I’ll risk a blinding flash of the obvious: college is expensive. If a house costs $500K+, a car costs $50K-ish, it rocks my world to think about the 4-year cost of a private or out-of-state public school—easily $200K-$300K+! While I understand the debate about whether college is worth the cost, the statistics are stark: a bachelor’s degree adds millions to lifetime earning potential. So, this article is going to stick with the assumption that you’ve decided that Junior is going to college, but the price tag needs consideration.
The Problem with College Pricing
The costs of college are both obvious and hidden. The obvious costs include tuition, room and board, books, and fees. The less obvious, but estimable costs include travel to/from school… multiple times per year for both the student and family and spending money for Junior (beer and pizza won’t buy itself!). The hidden costs may include tutoring during high school, application preparation services, application fees, test score transmittal fees, and worst of all: paying more than you have to get what junior needs (versus wants).
It’s this last part that we’ll focus on—paying the right amount for your family. You likely know that college prices have outpaced general inflation for several decades now. Unfortunately, it’s not just the prices that have inflated—the status symbol effect of a selective college has inflated too.
Just the same way that luxury car brands have successfully trained us to think of driving their cars as a proxy for self-worth and a symbol of financial well-being, the college industry has trained our kids (and maybe too many of us) that a high-end college is also a proxy for self-worth. Being accepted to/attending an elite school has become the baseline of aspiration for too many young adults.
How many people around you practice in the profession of their undergraduate degree? Do you? Especially for military families, the reality is that we earn an undergraduate degree and then start figuring out what our adult professional life will look like. How many people around you have a graduate degree that directly relates to both their undergraduate degree and their profession? I’ll hazard a guess that this is an astonishingly small number.
It’s very possible our kids will go to college, earn a degree and work 40 years in the field of that degree. Perhaps they’ll continue to graduate/professional school and then work a career in that field. The reality is that our 17 and 18-year-olds probably have no clue what their future self will be/do/want.
We’re fully formed adults and we don’t buy cars or homes without being awfully sure that they’ll meet our needs at a cost we can afford. Why on earth would we let 17 and 18-year-olds commit to spend (or take loans for) hundreds of thousands of dollars for a degree that they may (probably will) never really use in the marketplace?
What is College For?
For some kids, college is the place where networking with elite professors, researchers, mentors, politicians, executives, physicians, attorneys and connected peers occurs as part of a preordained path to wealth and top-tier professional/personal accomplishment. It would be super if that were the likely path for most of our kids.
For most kids, college is the place where they build the life skills to get to the starting line of adulthood. College provides the opportunity to become accountable, organized, resilient, hard-working, adept at failure and recovery, self-sufficient, and yes, educated about some topics that one can get paid to work on.
That’s not mutually exclusive with making great friends and pre-professional connections, but the core things most kids need from college are:
Maturation into a self-propelled adult…
With a good vector towards a first job or graduate school…
In a topic that their couple-of-years older self has a better chance of choosing properly
Clearly there’s lot of other important elements of college like life-long friendships, critical thinking, exposure to new ideas, etc.
If you buy the idea that what most kids need from college is formation into an adult that can start to navigate an independent and professional life, then how much should that cost?
The College Hangover
Our kids will probably learn about a short-term hangover once or twice during college without our help. The average cost of tuition, fees, books, and room/board for 4-years at a private college after typical discounts is nearly $56K or $224K without any inflation and probably not counting 100% of the true family outlays. Out-of-state and in-state costs are about $44K and $27K respectively ($176K and $108K for four years). If kiddos have loans for a sizable portion of the bill, the financial hangover can be life-altering.
You may know rough numbers already, but just in case: current average student loan debt amounts for undergraduate, law school, and medical school respectively are $28K, $145K, and $201K (and increasing). Student loan repayment plans usually start at 10 years and many extend to 25 years! The kiddos aren’t 25 years-old and they may be on track to make payments for longer than they’ve been alive.
Recall too that student loan debt isn’t generally bankrupt-able. You can pay it off or die (or hope for loan forgiveness programs, but hope is a lousy strategy!). Public Service Loan Forgiveness (PSLF) may be a possibility, but it still takes 10 years after degree completion, and it limits job choices significantly. Even with income-driven repayment plans, kids with student loan debt won’t have another choice but to be in debt for a large portion of their working career based on decisions set in motion as a teenager.
While I’m very pro-college and its benefits, it’s also true that many students don’t finish college, but student loan debt demands repayment regardless of degree completion. Many other students graduate and then work few if any years before stepping back from the workforce for goals such as raising a family.
Even if a family or student doesn’t take on burdensome debt, dollars spent on college can’t be used for another purpose. If 529 savings, retirement savings, or even current cashflow go towards high college costs, they can’t be used for other students in the family, grandchildren’s education, retirement, or other financial goals. Is the college that Junior wants to attend the most efficient use of the dollars?
Difficult College Conversations
Most families that I encounter have one of the following attitudes towards funding college for the kiddos:
“You try to get into the best school you can, we’ll find a way to pay for it.”
“We had skin in the game and paid some/all of our way, you’ll have to do the same.”
“We have the GI Bill/College Savings for you, don’t sweat it.”
Less common attitudes are:
“We have $XXXXX dollars set aside for all the children in the family. We’re not helping you get into debt, and we must peanut butter spread the money across all of the kids, not knowing what their aptitude and trajectory will be, so don’t set your sights on a school that won’t fit into the following budget…”
“Junior, let’s have you rock your undergrad degree and get into med/law school first, then we can consider loans when you’re on glidepath to earn enough to pay them off.”
“Junior, pick a school where you can earn enough to pay for your first year. If you succeed having paid your way for a year, we’ll pick up the rest of your undergrad degree.”
“Let’s see how you do at the state school/junior college for two years. If you get accepted as a transfer at your dream school, we’ll find a way to afford it at half the price.”
Clearly there’s no right answer for every family, but perhaps more important that what the parents’ attitude towards college funding is when the conversation takes place. Some kids can get marquee college fever in their early teen years, but most don’t start dreaming of ivy until their peers start talking about it in Junior year.
If parents want to avoid disappointing Junior (and other Junior… and maybe more Juniors…) with a senior year surprise “we can’t afford that school” conversation, then having “the talk” is appropriate as early as 9th grade. For kiddos that are starting to dream in middle school, it’s better to start the conversation even earlier.
Better College Conversations
Paying for college might seem easy compared to getting into the dream school. Despite a drop in overall attendance, highly selective schools have become even more selective in the pandemic’s wake as they drown in test score-free applications. If a child is interested in a highly selective school(s), it’s important to get way ahead of the application gauntlet.
“I know you’re in 9th grade, but you’re talking about a prestigious school so it’s time for you to earn some prestige!”
If you have the luxury of keeping your kids in the same high school (better yet same district as the middle school) for all 4 years, it may be helpful to see how high school credits earned in middle school can help or hurt the GPA arms race in high school. I.e., starting high school with a 3.0 GPA due to a B earned in an 8th grade high school credit class might not help as much as starting high school with a clean slate but earning 4.5 or 5.0 weighted A’s taken as a more seasoned student.
“You’re not ready for Honors Algebra in 8th grade. Take it in 9th grade after you master pre-algebra without denting your high school GPA from middle school.”
Mapping out AP/AICE/IB classes as well as dual enrollment both for the GPA impact and how potential colleges view those classes is also an important strategy that needs thought prior to 9th grade to have the most effect.
“Bougie University likes to see lots of AP classes, let’s build your schedule around those to boost your GPA and resume.”
Requiring Junior to start PSAT/SAT/ACT prep as early as possible may help avoid the disappointing “sorry you didn’t get in” conversation.
“I don’t care if you’re too cool for Khan Academy, you’ll log 2 hours a week on their free SAT prep program, or I won’t even pay for applications to Bougie University.”
Finally, this article can’t take the place of the many excellent books on the college admissions process that have come out over the past few years such as Who Gets In and Why, Where You Go Is Not Who You’ll Be. Perhaps the best piece of advice we found about preparing a student for highly selective school applications: “Be alike but have a ‘Spike’.”
Being alike implies that all the competitive applicants will have great grades, test scores, and several extracurricular activities. To stand out as the signal among the noise, it’s important to have a feature/talent/expertise/experience that helps the school identify you as a unique complement to the new freshman class. They don’t need 200 soccer team captains, but they may appreciate the kid that rocked academics and ran a business or orchestrated an impactful charity endeavor, etc.
“You love volunteering at the animal shelter, how can we amplify your passion into something with an even greater reach?”
“Let’s find a way to get you to that state university swim camp this summer, I think that maybe what gets you on the podium at the state meet and beyond.”
The college admissions process isn’t going to be a spa day, but it doesn’t have to be a scene from the Hunger Games either. Proactive planning can pave the way for a focused and realistic final college search senior year.
Cleared to Rejoin
College can be dumbfoundingly expensive, and the juice versus squeeze ratio isn’t always balanced. Before letting kiddos drive the fight by pining for an expensive school, parents should decide on their attitude and plan for funding school and then keep an ongoing dialogue going with the kiddos. It’s worth considering where dollars will have the most impact: undergraduate studies for an uncertain future or graduate studies when the future has clarified a bit? If a highly selective school is a possibility, middle school is the planning window to create a high school resume that will give kiddos a shot.
There’s no right answer that fits every family but waiting until senior year to establish the family’s funding plan and limits is the wrong answer for sure.
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“Winged Wealth Management and Financial Planning LLC (“WWMFP”) is a registered investment advisor offering advisory services in the States of Florida and Texas and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized responses to consumers in a particular state by WWMFP in the rendering of personalized investment advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant an applicable state exemption. All written content on this site is for information purposes only. Opinions expressed herein are solely those of WWMFP, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to other parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.