If you have children who are under 18 years of age, then at some point you may have thought about paying for college tuition. But how much of your child’s educational expenses do you want to cover, and can you afford it?
By 2033, which is 18 years from now, the average four-year college tuition and fees for a public university is expected to reach $94,800, up from $39,400 in today’s dollar. The cost is even more dramatic for private colleges, which is expected to reach a jaw-dropping $323,900, up from $134,600 today1.
According to The College Board®, these figures reflect an annual rate of increase of approximately 5 percent – higher than the general inflation rate1.
Still interested in paying for college?
While you may want to give your child more than what you had growing up, you still have your own financial goals to realize. Here are a few thoughts on saving for college and other, equally important milestones:
- Consider retirement first, college second. There are many student loans, scholarships, and financial aid programs that may be available to help pay for college tuition. You know what there aren’t loans for? Retirement. Saving for the day you retire can be the single most important financial goal. You can possibly use some of your remaining income to fund a college savings plan.
- Consider borrowing as part of the plan. There is nothing wrong with taking advantage of student financial aid or loans to help pay for college. In fact, many students find these programs extremely easy to pay back after college, as the terms are more flexible and the interest rates can be significantly lower than other lines of credit.
- Consider a partial payment. You may want to foot the entire bill for your child’s education, but it may not be realistic financially. If it’s not, then you may want to consider paying a part of the tuition and leaving the rest for loans.
All these ideas considered, we are not saying that it is a bad idea to pay for your child’s college tuition. This is a wonderful gift to offer your children. Just make sure that you are able to save enough money for your own future needs before you make a commitment to students who have the ability to work and pay off loans after college days are over.