Archives For College Savings

Bag of college savings

We all want our children and grandchildren to be successful in life. Often this translates to a college degree, but a degree doesn’t ensure success or even a job these days.

Encourage your child to really understand the costs and benefits of a BA or BS. There are alternative to college to consider

How Much Does College Cost?

The cost of attending a traditional 4 year college is increasing every year, making saving for college a priority for many parents. [Don’t forget to fund your retirement before funding your kid’s college.]

Just how much does it cost to attend college? A lot! Use this handy college search tool to determine the cost of tuition, books, room & board for your school of choice.

I did a search for my alma mater Auburn University.

Cost of college: Auburn University 2012

You can also adjust the tab to your appropriate income level.

According to FinAid, the inflation rate for college tuition is double the general inflation rate of around 2%-4% of recent years.

Use this guide to determine how much you’ll need to earn on your college savings fund:

  • Conservative: 3%-5%
  • Moderate 5%-7%
  • Aggressive 7%-9%
  • Very Aggressive 9%-12%+

In order to keep up with inflation and the rising costs of college, you’ll need to at least be in the moderate earnings range to break even. If college inflation rates are 8% and you earn 8%, you’ve only broken even.

Paying  for college without scholarships, grants, and loans is difficult if not impossible.

[We’d need to save $277,553.00 for my son to attend in-state tuition+ room and board to my alma mater.–Are you kidding me?]

It is recommended for parents to save 1/3 of the costs, cash flow 1/3 of the costs, and fund the other 1/3 alternatively (student work, loans, scholarships, grants, –go to the  bottom for more ideas).

Use the calculators below to estimate how much you’ll need to save.

10 Free College Savings Calculators

If you’re trying to figure out how much to save for your kid’s college fund, look no further. These savings calculators will help guide you to saving for the college education for your children.

I’ll also rate the calculators with a maximum of 5 stars for 1) usability 2) graphics 3) functionally. Yes, this will be subjective.

1. The College Board has a handy calculator that allows you to adjust for several variables including how much % to save, earning %, inflation %.  3 Stars

2. FinAid has several savings calculators, but I found it hard to know which to use and they where just clunky, but the numbers seemed legit.  2 Stars

3. Saving for College offers their World’s Simplest College Cost Calculator   You only input your kids age and adjust the variables afterwards. Easy. 4 Stars

4. FINRA College Savings Calculator has basic input options, chart is difficult to understand and it doesn’t break down how much I need to save per month.  1 Star

5. Bankrate  Their College Calculator has easy input, gives me monthly savings goal–no graphs, but it does the job. 3 Stars

6. ING- College Funding Calculator I expected more fun from ING. It was fairly plain, but got the job done. 3 Stars

7. MSN Money College Savings Calculator  does a good job, color charts and graphs, and allows for tax rate 4 Stars

8. Vanguard- Of course they have great College Savings Planner. Interactive & colorful, can plan up to 5 kids, change variables, search for your school of choice and it will plug in the numbers automatically. When you finish, you can print out a report to save or print out. 5 Stars

9. T. Rowe Price has a College Investment Calculator I don’t like the fact that I have to figure out the year each child will enter college. I should be able to enter their current age instead. I’m also forced to choose one of their 529 plans before I’m given an amount. This tool isn’t about education, but about sales. 2 Stars

10. Charles Schwab- College Savings Calculator Easy to input, easy to understand, interactive, and gives an action plan with monthly savings goals. 4 Stars

What Now?

So if you’re like me, you’re flabbergasted by how much you’ll need to save for just 1 child’s college! If you’ve got several kids, plan on some of these other options.

  • I’m considering not sending my kids to college. I’m saving of course, but there are alternatives to college.
  • Your child can attend community college and transfer to a four year and cut their cost almost in half.
  • Pick a college that gives you a good bang for your buck. Check out the Best Values in Public Colleges from Kiplinger.
  • Work. Work. Work. Your child can work during the summers and during school to help offset the living costs during the school year.
  • Grants and Scholarship- Their senior year can be spent applying for grants and scholarships as a part time job.
  • 17 more ways to pay for college without loans.
  • Loans should be a last alternative and only taken out if all the above alternatives have been exhausted.
How are you dealing with paying for your children’s education?
Photo Credit 401K

Gold Miner

Graduation. Celebration. Endless possibilites. New doors opening, old ones closing. I find myself trying to remember what it was like to have just graduated from high school and have your whole life ahead of you.

There is a lot about life and money that I’ve learned since high school gradation. In that light I will offer up a bit of advice for those 17-19 year olds entering into a new era of their lives.

Wisdom and Experience

In life there are two general ways to learn. Experience and wisdom. Experience is a tough teacher that often times includes bumps, heartaches, and empty wallets.

“Experience is a hard teacher because she gives the test first, the lesson afterwards.”-Vernon Sanders Law (Major League Pitcher)

Wisdom is the ability to learn a truth without having gone through an experience.

Having a good mix of wisdom and experience when it comes to financial matters will give both knowledge and motivation to stay on the right path.

Financial Wisdom for High School Graduates

1. Save- Pay cash for items. Save up or don’t buy it. These are great years to learn how to practice the art of savings. Start with an emergency fund to stay out of debt.

2. Work Hard– A bit of hustle can go a long way. You’ll find that if you work hard you’ll end up ahead of your peers that are smarter than you. Whether it is on a job or in the classroom (hopefully both), learn the value of hard work.

“Opportunity is missed by most people because it is dressed in overalls and looks like work.”- Thomas Edison

3. Solve Problems- Find the needs around you and solve them. If you solve others problems you’ll be rich in purpose and/or monetary gain. The marketplace will pay handsomely to those who solve our problems.

4. Create- With most activities in life you can either create or consume. Err to the side of creation and you’ll be a rich person. Why not start a blog to begin creating today?

5. Give– Giving of your time and money will keep humbleness near. Developing an early practice of giving will ensure you have the character needed to handle responsibility and riches.

“We make a living by what we get, we make a life by what we give.”-Winston Churchill

6. Avoid Debt- Fight tooth and nail to avoid debt. There is always another path besides debt, yes even college or med school.  The path to avoid debt is harder in the moment, but in the end you’re free and slave to no one.

  • College Debt- Going to college can pay off in the long run, but you can attain a degree without debt. Debt-Free U is a book that can show you how. Having a college degree won’t ensure a job or career that you’ll love.  There are alternatives to college and learning if you’re interested in why I’m not sending my son to college.  
  • Credit Card Debt- The average college graduate has $4,000 of college debt. You can make it through life without debt by learning how to budget.

“The rich rules over the poor, and the borrower is the slave of the lender.”-Proverbs 22:7 (ESV)

7. Find your own Path– Recent graduate, you’ll hear a lot of advice–even from me. Most of it is good, but you’ll have to decide for yourself. It is your life to live, not your parents, not your significant other, not society. Heed wisdom, but forge your own way.

8. Explore Your passions- The richest people are doing something they enjoy + meeting needs (#3 above) the needs of others. Find your passions, focus on your strengths and make a difference.

9. Start a Business- You are never too young to start a business. Learning how to sell, market, bookkeeping, etc will help you for the rest of your life. You might even start your dream job without needing to go to college. Did you know you can start a business for $100?

10. Improve your Character– Your character is more important than money. Oddly enough many people of character have wealth. Find ways to improve your character. Start with the Proverbs. There are 30 short chapters, so you could read 1 per day. No matter if you are religious or not, there is wisdom that will improve your character and finances.

11. Did I mention avoiding debt? I hear horror stories of how debt has ruined lives in my coaching practice. Please graduate, learn wisdom, avoid debt, and choose freedom.

What do you wish you would have known about finances when graduating high school? 

Photo Credit  dotpolka

Student Loans for Life

Don’t keep student loans this long!

Most college graduates have college debt, unless you did something crazy like going to medical school for free.

I’ve talked to several very smart individuals lately who aren’t convinced they should pay off their student loans early; rather they’d like to pay the minimums the life of the loans.

I’ve encouraged them to knock out the student loan debt since they have the income to do so, but after they pay off their other credit cards and consumer debt.

 

I’ll share a few reasons why I believe paying off student loans early is a wise financial decision.

Why Pay Off Student Loans Early?

Student loans are a huge boulder that many college graduates carry with them for decades. Let’s put that boulder down and free your hands and money to work towards your goals.

1. You don’t know the future– The future is unknown and you don’t know what it will bring. That large student loan debt (a.k.a. student mortgage) limits you. Examples:

  • I’ve met female lawyers and docs who want to pause or quit their practice to start a family, but they can’t due to their $100,000+ student loan debt.
  • You are counting on the fact that you’ll be able to work, but the possibility for disability is a reality (another reason for disability insurance).
  • If you’re single and thinking of getting married, why bring debt into the relationship? Debt just isn’t sexy and might actually turn off a potential financially responsible spouse.
  • So many other possible future unknowns: death, sickness, divorce, change of professions…etc.

2. You’ll have more choices- Being debt free gives you choices. Want to transition to a lower paying job that you actually like? Do it! You want to live off one income? Go ahead!

Our family was able to do just this. My wife was able to quit her day job and stay home with our son since we paid off the remainder of my student loan. If we still had debt, this choice might not have been possible.

3. Opportunity cost– By paying principal and interest, the opportunity cost to grow your net income is gone.

Just think what you could do with your student loan payment? What if you paid off your your student loan early and had an extra $250 to apply towards savings or debt?

That is $3,000 a year that could be working for you earning interest! Action – Figure how much you are missing out per year due to your student loan debt.

4. Freedom– Being debt free except for your mortgage gives you a feeling of freedom and relieves stress. Being able to rest at night, knowing that you don’t owe anyone is a great feeling–I dare say being debt free is addictive.

Bad Reasons to Keep Student Loan Debt

These are a couple reasons I’ve heard from people who want to keep their student loans:

I want to keep my loans for a tax deduction.” Keeping your student loans shouldn’t be for tax reasons, in fact any financial decions shouldn’t be driven by tax reason.

The cap on deductions for student loan interest is $2,500 per year and you’ll need to make less than the required amount that changes yearly. 2011 it was $75,000 single or $150,000 jointly. Check the IRS requirements

True, you do receive a tax deduction for the interest paid, but this is a small amount. It’s like the government giving you a cheap plastic trophy when you were actually on the loosing youth soccer team.

“My interest rate is lower than inflation, so I’m making money.”– This is usually a statement from an educated guy who wants to beat the market. Inflation is a given and uncontrollable, but your debt doesn’t have to be.

The problem with this statement is it doesn’t account for opportunity cost or factor in the risk of debt.

Start Paying off Your Loans

If you’re out of consumer debt, there is really no reason to start getting aggressive to pay off your student loan early.

Paying any extra towards your student loan debt will start reducing principal or more interest from accruing.

Example: a $35,000 student loan at 3.25% for 30 years results is estimated to have minimum payments of $152.32 and cost you $19,836 in interest.

If you add just $100 extra per month in this example it reduces interest payments of $8,948. That’s a $10,888 difference in interest payments and shortens your time in debt to 15 years!

Use this student loan calculator to figure your monthly payments and how much you can reduce your total payout by adding extra monthly payments or a large one time payment.

What are your thoughts about paying off student loan debt early? 

Photo Credit DonkeyHotey (Creative Commons)

dorm room laptop

Do you need insurance for the dorm?

As you prepare to pack your college freshman off to school, you’ve got a long “to do” list. Items to buy, details to iron out, lots of things to do…whew! It’s tough kicking your kids out of the house.

As you are purchasing their $1000+ laptop along with their dozens of other electronic devices (I-pads, phones, gaming systems, speakers, guitars, flat screen TV, etc) that also cost thousands of dollar, you might be thinking—Do I need some kind of insurance for this?

Do I Need Insurance?

Here are the facts. Fires and water damages occur on campus. A friend of ours told us that on their campus the sprinkler systems were tripped by a frisbee. 3 feet of water ended up in the first floor dorm rooms. Yikes!

Thefts occur in dorms. Roommates and sweet-mates steal. Doors are unlocked. Random people are in your room for study groups.

In a 2010 study 77,441 incidents of theft were reported on college campuses. Who knows how many unreported incidences there were.

The university will not be responsible for the theft or damage. The 2011-2012 On-Campus Housing Contract from The University of Connecticut states:

“The University assumes no legal obligation for damage, theft, or loss of personal property. The Resident is responsible for protecting and
securing any personal property located within any on-campus assignment and is encouraged to obtain appropriate insurance.”

So what is this appropriate insurance they mention? It’s up to you, but your child’s dorm may already be covered by your existing homeowners or renters insurance.

Check with your insurance provider and read the fine print. It is common for the policy to cover only 10% of personal items in the dorm room, but each provider will be different.

It could also be possible to get a rider or addendum to boost that amount. Again we’re only talking about living on campus, if they are off campus—they’ll need to get an additional renters insurance policy.

What About Dorm Insurance?

A few specialized companies sell dorm insurance to cover your child.

For example NSSI (not endorsed) has a policy that will cover $6,000 of Accidental Damage, Theft, Fire, Flood, Natural Disasters, Vandalism and Lightning Strikes. Deductibles range $25-$100 with decreasing annual deductibles $130-$146.

A separate renters insurance might provide more coverage and be less expensive, you’ll have to shop for yourself.

Do get some kind of coverage for worst case scenarios and peace of mind if your child will be living in a dorm. Either your own homeowners or renters policy or a separate policy.

So there, I’ve added an additional item to your summer list before you ship off your kid off to college. Enjoy your summer and send them off well.

Have you looked into insurance for your child at college? How will you insure the contents in your kids dorm? 

Photo Credit cbowns (Creative Commons)

Becoming a medical doctor is a childhood dream that ends up being a long and expensive road. The amount of debt (possibly $100,000-$250,000) is almost as big as the commitment it takes to endure the rigorous study and residency programs. The debt can be crushing and a barrier for many to enter the field, but you can become a doctor for FREE. There are always other options.

Go to Medical School for Free with MD/PhD and MSTP

What is a MD/PhD program?

An MD/PhD program is another option for those desire to enter into the medical field without the burden of cost. You be getting a duel MD and PhD. upon completion (6-8 years). Unlike a traditional MD, you’ll also receive research experience that could help you later in your medical career. If you are are unsure if this path is right for you read Three Crucial Questions Questions when applying to M.D.-Ph.D. Program.  

What is MSTP program?

There are similarities between the Medical Scientist Training Program (MSTP) and MD/PhD programs, but differences in funding may exists depending on the institution. Read MSTP vs MD/PhD to help clarify the differences.

Financial Benefits of MD/PhD or MSTP programs

If this is the path you choose for your medical career you could graduate without paying tuition, annual stipends and grants, travel and research funds, and insurance and healthcare (some). You’ll be getting a free ride to medical school! Example funding for MSTP program at University of California Irvine.

How to Qualify for MD/PhD Program

This is a non-traditional path and is even more competitive than medical school. That means they only let the top students into this program. You’ll need a a high undergraduate G.P.A., high MCAT and GRE scores, and experience with medical research (Summer Undergraduate Research Programs). Remember the spots are few and grants generous, so do your research and speak with other MD/PhD graduates to find out what their qualifications were that garnered entrance into the MD/PhD program.  Read also Applying to MD-PhD Program.

Here is a list of MD/Phd programs by state to help you research the individual schools including requirements and grants.

 Medical School Debt Forgiveness Programs

If you already have medical school debt there are a few programs to repay your medical student loans:

  • National Health Service Corps– By serving in a Health Profesional Shortage Areas (HPSA) you can have up to $60,000 forgiven in two years and more if you continue to serve.
  • AAMC also over medical loan repayment or forgiveness plans by state.


Other Options to Pay for Medical School

  • National Health Service Corp Scholarship– Have tuition paid with stipend in return for commitment to HPSA area for 2-4 years.
  • HPSP Scholarship Program The military has a robust program to financially support military MDs. Free tuition + $20,000 sign on bonus + $2,000 month stipend in exchange for 1 year of service for every year of scholarship. Upon graduation you’ll receive a starting rank of captain.

Would you consider an alternative path to medical school? 

Photo Credit 401K (Creative Commons)