Everyone knows college is expensive. Still it’s surprising just how expensive.
According to CollegeData.com, which compiled College Board stats for the 2014–2015 academic year, U.S. students can expect to pay over $23 thousand in annual tuition at an in-state public college. For private colleges, make that over $46 thousand. Tack on $9 to 12 thousand for room and board, plus another grand for books and supplies (not to mention the two or three thousand you’ll spend each year on transportation and living costs) – and that’s your budget. Next year? Rinse and repeat.
Parents: When to start saving?
The answer is not, as you might expect, “right away.” The financial blog Nerd Wallet advises parents to do some serious financial housekeeping before they start working on a child’s college fund. Their advice? Wait until …
- You’re putting aside at least 10% of each paycheck for retirement
- You’ve paid off any high-interest debts
- You’ve gotten rid of your own student debt
- You’ve saved at least three months’ of living expenses
- You’ve created a fund for emergencies
Once you’ve accomplished that list, you can start squirreling away the funds to pay for your child’s higher education. Today there are more educational planning choices than ever, many with significant tax benefits. Options to consider include the qualified tax-free withdrawals of a 529 College Savings Plan, the gifting option of a UTMA/UGMA or the tax deductions available under an Education IRA.
Students: What are your options?
If you’re coming out of high school without a giant nest egg to tide you through college, you’re like a lot of people. According to a US News infographic, more than 60 percent of the 2013 graduating class borrowed money. Their average total debt after graduation was about $27 thousand.
Students who take advantage of every resource available to them, however, may be able to reduce that figure. Applying for financial aid, national grants and local scholarships is the first step. Next, make sure to apply to multiple universities; if accepted to more than one, you could negotiate a better deal.
Peace Corp and similar programs offer tuition money in exchange for participation. If you’re willing to study abroad, you could also try international schools, which sometimes offer a lower price tag.
Make every penny count.
The effort doesn’t end after you’ve been accepted and secured your money. If you can refrain from spending too freely, put some effort into minimizing your expenses and earning some money to help pay your way, you’ll be so much farther ahead by the time you graduate.
If you drive, choose your car carefully. “Students can save money by purchasing cars with low sticker prices, low associated insurance premiums, and minimal operating expenses,” said the financial fitness website Money Crashers. (Click here for their 10 best affordable cars for college students.) That’s just the beginning: there are plenty of other ways to save money while in college, too.