Saving for College: How to Prepare for the High Cost
Paying for college can be overwhelming, and many parents and students are getting hit hard in their wallets as tuition costs rise. Tuition and fees for a private, four-year college were roughly $34,740 during the 2017-2018 school year, according to College Board estimates. The cost for room and board was about $12,210.
A recent study conducted by Fidelity found some parents are expecting their children to help with the tuition bill. Although most parents still plan to pay most of the cost themselves (62%), Fidelity’s 2018 College Savings Indicator Study found parents want their children to help by saving an average of $15,385 by high school graduation.
The Cheat Sheet spoke with Melissa Ridolfi, Fidelity’s vice president of retirement and college products, to get some tips on how parents and children can prepare for the high cost of college.
CS: Why aren’t parents prepared for college costs?
MR: There are a number of factors. Many need more education, guidance, and support to get started. This year’s study found 38% of parents think “college costs are too overwhelming to think about” and 22% say they either “don’t know how to create a plan to get started” or “don’t know how much they should be saving.” Also, many parents of college-bound children are still struggling to pay down their own student loans.
CS: What advice would you give to parents who can’t afford to send their children to college?
MR: Every family situation is unique, and the cost of college can give some a sticker shock at first. It’s important to keep in mind that even small contributions can make a difference over time. Many families turn to loans, grants, and financial aid or scholarships to reduce out-of-pocket expenses.
There are additional opportunities to save, such as asking friends and family to gift toward college in lieu of traditional presents. Fidelity’s Grandparents and College Savings Study in 2014 found that an overwhelming 90% of grandparents would be likely to make a gift to college savings in lieu of traditional gifts for birthdays, holidays or other special occasions.
CS: Anything to add?
MR: Although the theme of this year’s study centers around parents speaking with their children about college costs, the study points to some positive findings related to parents who work with an advisor. Roughly 41% of parents report working with a financial professional, up from 21% who reported doing so in 2007. Of those who have an advisor, 86% have started saving for college already, compared to 59% without an advisor who haven’t started at all.
CS: How can an advisor help?
MR: Advisors can play an important role in helping to build those savings plans by asking the questions you haven’t thought about, keeping you on track to reach your savings goal by using a dedicated college savings account, and knowing when it might be the best time to start the conversation with your child. If you develop a plan early, understand the costs, and speak with an advisor regularly, you’ll have a better handle on how your family can tackle the total cost of college by the time Freshman Drop-Off Day rolls around.
Read part one of our discussion here.
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