Please, please, please just let us finance our two kids through college without too much debt. I’m a biologist, by Zeus, not an economist, not an accountant, not a portfolio manager at an investment firm. I seem to do fine spending money, but planning for enormous purchases such as college and retirement are way beyond my comfort (and frankly, my interest) level. Way.
But we’re blazing along that path towards college at what seems to be a greater rate each year. Despite the fact that we have always encouraged a college track for our kids and assumed that we’d make it feasible for them, we have not been very good about systematically saving for college specifically. As a faculty perk at his previous university, my husband had the reassuring option of tuition remission for all dependents, but we lost that benefit in our recent move to the west coast. I’ve been feeling more and more behind in the planning process, and more and more scared to broach the subject. So when my daughter’s middle school offered a seminar with a CPA who specializes in college planning, I dragged my husband (who has, if possible, less interest than I do in financial affairs) along to an evening of college planning 101. It opened my eyes, so I thought I’d share a few things, for anyone who’s starting this process with as little initial knowledge as I am.
1. CPAs can have a great sense of humor and tell CPA jokes! Ours admitted that if you google “CPA jokes” you don’t come up with much, but she was quite capable of making up her own. This made the evening quite enjoyable (never thought I’d say that!) College planning is a relatively new specialization in the CPA world. Our CPA started specializing in this direction 10 years ago, and has amassed a dataset of client income situations and college attendance that allows her to make predictions - how much a family can expect to pay if their child gets into a particular college, year-to-year trends, stuff like that. She also had suggestions for how individuals can predict college affordability given their own circumstance, which is somewhat complicated, as you’ll see in 2., below.
2. Affording college is a huge commitment. But the pricing schemes are crazily variable! Don’t assume that a public university will cost far less than going to an Ivy League school or a highly selective small college. This is because colleges fall into several categories in terms of the kind of aid they give. For someone with my family’s (relatively modest) income level, these private institutions can have a lower pricetag than our in state flagship public university (your child just has to be able to get in - ok, this is another can of worms), because this tier of colleges tend to give mostly need-based aid.
Our CPA highly recommended using the calculator tools online at www.collegeboard.com to figure out our “EPC” Expected Family Contribution - a crucial figure in determining what we should expect to pay for college. This figure depends on household income, assets, numbers of kids in college, student income, etc. With this in mind, you can figure out affordability of various categories of colleges by running a “Net Price Calculator” (try www.netpricecalculator.com) which will estimate your need-based aid and merit award eligibility for any college you specify, as well as giving you the percent of your need that college will meet and how the college will meet the need (i.e. gift vs loans vs work study). With this info, you can determine which college categories (in-state and out of state flagship and non-flagship public universities; highly selective Ivy League type private colleges; mid-sized smaller private colleges; community colleges) are most affordable for your income/EPC.
The take home message I got from this is that it is worth determining which kinds of college you can afford before your child gets his/her heart set on one that is completely out of your range (unless you have unlimited assets for college education). For example, I will discourage my daughters from developing further interest in UC Berkeley, a campus they have found intriguing since alumnus-uncle Gordon treated them to a dynamic personal tour. For us, this institution would cost >$57K per year (all included), with very little chance of the state of California giving us out-of-state residents much aid.
3. Colleges use two different methods to calculate EFC, the institutional method (CSS Profile) and the federal (FAFSA) form. The stricter CSS Profile asks for family financial information starting two years before your child would start college, so I’m glad I attended seminar while my daughter is in 8th grade, rather than waiting. Knowing what I do now, I will play with the EPC calculators to figure out how different forms of assets effect my expected tuition contribution, and whether some asset planning might be advantageous for us. For example, is it worth selling the small property my husband and I invested in years ago, and put this money into retirement savings (which are not considered assets by the FAFSA form, and thus many colleges that use this form)? If it does help to do this, we need to do it well before the CSS profile is due. If my parents want to contribute to their grandchildren’s college, where is the best place for them to put that money - in my name? My children’s? Can we afford to get through without the gift during college, so it wouldn’t contribute to our assessed assets and lower our aid eligibility and accept the gift on the other side of the college years. Is it worth contributing to college funds at this point? My neighbor, while putting her son through Brown, discouraged me from doing this - her warning: the college will just take any money you earmark like this. I haven’t tried the EFC calculator yet, but I’m hoping it will give me some power to make good decisions.
4. (Slightly off the financial topic) In the back of my mind I have always known that there are many more colleges on the east coast than the west, but our seminar speaker showed us a map that illustrated this phenomenon. It is striking! Compare the number of east coast and west coast blue dots (4 year colleges) on this map http://highereddata.blogspot.com/2013/01/mapping-us-colleges-and-universities.html. Seeing this drove home the likelihood that my daughters will go back East for college. Not that this is a bad thing, necessarily. I did it myself; growing up in LA and going to college in Boston. And then East coast grad school. Then staying for an academic position (for my husband), again 3000 miles from our families. We only just returned to this side of the world and I realize I may lose proximity to the next generation of my family due to these geographical factors… selfishly, I hope they make it back to live near me.
Are you asleep yet? There’s more: 529 plans, guaranteed education tuition programs, highschool/college dual enrollment programs… Having gotten my feet wet in this process, I feel extremely grateful for the opportunity to have someone help lead me into this information, and slightly less overwhelmed at the prospect of exploring the numerous options ahead. I keep wondering, how could this complicated, and oft-changing process be made more approachable for others, especially those who may not have the benefit of going to college themselves?
Many of you have already gone through financing college or are further along than I… any pointers or experience you’ve learned along the way?
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