In an increasingly competitive job environment, obtaining a degree after high school has become even more necessary.
What are the options to plan ahead?
The average estimated cost to attend at a public four-year in-state university is $24,061. The tuition is only a fraction of that figure but the total cost more than doubles when you factor in other room and board, books and supplies, transportation and personal expenses. The cost of a bachelor’s degree can vary based on several factors: attending public vs. private university; attending in-state vs. out-of-state university; location; or living at home vs. living on campus.
Who pays the bill?
Based on the most recent study from Sallie Mae, currently contributions from parents have surpassed scholarships and grants.
Investing early and allowing the funds to compound can be an efficient way to pre-pay for higher education. There are different types of accounts that are available such as brokerage, Roth IRA, 529 Plans, Coverdell savings, UGMA/UTMA and savings bonds. Each of these strategies has its own rules, advantages and disadvantages.
Personally, I think the benefit of 529 plans and the ability to have tax free growth is invaluable. The investment growth in 529 plans remains tax-free if the funds are used for qualified undergraduate or graduate expenses.
The total cost of obtaining an undergraduate degree seems expensive. However, finding other resources can help reduce the net bill. One possibility is having friends and relatives help give the gift of college education by deposit the money they would have spent on gifts into a 529 plan.
There are several grant and scholarship programs available at the federal level, state level and via nonprofit organizations. Missouri offers several grants and scholarships to its residents and the information is on the MO.gov website. The College Board also offers a free scholarship finder tool on their website that identifies relevant scholarship opportunities.
Ultimately, many students and parents need to borrow money to finance the dream of attending college. A few sources of financing are federal student loans, private student loans, financial aid offered by the university, home equity cash out, peer-to-peer lending and income share agreements.
Sallie Mae. How America Pays for College 2015: Sallie Mae’s National Study of College Students and Parents.
College Board. Education Pays 2013: The Benefit of Higher Education for Individuals and Society.
College Board. Trends in College Pricing 2015.