Childhood preparation for college (‘college prep’)

Today’s children [“generation Z”] have plenty of choices in careers and colleges.  There are pre-college and 2-year colleges as well the traditional 4-year colleges and graduate schools.  Trade schools are an option to liberal arts programs.  Online colleges offer courses taught in virtual classrooms.

Roughly half of college students complete their studies and graduate.  Those who dropped out early were either unprepared for the classroom, overwhelmed by stress, or couldn’t pay the bills.  Maybe the drop-out rate can be reduced by childhood preparation for college [‘college prep’] (ref 1, 2).  

COLLEGE PREP

Parents have considerable influence on fostering their children’s dreams and attitudes toward college.  High school and college students can receive help from their own ‘college team’ of parents, counselors, and trusted adults.  Here are the important milestones. 

before high school :

Save money for college.  College is expensive.  It’s cheaper to pay the cost by saving money beforehand than to pay interest on a student loan afterwards.  Parents: consider starting a “529 Savings” plan for your newborn child (ref 3, 4).  Later on, your growing child and other family members can help with additional contributions.

Dream about the future.  Pre-schoolers dream about being a grown-up.  It’s the perfect time for parents to discuss the jobs, trades, and professional careers of friends and family members.  School children can benefit from attending career presentations and visiting job sites.  Encourage your middle schoolers to read My Future My Way (ref 5).

Learn, Learn, Learn.  Every child should learn to manage money wisely.  Their training can begin by age 3 and continue throughout life (ref 6, 7, 8).  Every child should also learn to read well and perform homework assignments.  Tutor them, if necessary, and help them form good study habits (ref 9).

Enrichment.  Help your child participate in summer programs, after-school activities, community service, travel, clubs, teams, fellowships, and other enrichment programs (ref 10).      

Go to college?  College is optional, not mandatory.  Ask your child what they want to do after high school.  If they are strongly opposed to college, do they want to get a job or start a business?  There are job fairs and entrepreneurial training programs available to teens.  If they are either undecided or interested in college, help them explore college opportunities with the aid of campus visits.  Also encourage them to read My Future My Way if they haven’t already done so (ref 5).

during high school :

Shop for colleges.  Every college has a unique set of characteristics and opportunities.  College fairs allow students to discuss those features with a large selection of college representatives (ref 11).  Virtual and actual campus tours of interesting colleges help students prepare for college.

Assemble a College Team.  High school students should place more effort into college prep than parttime jobs.  They need a ‘team’ of parents, school faculty members, and other trusted adults to help with college prep.  Parents can facilitate the college selection, application, and enrollment processes.  For one reason, the required Free Application for Student Financial Aid (FASFA) requires timely parental input (ref 12).  Furthermore, parents can monitor their student’s adjustment to the transition year of college (ref 13).  School guidance counselors have valuable experience and information to share with the student.  Teachers and community leaders are wonderful sources of information and recommendation letters.  Grandparents can lend help, funds, and wisdom to the college prep process.

Use a checklist.  Here are some suggestions:

  • develop good study habits
  • decide what kind of college you want to attend and what you want to study
  • during the freshman year of high school, consult your school teacher and guidance counselor about; 
    • earning college credits in high school (ref 14)
    • taking college placement tests
    • applying for scholarships (ref 15)
    • choosing colleges
    • preparing for FAFSA (ref 12)
  • seek frequent advice and take early action!
  • select your preferred colleges
  • take care of financial matters
    • choose an affordable safety school 
    • compare college acceptance letters
    • re-visit acceptable schools and negotiate their offers of financial aid
    • minimize college expenses (ref 16).

during college :

Survive the transition year.  The first year of college [“transition year”] will likely be academically and emotionally stressful; that’s when dropping out of college is most likely to occur (ref 13).  Emotional issues may prevent graduation unless college students learn to manage the stress or parents intervene for signs of unusual behavior (ref 17).   

CONCLUSIONS

Parents have considerable influence on fostering children’s dreams and attitudes toward college.  Those with K-12 children might benefit from consulting a comprehensive checklist published by the U.S. Department of Education (ref 18). 

Middle school students can find helpful information in the pamphlet My Future, My Way by downloading it from the U.S. Department of Education (ref 5).  High school students must take charge of their college prep to have the best chance of success.  There is much to gain by an aggressive pursuit of scholarships, advanced placement courses, campus visits, and timely submission of the applications recommended by guidance counselors.  Students and parents may also benefit from consulting the “right fit” worksheet published by the Jed Foundation (ref 13).  

REFERENCES

1. Improving college graduation rates: a closer look at California State University. Jacob Jackson and Kevin Cook, Public Policy Institute of California, 2018. http://www.ppic.org/publication/improving-college-graduation-rates-a-closer-look-at-california-state-university/ . 

2. 10 ideas for improving community college completion rates.  Grace Chen, 2/14/2018, Community College Review.  https://www.communitycollegereview.com/blog/10-ideas-for-improving-community-college-completion-rates .

3.  Saving Early = Saving Smart!  Federal Student Aid, February 2018.  https://studentaid.ed.gov/sa/sites/default/files/saving-early.pdf  

4.  FAMILY GUIDE TO COLLEGE SAVINGS. Joseph F. Hurley and Brian Boswell.  www.savingforcollege.com .  2016.

5. MY FUTURE, MY WAY.  FIRST STEPS TOWARD COLLEGE; A Workbook for Middle and Junior High School Students. Federal Student Aid, U.S. Department of Education.  StudentAid.gov. July, 2017. 

6. How to teach kids money smarts from as young as three.  SBS com/au, 7/15/16.  https://www.sbs.com.au/topics/life/culture/article/2016/07/13/how-teach-kids-money-smarts-young-three 

7. The Money Tree Myth: A Parents’ Guide to Helping Kids Unravel The Mysteries of Money.  Gail Vaz-Oxlade, Stoddart Publishing, Toronto, 1996.

8.  Teaching Kids about money.  ASIC’s MoneySmart Financial Guidance You Can Trust. 5/29/18.  https://www.moneysmart.gov.au/life-events-and-you/families/teaching-kids-about-money 

9.  Helping Your Child. U.S. Department of Education, 9/17/2008.  www.ed.gov/parents/academic/help/hyc.html

10.   The value of out-of-school time programs.  Jennifer Mcombs, Anamarie Whitaker, and Paul Yoo.  2017, Rand Corporation.  http://www.wallacefoundation.org/knowledge-center/Documents/The-Value-of-Out-of-School-Time-Programs.pdf 

11.  NACAC national college fairs.  https://www.nacacfairs.org 

12.  Overview of the Financial Aid Process. www.YouTube.com/FederalStudentAid  

13.  EMOTIONAL HEALTH & YOUR COLLEGE STUDENT.  A GUIDE FOR PARENTS.  Alan A. Axelson and Donna Satow, Jed Foundation, www.TransitionYear.org .

14.  AP Students. https://apstudent.collegeboard.org/home 

15.  Finding and applying for scholarships.  StudentAid.gov/scholarships 

16.  Managing college costs. https://www.mycollegeoptions.org/Core/SiteContent/Students/Advice/College-Resource-Center/For-Parents/Paying-For-College/Managing-College-Costs.aspx 

17. 3 Attending College in Transition Year, Student Edition. 2012, The Jed Foundation.  http://www.transitionyear.org/student/intro.php

18. COLLEGE PREPARATION CHECKLIST.  Federal Student Aid, U.S. Department of Education.  July, 2016.  https://studentaid.ed.gov/sa/sites/default/files/college-prep-checklist.pdf

Copyright © 2018 Douglas R. Knight 

College is optional, not mandatory

College graduation is part of the American Dream, but not for everyone (ref 1)!  Marketing, peer pressure, and well-meaning adults may push young students into the wrong college for the wrong reason (ref 2). So let’s consider the pros and cons of attending college under the topics of cost, readiness, careers, health, and miscellaneous factors.

COST 

College is expensive; its rising costs surpass the inflation rate of consumer prices and the growth of household earnings (ref 1, 3).

  • PROS:  
    • Financially secure families can pay college expenses.
    • Student aid might pay college expenses for qualified students who need assistance (ref 4).
    • The return-on-investment (ROI) is a ratio of net return for every dollar paid for college.  A positive value means that the investment is profitable (ref 1, 5).  Example: for American community college students in year 2012, the ROI of 3.8 inferred that students could receive $3.80 for every $1.00 paid for college (ref 5).
  • CONS:  
    • Unfortunately, college may be too expensive for low-income families (ref 1)
    • It’s a waste of money for college students to drop out after one year (ref 1-3)
    • The total cost of college includes any missed income from not having a job (“opportunity cost”).  Delaying employment during college impedes retirement savings plans, buying a house, and other big-cost projects after graduation (ref 1, 5).
    • The payback period is the time needed to recoup college costs.  For American community college students in year 2012, the average payback period was 7.8 years (ref 5). 
    • Can’t afford it?  Beware that a ‘crippling’ debt of large student-loan balances could cause financial distress for many college graduates.  Unpaid balances prevent financial independence and student loans cannot be erased by bankruptcy (ref 1-3)

READINESS

Some high school students aren’t ready to attend college and might benefit from gaining more experience before applying to college (ref 2, 4).

  • PROS: Preparation for college (“college prep”) is essential for success.  Families and school counselors can facilitate the process (ref 4). 
  • CONS: Students with low motivation, poor study habits, and low test scores are less likely to succeed in college. 

CHOICES

College is not the only pathway to lifetime success.

  • PROS: 
    • A bachelor’s degree is usually required for enrollment in graduate- or professional school.  
    • There are many opportunities for personal and career development offered by trade schools, 2-year colleges, and 4-year colleges (ref 1, 4) 
  • CONS:  
    • Waste of time?  Don’t apply to college if you have something better to do such as pursuing self education and building a business (ref 2, 3).

CAREERS

Most colleges support career development with a wide selection of courses and career internships, but young people can still develop a career without going to college (ref 1, 3, 4). 

  • PROS:  
    • Many jobs require college degrees.  A lower percentage of American jobs require high school diplomas today than in the 1970s.  Most of America’s job growth after year 2010 went to holders of a college degree, and this trend will likely continue (ref 1, 6). 
    • College degrees represent the potential for earning a higher salary.  Between years 1965 and 2013, young adults ages 25-32 who worked full time earned higher annual incomes with at least a bachelor’s degree than young adults with lesser amounts of education (ref 1, 4, 5-7). 
    • College graduates enjoy greater job security compared to workers without an associate’s degree or higher.  Graduates have lower unemployment rates (ref 1, 4) and higher employment rates (ref 7, 8)
    • There’s a shortage of skilled workers for trades taught in trade schools and community colleges (ref 1).
    • Millennial graduates (ages 25-32) with bachelor’s degrees are more satisfied with their choice of careers than other employed Millennials (ref 6).  
  • CONS:  
    • A college degree is not necessary for a successful career.  Some of America’s fastest growing jobs don’t require college degrees (ref 1)
    • Don’t apply to college if you seek the fast-track to earnings (e.g., military enlistment with on-the-job training; unskilled labor; ref 1).  
    • A large supply of college graduates dilutes the employment value of a bachelor’s degree (ref 8).  About 10% of recent-graduates are unemployed and about 40% have part-time jobs.  College graduates encounter greater competition to be hired and may have to settle for jobs that don’t require a college education (ref 1).
    • Many college graduates are unprepared for jobs that require reasoning skills  (ref 1, 3). 
    • A college degree does not guarantee workplace benefits (ref 1)

HEALTH

The college experience can favorably or unfavorably affect a student’s health.

  • PROS:  
    • College graduates tend to live healthier, longer lives (ref 1, 5) 
    • College graduates raise healthier children (ref 1) 
  • CONS:  
    • Overwhelming academic and social stress can cause health problems (ref 1, 9)

MISCELLANEOUS FACTORS

There are many opinions about the benefits of attending college.

  • PROS: 
    • Better living conditions: the poverty rate of Mellennials, Gen Xers, and Boomers was lower among college graduates with bachelor’s degrees compared to graduates with associate’s or high school degrees (ref 1, 4, 6). 
    • College graduates are more likely to have employer sponsored health insurance and retirement plans compared to workers who didn’t attend college (ref 1).
    • A liberal arts education promotes personal and professional growth (ref 1, 10)
    • Social mobility:  Young adults with a bachelor’s degree are more likely to achieve higher levels of income and less likely to rely on public assistance programs compared to high school graduates (ref 1, 7). 
    • Data suggest that college alumni donate more time, effort, and money to charity than people without a college education (ref 1, 7). 
    • Social savings:  Fewer graduates with bachelor’s degrees are incarcerated in prisons compared to high school dropouts (ref 1, 5).  
    • College students are exposed to diversified social and professional networks (ref 1, 4, 10).  
    • College students develop skills in collaboration, time management, and project discipline (ref 10).
    • Children of college graduates tend to enroll and finish college compared to children of families without college degrees (ref 1, 4). 
    •  
  • CONS:  
    • A college degree is no guarantee of adequate learning (ref 1).  
    • College teachers may abuse their authority by imposing personal values and beliefs on students (ref 1).
    • College classroom instruction tends to be irrelevant to everyday life, outdated and obsolete (ref 3).  While a majority of college graduates believe that college studies are useful in their job, a minority are dissatisfied (ref 6).
    • In reconsidering their undergraduate college experience, many students wished they gained more work experience, studied harder, sought work sooner, or chose different studies (ref 6).  

REFERENCES

1.  Is a College Education Worth It?  ProCon org. https://college-education.procon.org 

2.  3 Reasons Not to Go to College. Tim Patterson, 10/26/2017, Sterling College. https://sterlingcollege.edu/blog/3-reasons-not-go-college/ 

3.  7 Reasons Why You Shouldn’t Go to College and 4 Things to Do Instead. Michael Price, 9/6/2017, HuffPost.  https://www.huffingtonpost.com/michaelprice/7-reasons-why-you-shouldn_1_b_5501111.html

4.  8 Reasons Why College is Important.  6/24/2014, CollegeAtlas org.  https://www.collegeatlas.org/why-go-to-college.html

5.  Where Value Meets Values: The Economic Impact of Community Colleges.  Analysis of the Economic Impact and Return on Investment of Education. February 2014.  Economic Modeling Specialistis Intl.  https://www.empowererie.org/uploads/resources/796450_usa_agg_mainreport_final_021114.pdf 

6.  The rising cost of not going to college.  Pew Research Center, Social and Demographic trends. 2/11/14.  http://www.pewsocialtrends.org/2014/02/11/the-rising-cost-of-not-going-to-college/ 

7. Return on Investment in College Education. Association of Governing Boards of Universities and Colleges. 2017.  https://www.agb.org/sites/default/files/report_2017_guardians_roi.pdf 

8.  College Education. Background of the Issue, 8/11/2016, ProCon org.  https://college-education.procon.org/view.resource.php?resourceID=006578 

9.  Emotional Health & Your College Student. A Guide for Parents.  The Jed Foundation  http://www.transitionyear.org/_downloads/parent_pdf_guide.pdf 

10.  Why go to college?  https://www.psychologytoday.com/us/blog/darwins-subterranean-world/201801/why-go-college 

Copyright © 2018 Douglas R. Knight 

What is College and Why Invest in It?

WHAT?

“College” is a training program designed for high school graduates to receive more education (“higher education”) with a certificate (“degree”) for successful completion of studies.  The available degrees are a trade school degree, 2-year associates degree, 4-year bachelors degree, masters degree, doctoral degree, and professional degree.  Students may apply for federal student aid to earn any of these degrees (ref 1).  

WHY?

Children need a good education in order to manage their adult lives.  Graduation from high school signifies an educational achievement that offers opportunities for immediate employment or enrollment in college.  Furthermore, graduation from college generally results in a higher income, healthier lifestyle, and greater contribution to society compared to the completion of high school (ref 1, 2).  

A WORLD OF OPPORTUNITY

Students who graduate from college (rather than dropping out early) earn the most value for their type of higher education (ref 2).  College offers the opportunity to expand knowledge, improve thinking, launch a career, and build new relationships [my opinion: college also increases the student’s capacity for making financial decisions]. Although other organizations offer a similar opportunity through on-the-job training (e.g., armed forces, businesses), colleges offer opportunities that can’t be obtained elsewhere.  For example, many professions require a college degree.  

RETURN AND RISK

College is not free and can be quite expensive; it’s a risky investment in your child’s future (ref 3).  Is it worth the investment?  Yes, if your student graduates with reasonable financial and emotional health.  College graduation improves students’ chances for financial success as measured by the return-on-investment (ROI).   Here are several measures of the ROI in college (ref 2):

  • graduation from college increases the employment rate
  • college graduates have more job security
  • college graduates earn more money than those with less education

The payback period for a college degree is the number of years needed to recoup the cost of college.  The length of the payback period depends on the annual salary of the college graduate and total cost of college (ref 3).  The choice of school and total time of enrollment are prime determinants of total cost.

Nearly all parents want their child to attend college, yet only one third of college students earn a bachelors degree or higher (ref 2).  The high dropout rate may be due to academic or emotional stress, especially during the transition from high school to college.  The student and family may not be prepared for the academic and social life of college (ref 4).    

NEXT?

The process of college preparation (“College Prep”) can help motivate children to attend college and graduate with a degree (ref 5).  College Prep should start at home as early as possible and continue through high school. 

REFERENCES

  1. Federal Student Aid.  U.S. Department of Education. https://studentaid.ed.gov/sa/ 
  2. Return on Investment in College Education. Association of Governing Boards of Universities and Colleges. 2017.  https://www.agb.org/sites/default/files/report_2017_guardians_roi.pdf 
  3. Jonathan F. Foster. The risks of investing in a college education. Fortune, March 25, 2015.  http://fortune.com/2015/03/25/the-risks-of-investing-in-a-college-education/ 
  4. Emotional Health & Your College Student. A Guide for Parents.  The Jed Foundation  http://www.transitionyear.org/_downloads/parent_pdf_guide.pdf 
  5. College preparation checklist. Federal Student Aid, U.S. Department of Education.  https://studentaid.ed.gov/sa/sites/default/files/college-prep-checklist.pdf 

 Copyright © 2018 Douglas R. Knight 

Helping grandchildren invest in college and retirement. A 2018 workshop for Otterbein University’s Lifelong Learning Community.

Moderator’s Introduction, Douglas R. Knight

The goal of this workshop is to discuss ways of helping grandchildren invest for college and eventual retirement. Grandparents have the time, experience, and resources to help those investments.  

My role as moderator is to introduce today’s topics.  Mr. Eric J. Robbins will then describe ways of investing in your grandchildren’s future.  Eric is a senior investment advisor at Buckeye Wealth Management with over 30 years of experience in the financial services industry.  Finally, Mr. Jefferson R. Blackburn-Smith will suggest ways of preparing grandchildren for college.  Jefferson is Otterbein University’s Vice President for Enrollment Management. 

1 moderator
chart 1. basic concepts

The reinvestment of stock market returns is the preferred method of saving for college and retirement (chart 1).  “College” is any certified program of higher education at trade school, the 2-year Associates degree, the 4-year Bachelors degree, graduate school, or professional school.  Family savings, student scholarships, and financial aid are principal sources of funding to pay the cost of college. There are also ways of reducing the cost of college. Paying for college deserves early planning.  

2 moderator
chart 2. The column headings identify 3 training goals, each of which progress through 6 stages of educational development identified by the row headings. Suggestions for grandparents’ goals are printed in blue font.  Topics surrounded by red borders are the focus of today’s workshop.

Chart 2 shows 3 goals for gradually improving children’s knowledge of personal finance.  

  • The first goal, financial training, is an important program which is best taught at home by parents. The topic of money for pre-school children is an ideal place to start. Proper management of money will become the child’s most important skill for personal finance and college preparation. 
  • The second goal, “college” graduation, is headed for success when parents start saving for college early-and-often in a 529 plan. Grandparents can contribute funds to the 529 and also help nurture the lives of their grandchildren. Grandchildren thrive on dreams, experiences, and skills to help prepare for college. Well prepared students are those most likely to graduate from college with a useful education. “College prep” refers to the high school student’s tasks of choosing colleges, obtaining scholarships, and reducing the costs of college; guidance counselors and librarians are excellent resources.  Negotiation is the process of comparing college acceptance letters and seeking the best financial terms of paying for college. Excessive student loans can be a disturbing financial burden after graduation.  
  • The third goal, secure retirement, begins when grandchildren start saving for expensive things; those things become more expensive as a child’s interest shifts from toys to stylish clothes, electronic devices, and cars. Bank accounts offer security to a child’s savings. A grandparent can help grandchildren buy a stock and then periodically review its performance; it’s an excellent introduction to the world of finance. Jobs help grandchildren form entrepreneurial ideas. The taxable earnings can be deposited in a custodial Roth retirement account. Grandchildren need to be encouraged to save taxable earnings in the Roth account as a matter of habit. All children need safety lessons to avoid truancy, cyber attacks, gambling, credit card debt, and other risks to their wealth and health.

After college, young adults should enter the workforce even if their first job is not a ‘dream job’.  Job success will enhance their future workforce mobility.

Investing for Your Grandchild’s Future. It’s Never Too Early to Start, Eric J. Robbins

The key points of my talk are:

  • college is an expensive investment that often incurs debt
  • grandparents’ financial assets are not detrimental to student eligibility for federal financial aid
  • families have many ways of saving for college; among them are several tax-advantaged savings programs
  • parents and grandparents should avoid making 4 big mistakes when paying for college
  • careful planning will reduce expensive mistakes

The average cost of college tuition and fees in 2017-18 varied from $9,970 [for in-state public schools] to $25,620 [for out-of-state public schools] and $34,740 [for private colleges].  To cover these costs, my recommendation is to start a college payment plan early!  Otherwise, a large debt from student loans could cause significant financial distress after graduation from college.  The average cost of student-loan debt is $351/month (chart 3).

3 investing
chart 3.

In general, students use loans to pay for 19% of college costs and parents borrow an additional 8%.  Grandparents typically pay no more than 4% of college costs (chart 4)

4-investing1-e1523979641810.jpeg
chart 4.

College students are required to submit a FAFSA form (chart 5) to the college admissions office when applying for federal financial aid.  High-income families with large savings accounts (“assets”) receive less federal financial aid than low-income families with small accounts.  For a given amount of family assets, larger portions of student savings attract less federal financial aid.  Grandparent-owned assets are invisible and have no effect on federal financial aid (chart 5).  

5-investing1-e1523979595483.jpeg
chart 5.

Families have many ways of saving for college (chart 6)

6-investing1.jpeg
chart 6.

 

Qualifed series EE savings bond, 529 savings plans, Coverdell IRAs, and Roth IRAs are protected from federal taxation of investment returns.  Chart 7 offers a useful comparison of these tax-advantaged plans with taxable custodial accounts.

7 investing
chart 7. Four savings accounts (column headings) are compared by a list of important variables (row headings).

Several comments about chart 7: Investment returns are not taxed except in the UGMA/UTMA accounts; annual income limits may restrict participation in the Roth and Coverdell accounts; contribution limits to all accounts are regulated by the government except for the UGMA/UTMA; untaxed returns can be withdrawn for qualified educational expenses (UGMA/UTMA returns are always taxable); account owners are allowed to change the student beneficiary in all but the UGMA/UTMA accounts;  account owners or custodians are generally allowed to control the account with some exceptions; non-FDIC investments are not guaranteed (but why invest in a low-return FDIC account for long-term growth of savings?) 

The reason for having a college savings plan is avoid mistakes that lead to unnecessary personal losses.  The biggest mistakes that parents and grandparents make are shown in charts 8-11.  

8-investing1.jpeg
chart 8.

If a parent waits 5 years before starting to invest $200/month, the $17,380 opportunity-cost of waiting to invest would decrease the final savings balance to $13,680 instead of $30,998 (chart 9).  If the parent initially invested $10,000 and then waited 5 years before investing $200/month, an opportunity cost of $29,885 would reduce the final balance to $64,906 instead of $94,791.

9-investing1.jpeg
chart 9.
10 investing
chart 10.
11-investing1-e1523981782363.jpeg
chart 11.

Additional mistakes are: failing to plan for college; allocating college savings and other financial assets to the student instead of the parent; and, no planning for possible investment losses.

Families can reduce financial mistakes for college by gathering useful information (chart 12), selecting a suitable investment return (chart 13), and seeking alternative sources of funding (chart 14).  

12-investing1-e1523979835591.jpeg
chart 12.
13-investing1-e1523979884578.jpeg
chart 13.
14-investing1-e1523979926982.jpeg
chart 14.
15-investing1-e1523985362116.jpeg
chart 15.
16-investing1-e1523980018696.jpeg
chart 16.

Helping Grandchildren Invest: Strategies for College, Jefferson R. Blackburn-Smith

The agenda for my talk:

  • some truths about college
  • savings strategies
  • controlling cost

Many families aren’t prepared for college.  Here are four ‘truths’ that college-student families need to know:

Truth #1: College is worth the effort of careful planning (chart 17).  Grandparents can help by promoting the opportunities of a college education.  

17 college
chart 17.

Truth #2: College is expensive but few students pay the full price (chart 18).  For example,  students can seek grants and scholarships that reduce their payments.  

18 college
chart 18.

Truth #3: The student debt crisis needn’t be as bad as reported by the media (chart 19).  Low-income students tend to borrow more carefully, high-income students less carefully.  

19-college-e1524062098508.png
chart 19.

Families can shop for government and private student loans with the best interest rates and repayment plans. College graduates might choose to participate in debt-forgiveness programs by seeking employment in certain public service programs.

 Truth #4: Cost, quality, and educational outcomes are important factors to consider in selecting a college (chart 20).  

20-college.png
chart 20.

One way of paying for college is to distribute the expenses equally among 3 financial accounts (chart 21).   

21-college.png
chart 21.

Among ways of paying for college, an educational savings account works best when started by an adult early in the grandchild’s life.  Grandparents can encourage their family to open a savings account and then make contributions to that account (chart 22).

22-college.png
chart 22.

There are many advantages to using a 529 college savings account owned by parents (chart 23).

23-college.png
chart 23.

In comparison, student-owned savings accounts may be taxable and could reduce the student’s eligibility for financial aid (chart 24). 

24-college.png
chart 24.

Student performance and lifestyle have a signficant impact on the cost of college.  Roughly  half of Ohio’s 4-year college students graduate on time, which means that the other half are either dropping out or paying much more to graduate.  In chart 25, “Lifestyle” borrowing refers to students paying for unnecessary college expenses such as extravagant vacations.

25-college.png
chart 25.

 

26-college.png
chart 26.

WORKSHOP CONCLUSIONS

  1. Grandparents have the time, experience, and resources to help prepare grandchildren for college and retirement.
  2. Continual reinvestment of stock market returns is recommended for college and retirement savings plans that are started early in the grandchild’s life.
  3. Protect college and retirement savings in a tax-advantaged education account (e.g., 529 plan) and retirement account (e.g., Roth IRA).
  4. Help grandchildren acquire the lifetime habit of saving for retirement
  5. Help grandchildren channel their dreams and experiences into goals for careers and adult life; college could help them achieve those goals.
  6. Many families are unprepared for college. Early planning and careful preparation will reduce the cost of graduating from college.
  7. Minimize student-loan debt by starting a 529 plan early. Other ways of minimizing student debt include grants & scholarships, work-study programs, reduced college expenses, and loan forgiveness programs.

[additional references are listed in the LITERATURE page of this blog]

Copyright © 2018 Douglas R. Knight, Eric J. Robbins, and Jefferson R. Blackburn-Smith