
Although a student may not qualify for needs-based aid, there is still hope for other resources. Many private colleges offer institutional grant aid that reduces the sticker price. This kind of aid doesn’t need to be repaid and ranges from one-third to one-half of the sticker price.
What now?
Beyond getting loans, there’s the popular 529 college saving plan. And it even makes sense if a student is within a couple of years of attending college. It offers several benefits:
- Your investment grows free from federal taxes if used for qualified college expenses
- Depending on where you live, you may get a tax deduction for your 529 savings account
- Your child can attend almost any college (US or overseas), no matter where your 529 is based
- Anyone can fund it (so start begging your grandparents)
Also, if you happen to need the money for something other than college education, you can withdraw it. Just keep in mind you’ll get hit with a 10% federal penalty on the earnings (However, there may be no withdrawal penalty if your child receives a full scholarship).
Other options to consider include funding a college education trust or even cash value life insurance – if you have a long lead time to college.
Early bird gets the worm
If you’re the type of person who plans ahead, you can set up a 529 account when a child is born, which will give you nearly two decades of potential earnings. How much should you save? If you can manage it, aim for enough to cover at least one-third of future college costs. For a child born this year, that means saving roughly $250 a month from birth until his/her future enrollment in a four-year college.
The Takeaway
Yes, it’s expensive out there, but with some insight, a plan and a head start, you can help make saving for college a little less painful. That way when you’re watching schools battle it out on the court, the only thing you’ll have on your mind is your bracket.
To find out how to put a college funding plan in place for your family, give us a call.
Steve Stanganelli is a Fee-Only Certified Financial Planner™ Professional NAPFA-Registered Financial Advisor, and Accredited Estate Planner® at Clear View Wealth Advisors, LLC. He has been providing financial, tax, retirement, and college funding advice for more than 20 years. For more information, email: Steve@ClearViewWealthAdvisors.com
Notes:
(1) http://www.finaid.org/savings/tuition-inflation.phtml
(2) http://www.collegedata.com/cs/content/content_payarticle_tmpl.jhtml?articleId=10064
(3) Based on 2017-2018 out-of-station tuition, fees, room and board: http://phillips-scholarship.org/new-applicants/cost-of-college-list/
(4) http://money.cnn.com/2016/04/28/pf/college/college-financial-aid/
DISCLOSURE:
This information is provided to you as a resource for informational purposes only. It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. Assets in a 529 can accumulate and be withdrawn federally tax-free only if they are used to pay for qualified expenses. Earnings on nonqualified distributions will be subject to income tax and a 10% federal income tax penalty. Contribution limits vary by state. Refer to the individual plan for specific contribution guidelines.
