What is the first thing parents facing college financing should do?
“Educate yourself,” advised Tim Higgins, a certified financial planner and college planning specialist, who has created CollegePlusRetirement.com to provide information, has written a book on the subject and holds workshops around the area. “There’s no better time than right now.”
What’s the biggest mistake parents make?
“The biggest mistake is playing the admissions game, focusing on getting in to a school, and ignoring making a smart buying decision, how to pay for it. Every purchase combines two things: the right fit and price. When it comes to college, people are not putting these two together.
“The national numbers show private college in the mid- $20,000s and public college around $10,000 a year. In New England, you’re looking at close to $50,000 a year for private college. I tell families $50,000 times four is $200,000 that you have to pay after tax. If you have two kids, that’s $400,000. You’re ‘buying a house,’ and you don’t have 30 years to pay it off , you have 10.”
Should students be involved in financing decisions?
“Yes. They have no idea what you can afford and how you feel about paying diff erent amounts. Once the student is brought in on this financial decision, parents are blown away by how helpful the student wants to be.
“Students need to think of this as a major financial commitment. It does refocus them. Studies show that students with ‘skin in the game’ paying for college do better. They take it more seriously.”
How should families balance college and retirement?
“The balance should be heavily weighted toward retirement. If parents are 48, sending the first kid to college, and eight years later they are 56 when their last one graduates, how much time do they have before retirement? Do they want to be carrying a $200,000 loan? So look at your budget and your retirement goal. When parents look at how on track they are for retirement, they know how much they can contribute for college. It becomes clearer what they can do.”
Editor’s Note: the preceding is not an endorsement and is presented for informational purposes only.
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