How are you paying for college?

Written by Marcus Dusenbury

The Routine

This morning started like most mornings do.  My son wakes up first and will sing a short song.  My wife and I are up next and begin quarterbacking the home’s morning routine.  There’s still no peep from my daughter, our resident night owl, until we coax her into consciousness.  I love our morning routine, but I think a lot about my children’s future and what positive routines we can establish financially to take care of them.  Do you think about your children’s future as much as I do?

Establishing a College Funding Routine

It’s easy to fall into life’s routines. Some are healthy, like jogging and eating well. Others, such as being sedentary and eating ice cream every night, are not. Establishing a routine of saving money for your children’s education is financially very healthy, and is one that all families need to do as soon as possible. In-state public four-year universities now cost an average of more than $10K per year—and that’s just tuition and fees.  Out-of-state students can expect to pay $24K per year, and private schools average more than $33K.  Of course, tuition is just one part of the bill.  Room and board typically averages $10-12K per year, and items like books, computers, transportation and other basic needs for college can add another $3-5K.  Altogether, parents should expect a year of college to cost somewhere between $23K and 50K per year.

Here is a great place to get some stats on the Average Cost of College for 2018.

The Math

My son and daughter just turned 4 and 5 years old, respectively.  So, I have roughly 13-14 years before these expenses hit our household budget.  Using the average of my above numbers, I’m planning on $20K for tuition, $11K for room-and-board, and $4K for other costs.

$20K + $11K + 4K = $35K year

I have two children only 1 year apart in age, so:

$35K x 2 children = $70K per year

I’m hoping they each complete their 4-year college degree within…wait for it…4 years.  Oddly enough, only about 40% of today’s college students actually complete a 4-year degree program in 4 years.  But I’ve got a couple of smart ones, so for planning purposes, I’ll assume (hope) they pull it off in 4 years.

$70K x 4years = $280K in estimated college costs!

Don’t Forget the I-word…Inflation

As a professional financial advisor, I have almost 20 years of experience dealing with large dollar amounts, but I can’t lie; saving $280K over the course of 14 years is intimidating to me, as it is to most American parents.  But we’re not done with math yet. We’ve left out one important factor, INFLATION. Inflation has historically averaged about 2-3% on most goods and services over the past 50 years, but college costs have been outpacing inflation by a wide margin in recent decades, running 4-5% per year.  Thus, my $280K total in today’s dollars must be adjusted (increased) for inflation.

Assuming 4% annual compound inflation, my $280K actually becomes a whopping $484,869 after 14 years.  Yikes! We thought needing $280K in 14 years was bad; $485K is almost half a million dollars.

What’s the average family to do?  Well, first let’s discuss what not to do:  bury your head in the sand until it’s too late, or sacrifice your own intended lifestyle and/or retirement plan in order to give your child the education you want to provide them.

The Solution

Like most people, I don’t have an extra $200K+ lying around that can be invested today to achieve our 14-year college savings goal.  For most parents, a combination of strategies need to be employed—as soon as possible—to prepare for and pay for college.  As with other aspects of good financial planning, there’s no one perfect formula that fits everyone, but beginning a positive savings routine is the key to success.  Everyone needs their own plan that is custom-tailored to their life.  Develop a plan with a knowledgeable financial planner, and begin creating good financial strategies and saving routines. Here are some ideas to help guide you:

  • Consider starting a college 529 savings plan. These plans allow investors to take after-tax dollars and invest them (often with investment options similar to 401K plans) in a tax-sheltered account. As long as the assets are used for higher education, the growth in the account will be tax free.  Meet with a financial advisor to help calculate how much money you should be saving in your 529 plan.  Here is a good place to learn more about 529 plans.
  • Explore grants and scholarships. Assume that your 529 plan alone will not cover the cost of college.  Grants and scholarships can supplement your college savings.  Hundreds of thousands of grants and scholarships are available every year (some even go unclaimed!), from Federal Pell Grants to scholarships in specific fields of study.  Spend time researching what’s available to you.  Here is a good place to start.
  • Third, consider a cheaper path. More and more students, even those who qualify for top rated universities, are choosing to spend the first two years living at home and attending their local community college, transferring—after general studies have been completed—to their college of choice for the last two years of their degree.  This is terrific way to save money, and yet still get that prestigious diploma from a top-rated school.  Learn what sets some community colleges apart from others here.
  • Fourth, consider student employment. Everyone wants their children to focus on studying in school, but consider asking your child to contribute, especially if they’ve decided to attend an expensive school.  This can help build character, give them a taste of the working world, and help them appreciate the hard work you put into saving for their education.  If there’s absolutely no way for them to work during school, they can at least get seasonal summer and/or winter break jobs. Also, gone are the days of “free” internships; here are some of the higher paying internships students can pursue these day.
  • Fifth, use borrowed money. Student loans are a touchy subject in the world of financial planning. No one wants their kids to exit college under the burden of debt, but even with solid college savings, some schools are simply beyond reach without considering loans. Recent news about predatory student loan programs have left many worried about applying, but here is good place to learn what new federal standards mean to students considering loans in the future.
  • Lastly, think outside the box. Consider social financing, crowdfunding, and/or asking friends and family to make contributions to your 529 plan in the future as birthday or holiday gifts for the kids. You can learn a little more about crowdfunding here.

The Take Away

There’s no magic formula to saving for college, but planning as early as possible is the biggest key to success.  Putting a formal plan together that includes savings, actively seeking college grants, working while in school, financial support from extended family, and/or using a cheaper school for the first few years can make higher education for your children affordable, and do so without jeopardizing your other financial goals, especially retirement.  Start your positive savings routine now by meeting with a financial advisor to see which of these options make the most sense for your particular situation.


College Cost and timeframe data from

Marcus Dusenbury is a Financial Advisor and Founding Partner with Viridian Advisors (  Assurance, Tax, Consulting, Accounting services offered through Viridian Tax and Accounting, Corp. Financial Planning and Investment Management services offered through Viridian RIA, LLC. A Registered Investment Advisor

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

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