Plan Now To Pay For College In The Future
Monday, July 4, 2011 at 12:00PM A child's college graduation may cause parents to well up with pride, but that's nothing compared to the tears they'll cry when they see how much it costs to get them there.
Robert Franek of the Princeton Review says when it comes to higher education, prepare for sticker shock.
“For public colleges for this year, on average, across the country it's about $16,140,” says Franek.
Multiply that by four years and the amount comes to about $65,000. Private colleges are closer to $36,000 each year.
“So that's almost $150,000, but we know there are well over 100 schools, public and private, that can top that $50,000-a-year mark,” says Franek.
Since that price tag is rising faster than the rate of inflation, when should parents start saving?
“What I recommend: as soon as the baby is in your tummy, start thinking about it,” says Alan Kahn, president of AJK Financial Group, “and then once the baby is born and you get a social security number, open up a college savings 529 account.”
529 is a program that allows parents to set money aside strictly to cover the costs of education. Since the money in that account grows tax free, it is best to start as early as possible. The question is, how much should parents contribute?
“And the problem with that question is that nobody knows the answer because you don't know what school your child is ultimately going to go to,” says John Vento, a certified financial planner. “You don’t know how much a grant he'll get, or scholarships, so there’s a lot of unknowns.”
Luckily, there are a lot of resources on the internet to help with the math . For instance, there’s nysaves.com.
Assuming a child plans to attend a moderately priced private university 17 years from now, as NY1’s Tara Lynn Wagner’s does, and factoring in inflation and the projected rate of return, it projects college education will cost $435,000. It suggests setting aside $992 a month now to pay for it.
“When you see what you need to save on a monthly basis,” says Kahn, “you will literally be, uh.”
Speechless.
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