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Mary
Rowland
Personal
Finance Column
May
2008
Planning for
College: Consider all your options
Don’t we all look forward to summer when we plan to
work less – or less intensely? Educators get a special award in that they
may decide not to work at all. The agenda is looser with more time for
relaxation and reflection.
One important reflection is how we will grow our
lives to the fullest through education, new jobs, a sport, volunteer work.
And then comes how we will do the same thing for our children. Educating –
and changing and growing – are the most important things we do in this
life. We should never stop. And certainly we should never stop in the name
of money.
But today, paying for college is high on the worry
list of the child, student, parent and grandparent. So much so that we’ve
pushed the magical world of curiosity and learning into the background. I
remember when my son was eight years old and he said: “Mom, how much money
have you got for me for college?” I said: “We’re doing our best.”
My son just turned 18 and the past year has been one
of fretting and worrying, not just about how he will pay for college next
year but whether he will even get into a college and have the privilege
of paying tuition. Some of his friends do not have a nickel set aside for
college. Others have applied to a dozen schools, been waitlisted at five
and denied at the others. “Why should I even bother to go to college?” is
a question I hear from my son’s and daughter’s friends. Four more years of
studying, pinching pennies, and living by someone else’s rules. Of course,
for some students who have no money worries, going to college is a way to
let the good times roll and extend the buffer between childhood and
adulthood.
Why go to college? We always get the answer that a
college graduate earns $1 million to $1.5 million more over his lifetime
than a high school graduate. OK. But that’s not the only reason. When I
graduated from high school, I didn’t even entertain the idea of college.
My family had no money. But then it began to look intriguing. I worked for
a year, saved my money and started as a freshman at the University of
Minnesota. It changed my life. And that was in the first week. I’m sure
many, many other students could say the same thing. In my years (decades)
of writing about personal finance, I’ve found that what happy people and
fulfilled people seem to have in common is a passion for what they do
whether it is their day job, a hobby, church group or volunteer work. The
more you learn about yourself and about your options, the more likely you
are to find what fulfills you.
Isn’t it time to change “college” from a dirty word
full of anxiety to an opportunity to identify the golden ring? And to get
back to college ourselves, to some kind of learning that will enhance our
opportunities?
Paying out every last penny you have for your child’s
education so that you must spend the next four years at home watching
American Idol because you can’t afford to buy a book to read or gardening
tools or gas to drive to the park, is not the right answer for your
family. Continued learning is something each family member deserves.
Here are five possibilities to consider to get
yourself or your child or grandchild into a college where both you and he
will grow:
1.
Spring 2008 marked a record number of college applicants and a
record number of denials. Colleges had the lowest acceptance rates in
their histories. Gifted students were turned down everywhere from
Princeton University to State U. Prepare your child for this. Denial might
be his first rejection. Help put it in perspective. Then look on the
bright side. Under pressure from the federal government, colleges are
beginning to make concessions on their financial aid programs such as
turning loans into grants, which can help middle-income people. Start
strategizing in advance. Tell your child how much you can contribute to
his college education and help him get started in looking for schools and
financial aid now.
2.
Colleges – and students – must become more flexible. Some students
apply to a college in their senior year of high school, asking for a
one-year deferral, a year when they may work to save money or for Habitat
for Humanity, etc. Colleges seem to like that. Colleges are also
increasing offers of acceptance for spring semester of the freshman year.
If you or your student likes that program, say so upfront. Many schools,
like Northeastern University, which my children will attend, encourage
students to take two or three “co-op” semesters where they work full time
in their chosen field, get paid, and do not pay tuition.
3.
Make careful choices about student financial aid. Do not put
college savings in the student’s name. There was once a tax advantage to
doing this, but no more. When financial aid is calculated, 6 percent of
the parents’ savings are considered to be available for college. But 35
percent of money in a student’s college account is considered available
for college bills that year.
Here’s a time I should
have listened to myself. My husband and I earned enough money that we
never expected to be eligible for financial aid so I tried to put money
regularly into a Uniform Gift to Minors account for Tom, figuring it would
be better to have something than nothing. A couple of years ago, I had a
disabling accident. Last year, I earned around $15,000, certainly low
enough to qualify for financial aid. But Tom’s college account brought him
over the eligibility level. Always check before you invest in an account
whether the money in it is considered the parent’s assets or if it is
considered the student’s assets. Some accounts – like 529 plans – are
considered the parents’ savings for the children, which is good. And don’t
pay for help on filling out the financial aid forms. You can do it.
4.
Say you are just out of college and hoping to go to graduate or law
school. Look for an employer who shares your plans and will help you pay
tuition. If you’ve been out of college for 20 or 30 years, ditto.
5.
College is just the beginning of looking for what you were meant to
do. Hesitate before lining up all your ducks into retirement. I know many
people who have chosen a major, then a job, an employer who will pay for
advanced work in the field, without ever reflecting on how they might
change over those years. One young woman is planning to become an actuary.
She’s finished college and is now beginning the ten-year journey of
courses and tests to become an actuary so she can lie back, relax, and get
her BMW. She hates everything about her job but her employer pays for her
to take these courses. She doesn’t see what she’s losing in those ten
years by failing to enrich her life, to follow her passions, to learn
about things other than numbers and longevity.
Mary Rowland is a nationally known business and
finance writer. The former personal finance columnist for the New
York Times and former co-host of a nationally syndicated radio show, Ms.
Rowland is the author of several investment books and speaks regularly to
consumers and financial planners about investing and personal finance.
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