Fasten Your Wallet: Your Kid Might Go to College

Most parents envision their kids having a successful college career filled with enrichment, opportunity, and the expansion of their dreams. We all know that college is also filled with beer, dropped classes and angst, but that part of the college career actually is part of the human experience that extends into adulthood and is therefore beyond the scope of this discussion.

Focus instead on cost. Some will stop at no length to send their kid to the college of their choice whatever the cost. Some think it wiser to have their kid earn their own way. The in-between provide some funds, and leave the rest up to their newly minted adult. My own parents chipped in only if we provided grade reports that were at least a B average. Any choice you make will be wrought with feelings on both sides (do they appreciate it? do they deserve it? are we being too controlling?). Whatever your philosophy, start saving.

Here is a projection for Portland State University:

Currently, Portland State tuition is: 2023.80 per term, or for a full-time 3 terms = 6,071 a year, no books included. (they will be using e-readers by then anyway, hopefully that cost will abate).

If your kid is 8, grow the projected cost 10 years ahead at the current education inflation rate of 7%, it will cost $11,942 a year.

With that calculation, determine the present value of that tuition for four years of college, adjusted for inflation and an expected earnings rate on your savings of 8% and you get a total cost of $53,277. This figure accounts for the increases in tuition during the four years of college as well.

How much do you need to save per year over the next 10 years to send your kid to Portland State? $3,677. Ack. What if you have more than one kid? AckAckAck. This is the point people just freeze (that Ack is just for State, what if you have a Duck?!).

There are loans, of course, but no jobs upon graduation are guaranteed and they start their careers as semi-indentured servants to the student loan machine. There is the hope that by then you will be making enough to pay as they go. Let’s assume that you will. Even with that assumption, you should act to save now. Open a Roth IRA, or even better, open a529, even better than that, ask Grandma and Grandpa to open a 529 so it will never show up on the FAFSA application.  You will thank yourself when you don’t have to pay extra taxes on your future big bucks.