Kids and Education

Post-pandemic, what might college education look like and how much might it cost?

College Education in the Post-Covid World

As I write this, we are still in the throes of the Covid-19 pandemic, and it’s early in the school year. Many students of all ages remain at home doing remote learning. But there are also many college students across the country who have returned to campus.

Mounting Financial Pressure

Colleges and universities seem to be facing mounting financial pressure to open up campus, and keep their students on campus even if they are remote learning from their dorm rooms. It’s no wonder. According to the College Board (link opens in new tab), for the 2019-20 school year, average tuition and fees for a public 4-year out of state university was $26,820, and room and board cost $11,510. If school is in session for about 8 months, that’s a monthly cost of $4,791.

College Board also examines how much college expenses increase year over year. According to the same study, public 4-year out of state schools cost of attendance increased by 2.5% from the 2018-19 school year to the 2019-20 school year. In 2019, the average US inflation rate was 1.8% (link opens in new tab), meaning that college costs increased over 38% more than inflation, in just one year.

How can colleges continue having prices like this, if they are only offering remote learning? A major benefit of a college education cited can be considered the experience of living away from home while still in somewhat of a controlled environment – a chance to “practice” being an independent member of society away from your parents. Another major benefit of college is also the relationships students build with each other and mentorships with professors. How can relationships be built in a remote learning environment?

On top of these challenges, and with so many other critical societal and financial factors, fundraising has to be a challenge for many universities at this time. Schools that may have been hanging on before, are now even more impacted since their alumni may no longer be able to support the school with donations at their typical level.

Between a Rock and a Hard Place

So how is a university going to cope? Many schools are discontinuing less popular majors or eliminating whole departments. My alma mater, small liberal arts John Carroll University in Ohio, recently announced (link opens in new tab) the dissolution of the art history department to much student and alumni dismay. But if it’s a choice between eliminating a department or two, vs the whole school being closed, it’s understandable for administrators to choose the latter. But how many of these liberal arts majors can be eliminated before it negatively impacts the entire education offered at the school?

The Future of Higher Education

This New York Times article (link opens in new tab) is from May 2020, and predicts that just a handful of universities will remain after Covid-19 and the move to remote learning. A different perspective, here (link opens in new tab), written by a New York University professor outlines some of the financial impacts felt even by Harvard, but also identifies potential bright spots in remote learning. There are some fascinating and thought-provoking insights to consider, and only time will tell the true long-term outcome of the Covid-19 pandemic on higher education.

It’s too soon to tell, in my opinion, whether remote learning will spark a revolution in how a college education is offered, and the associated costs. But I believe it’s coming.

In this article, we discuss maximizing financial aid for college.

A child’s college education can be a big family expense

A college education is often the largest major expense outside of retirement for many families. According to the Federal Reserve (link opens in new tab), student loans represent the second-highest consumer debt category behind mortgages, but higher than both credit cards and car loans.

72% of US college students receive some form of need-based financial aid according to the National Center for Education Statistics (link opens in new tab). This is good news, because according to Trends in College Pricing (link opens in new tab) research by the College Board, in about 10 years college is expected to cost over $142,000 for 4 years at a public university, and over $324,000 for 4 years at a private university, including tuition, fees, and room and board. These figures assume an average college cost inflation rate of 5%.

Planning for college expenses should typically start when children are young, so any savings have longer to potentially accumulate compound interest. I wrote another article (link opens in new tab) about some fun ways to contribute to a child’s education savings account.

FAFSA & CSS calculate a family’s expected contribution to college expenses

But what about all the other assets a family has when it comes time to apply for financial aid? Typically, the first step in seeing if a student qualifies for financial aid is to complete the FAFSA, Free Application for Federal Student Aid. Some schools require the CSS, College Scholarship Service Profile. These forms calculate the family’s expected contribution to college.

To complete either form, the family and student must provide many details about their financial situation, such as income, savings, debt, other children also in college, net worth, and more. Each application looks at the previous year’s financial information. So for example, if a student was beginning school in the fall of 2022, the family would fill out the aid form in 2021 based on the 2020 tax return.

Ways to potentially maximize financial aid

Here’s an article (link opens in new tab) which looks at some ways a family and student may be able to maximize financial aid for college by doing things like paying off car loans and credit card balances, moving funds into retirement accounts, and using earned student income over a set limit to pay for things a student would need in college like a laptop, rather than keeping it in a bank account. Typically, assets in a student’s name count towards the amount they will be expected to pay, so it can be beneficial to spend down these assets, like an UTMA account or checking account, prior to applying for aid. For parents, retirement assets and principal in a primary home are typically not counted as assets available for college.

Read the full article here (link opens in new tab). And talk to your financial advisor about your specific situation.

In this article, we consider ways of teaching kids about money.

I often talk with clients about how to teach their kids about money.

I’ve also had many conversations with my husband about ways to educate our son about money. I don’t want him to be spoiled, or overly focused on money. But I do want him to understand that we work hard for the money we earn, and we can’t afford to get every new toy that catches our (his) eye, because we have other things we need to use our money for. I also don’t want him to be constantly worried or thinking about money, because that’s not his job.

It’s a tricky balancing act. And then there’s an allowance. How to do it, whether to do it, how much to give, etc.

I read a couple articles recently that offered up some tips on teaching kids about money.

This article (link opens in new tab) mentions the benefit of paying an allowance (about the amount in dollars of your child’s age), and requiring them to allocate a that allowance by percentage to charity (10%); immediate spending or quick cash (30%); medium term saving such as saving up for a bike or laptop (30%); and an amount towards future expenses like college (30%).

This article (link opens in new tab) gives some concrete examples of how to teach kids about money at different ages. The early childhood timeframe can be an opportune time to start the teaching. The article mentions letting kids mess up, for example, let them regret a spending decision and sit with that feeling. And also, for a child who’s not a natural saver, perhaps offering an incentive to help them save – like matching every dollar they save. And doing it with actual dollars and coins, rather than electronically, can be another way for them to learn.

I’m also reading a good book right now about allowances and how they can be used to teach kids many lessons about money in a very immediate and practical way that can change over time. The book is called The Art of Allowance, by John Lanza.

I’d love to hear from you too; how do you teach your children about money? Click here (link opens in new tab) to post your ideas and tips in the contact us message form.

In this article, we will discuss how to make contributing to a child’s education savings account an enjoyable gift.

College is expensive now, and it’s getting ever more costly.

According to The College Board (link opens in new tab), in 10 years the projected cost of a 4 year public college degree is expected to be over $142,000, while a 4 year private college degree is projected to cost over $324,000. Will the important children in your life have the funding they need for college?

There’s a lot to love about giving the gift of education

For that special child in your life, consider giving the gift of education this holiday season – or during any gift-giving moment like birthdays. How about making a contribution to an Education Savings Account for that important child in your life?

An Education Savings Account is a type of account that is typically funded with after tax contributions, and if used for qualified education related withdrawals, can be withdrawn without any taxes owed on the withdrawal, meaning, tax free growth. There are different types of accounts like a Coverdell Education Savings Account and a 529 Account, and not all accounts work for every situation. Consult a financial professional before opening an account. Read more about the details here (link opens in new tab) and here (link opens in new tab).

The kid won’t like this gift, and besides I want something they can open and play with!

I came across this blog article with some really creative ways to make a contribution to an education savings account more fun to give as a gift. I love the idea of a science kit/art supplies (or whatever your child’s special interest is) along with a note about your contribution helping them be able to study their special interest later. Pairing one of these ideas with the gift of education seems like the best of both worlds.

Read the ideas here (link opens in new tab).