Insights

How to Put Your Kid Through College for Less Money

By  Opher Ganel

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The cost of a college education appears to be on a constant (and rapid) upward trajectory.

This is especially true when compared to the flat or even drooping inflation-adjusted income of most Americans.

If you’re a parent, and especially if your kid is young, here are 5 tips that will help you put your kid through college without breaking the bank or taking on enormous student-loan debt.

Tip 1: Start Saving for College ASAP

I’ve been there, so I know this is not easy to do!

If you’re a young parent, you may be facing the double crunch of an insufficient income and high child-raising expenses.

Still, I’m sure you can find a way to squeeze out of your budget at least $25 a month, right? That’s the minimum regular investment required (for example) by T. Rowe Price’s Maryland College Investment Plan. If you get an average 7%/year investment return, that $25/month investment could build up to over $10k in the course of 18 years!

That’s enough to cover in-state tuition even at Maryland’s flagship University of Maryland, College Park.

Start at $50/month and increase that by 5% each year, and by the time Junior’s ready to attend college, your college savings balance may be over $31k!

That’s almost enough for the full cost of attendance for 1.5 years at UMD.

Double that to $100/month, increasing by 5%/year and you should get to almost $63k – almost 3 years’ worth of the full cost of attendance at UMD.

Tip 2: Use a 529 Plan

This is a special, tax-advantaged way to save and invest for college.

Depending on the details of your state’s tax laws and which 529 plan you use, you should be able to save on your state and local taxes in the year you contribute. You’ll also avoid paying federal income tax on investment returns in the plan if you use the money for qualified educational expenses such as tuition.

Note that there are significant penalties for using the money for non-qualified expenses, so you may want to consider how much you want to place in the 529 plan and how much in a taxable account.

Tip 3: Temper Your Kid’s Expectations

When my two younger kids were tweens, their mother and I promised them that we would cover their full cost of attendance, but only for 4 years at the cost level of in-state students at UMD.

We told them they’d be free to choose any other school, public or private, and that they could take as long as they wanted or needed to graduate. It’s just that the cost beyond 4 years at UMD would be their responsibility.

When the time came, they both chose to attend the University of Maryland. As a result, they both graduated owing $0 in student-loan debt.

Tip 4: Encourage Academic Excellence in High School

There are many good reasons to encourage your kids to excel in high school.

One significant one is that high-achieving students become eligible for merit-based scholarships.

These saved us almost $100k on our kids’ education.

Tip 5: Encourage Graduation in 4 Years

Almost 3 in 5 undergraduate students take 6 years to graduate from college.

Having graduated with a double major in math and physics in 3 years, I see this as a combined failure on the part of schools, students, and their parents.

As I alluded to above, my two younger kids both graduated in 4 years.

It was the encouragement they received from their mother and me that helped them do so. On their path to achieving it, they:

  • Took classes at a community college during high school and transferred those credits to UMD.
  • Took more classes than the minimum required (when they could).
  • Managed the level of difficulty of classes they took (not taking too many hard courses at once).
  • Took advantage of summer and winter terms when needed.
  • Took advantage of instructor and teaching assistant help when needed.

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Bonus Tip: Encourage Your Kid to Work During School

We encouraged all our kids to work part-time during terms (no more than 10 hours/week), and full-time during breaks.

This was for multiple reasons, not least of which was to build the habit and appreciation for the importance of being productive. It also helped build their resumes, and for at least one of them, it led to a first full-time, industry-relevant job straight out of college.

We told them that what they earned from work during terms was theirs to spend as they chose, but what they earned during breaks was to be used toward their cost of attendance. This included, for example, rent and/or food they wanted to order in during their school years.

The logic was that the work they took on during terms was the equivalent of working overtime, but work during breaks was just them working like we did to help cover the family’s financial obligations. They accepted that it didn’t make sense that they could laze around for months on end while we worked full-time-plus to pay for their education.

The Bottom Line

Yes, college is ever more expensive.

However, the above tips can help you cover your kid’s higher education without breaking you financially, and while minimizing any student-loan debt he or she needs to incur.

Opher Ganel profile pic

About the Author

Opher Ganel

My career has had many unpredictable twists and turns. A MSc in theoretical physics, PhD in experimental high-energy physics, postdoc in particle detector R&D, research position in experimental cosmic-ray physics (including a couple of visits to Antarctica), a brief stint at a small engineering services company supporting NASA, followed by starting my own small consulting practice supporting NASA projects and programs. Along the way, I started other micro businesses and helped my wife start and grow her own Marriage and Family Therapy practice. Now, I use all these experiences to also offer financial strategy services to help independent professionals achieve their personal and business finance goals.

Connect with me on my own site: OpherGanel.com and/or follow my Medium publication: medium.com/financial-strategy/.

Disclaimer: The information in this article is not intended to encourage any lifestyle changes without careful consideration and consultation with a qualified professional. This article is for reference purposes only, is generic in nature, is not intended as individual advice and is not financial or legal advice.

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