How to Afford a College Education

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If you add a little to a little, and then do it again, soon that little shall be much.” —Hesoid

A very wise woman once told me that money provides freedom in life, and a college education is expensive at around $60,000 to $80,000 a year (with room and board) at the time of this writing in 2022.  If you are extremely rich, you don’t have to worry about this part.  However, for the rest of us, money for education is something we need to consider as soon as your kid is born.  There are groups on Facebook about paying for college for high income families.

You have 18 years to come up with the money: how will you spend these 18 years?  If you have a rich relative who is kind, perhaps you can get him or her to start a college fund for your child.  Even if your kid has a college fund, keep on adding to it every year, because you just never know if you will need more money. What if your kid wants to attend graduate school after college?  However, if the rich relative never appears, you need to start a college fund yourself as soon as possible.  A 529 account is a tax-free account for college as long as the expenses are used for college.  If you do not withdraw from the fund, your child can continue to keep the fund and use it for her child’s educational expenses.

Whatever you do, invest early and invest often.  Invest as soon as the kid is born. 

We used the Mass Mutual calculator to see how much one needs to save for a kid born today (2022):

When your first child goes to a private 4-year college in 2040, their total estimated tuition will be $517,293.

To fund your children’s education you need to save $1,251 per month until 2043.

In addition to your contributions of $320,346, your college savings could grow by $196,947 over 22 years.

Based on this calculator, you need to save $15,012 per year around 21 years.  If you split the savings into months, it makes the amount a bit easier to stomach. One thing you need to watch out for is not to be too aggressive with your investment choices as your kid becomes closer to college-age.  Yes, in 2021, the S&P 500 returned 26.89% but so far in March 2022, the S&P returned negative 12.17%.  You can lose so much money in just a few months if you are not careful!   If you are in a 529 account, make sure to stick to the age of the child recommendations in the fund.  Look at what happened to the stock market between 2021 and 2022 before you get too confident that your money will keep on going up and your child is close to going to college (as in within a year or less). 

There are Facebook pages about affording college.  One of the more popular ones is called Paying for College for High-Income Families 101.  It is good just to lurk and read posts by parents to learn how people are saving and trying to afford college.

Another thing to trick yourself to save if you are a parent is to increase the taxes that your employers take out of your paycheck so that you get a bigger refund at tax time.  If you claim single and zero deductions, the employer will take out a lot more for taxes.  Or, you can just ask them to take out more taxes.  Then, you or your accountant can file your taxes using the formula for married filing jointly (if that is your situation) and you will get a huge tax refund especially if you have child tax credits and other tax deductions such as a mortgage.

Apply for as many scholarships as possible.  You never know, maybe someone will give you some money for college.  Your high school guidance counselor should be emailing opportunities for scholarships.

I have heard good things about work study, but if your child needs to concentrate on school, it is up to you whether this is a good thing for you.  Of course, there are people who have no choice but to work, and this is fine too.

If you are a student who is reading this and your parents did not save any money for your education, should you take out loans?  Often, this is the only way you can stay in school.  Yes, you might owe a lot of money when you graduate, but you have a chance to make something of your life with this degree.  With some hard work, ambition and smarts, you will never lose money with an Ivy League degree.  An Ivy League education is the best investment you can make in yourself.  You will gain access to a group of people who can help you in so many ways.  Let me tell you about a girl who was offered an opportunity to go to law school.  She was working in a retail store at the time, and she could not quit any faster.  She left the store with a big bag of books that she purchased at the bookstore for her courses, and never looked back.  She signed for the student loans and just concentrated on her school work.  She did not know this, but the tuition they charged was a bargain because the tuition would increase tremendously year after year.  When she got married, her husband’s family paid off her student loans.  She worked as an attorney and became a self-made millionaire due to the blind faith that she would succeed one day.  That is manifestation, ladies and gentlemen.  Believe that it will happen and it will.

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