To Save or Not to Save?
Upper middle class (UMC) parents have a dilemma, should they save for college or not? Since the cost of private college tuition, room and board and fees averaged $34,132 in 2009 according to the College Board, is it worth it to have savings for college?
And those figures do not include prestigious private schools such as Harvard, which totals $52,000 for the 2009-10 school year. Thus, the task of college financial planning is daunting to many UMC parents.
The scarier part is for newer parents or parents that have a long way off before their children attend college. For example, FinAid reports, “During any 17-year period from 1958 to 2001, the average annual tuition inflation rate was between 6% and 9%, ranging from 1.2 times general inflation to 2.1 times general inflation. On average, tuition tends to increase about 8% per year” (Tuition Inflation, FinAid.org).
So UMC parents can just imagine what the average cost of college will be ten years from now. If not, that average figure for private college in 2020 will be $73,688.42.
Now let’s say the average number for a prestigious private university costs $48,000 for the 2009-10 school year. In 2020, that number would be $103,628.39. And with tuition increases every year for four years, that number will keep rising to the point no UMC parent will be able to pay.
So why save at all?
Well, the key to financial planning for college is to save some. Most experts agree that UMC parents have to save for a child’s education. Otherwise an affluent family on paper who has no college savings will not be favorable in the eyes of a financial aid officer. Parents cannot just throw up their hands and say, “I can’t afford it anyway, so I’m not going to save.” Parents mistakenly think by doing this, they will receive tons of educational financial aid.
And nothing is further from the truth.
To the college, this lack of financial planning will look as if the parents spent money on insignificant things and wasted away their potential savings. And they won’t take pity on irresponsible UMC parents.
Imagine the scenario. You’re a financial aid officer and you see a family with a mother, father and two children, one who is applying to your college and the other who is 14 years old. The family makes $250,000 a year and has no savings. Would you give this family money? Probably not.
However, the family that does invest in a child’s education will be looked more favorably upon. At least this family made an effort.
Don’t worry so much about the future, especially the year 2020. By this time, WPC predicts no one (except the very rich) will be able to afford college in this country. And colleges surely won’t have enough money to dole out.
After immigration reform and tackling the climate and energy crises in Congress, WPC believes the hot topic will be the average UMC American family affording college.
Don’t stress over what you don’t know about the future. Laws may change, colleges may change their rules. Meanwhile, continue to save for college and squirrel away as much as financially possible into education funds for your children.