Michael can read; Michael can write; but …will Michael be able to go to college? Having a financial checklist for your child’s future plans.

Highest college tuition? A record-breaking $60,000 a year. That is $240,000 for four years; nearly a quarter of a million dollars. Mind Blowing!

This has now become a major source of stress for parents as well as students.

The rising cost of college and the related student debt are a bubble that is ready to pop. The current conditions are not sustainable.

Do not despair! There is a way for newly married couples planning to have children, parents with young children, and even parents with middle school to high school students, to include this in their financial plans, budget for reasonable college expenses, and make decisions for their child’s/student’s future education based on their values.

Remember Jessica (Michael’s older sister)?

In ‘What will you do with your $5,000,000’, we met Jessica, a recent college graduate. Jessica graduated from college with the average amount of debt:

Student Loans: $30,000 @ 6.8% over 10 years; Monthly payments: $345

Credit Card: $16,000 @ a 13% minimum payment of $177; (That would take 30 years to pay off if no more debt was added. Jane was paying it off over 7 years.) Monthly payments: $300

To pay off college, Jessica will spend 23% of her monthly take home income and will be making payments for over 7 – 10 years.

These figures are the average, which means some people have less college debt and some people have much, much more.

To look at the cost of college a different way, if you invested $100,000 (the average cost of a four-year degree at a state school) at the age of 18 and left it for 50 years, and it earned 8% per year, it would be worth $3,200,000 by the time you reached the age 68. This is a big investment that requires your attention. That is why it is on the Debt Checklist.

The earlier you start planning for your student’s education, the better, but it is never too late.

Here are some ideas to help check college debt off of your financial checklist:

For the Parents:

1. Have a budget that includes saving for college.

2. Stay on track with your budget so that you don’t overspend. Overspending is stealing from yourself and from your future.

3. For parents with newborns and younger children, ask grandparents to forgo toys and contribute to a college fund. This might be a tough one, but a toy will end up at a consignment shop or in the trash in a couple of years while, if invested, the money would have time to grow.

4. Stay involved with your children’s education. Studies show that students with involved parents perform better in school.

5. Talk to your children early and often about the benefits of doing well in school, doing their best, asking for help, and learning good habits like eating well, getting enough sleep, and being organized.

6. Provide a home environment that helps support good study habits.

7. When needed, seek help/advice from school counselors, trusted teachers, tutors, and administrators.

8. Know your student’s educational options. Choice is an AWESOME thing. There are more educational choices than ever. For high school, look into early college, AP classes (advanced placement), or IB programs (International Baccalaureate) as a way of earning college credit while your student is in high school.

9. When it comes time to choose a college, set reasonable expectations that fit into a plan that includes NO DEBT.

10. Get creative and think outside the box. It is a world of opportunity out there…go for it.

For the student:

1. Understand the long-term benefits of doing well in school, doing your best, asking for help, and learning good habits like eating well, getting enough sleep, and being organized.

2. Create an area at home that helps support good study habits.

3. Volunteer, work part-time, or start a business – get experience. Pay attention to what you like doing.

4. Start saving your own money. Even if you receive a full scholarship, you will still want some pizza money.

5. Know your educational options. Choice is an AWESOME thing. There are more educational choices than ever. For high school: look into early college, AP classes (advanced placement), or IB programs (International Baccalaureate) as a way of earning college credit while in high school.

6. After your freshman year in high school, get focused. Don’t just be a bystander hoping it will all work out. Hope is not a strategy. Understand the process and make choices. Have a plan.

7. Whether for an assignment, a subject, or future plans like college, seek help from school counselors, trusted teachers, and administrators.

8. Work on developing marketable skills: Writing, people skills, language skills, work habits, and personal habits.

9. When it comes time to choose a college, choose a program fits into your budget and that includes NO DEBT.

10. Don’t spend your money on a barista degree. What is a barista degree? A degree in an area where you are not employable, where there is not a market for that degree. If you want to work in a coffee-house, then go work in a coffee-house (in a future blog I will calculate for you how you can become a millionaire by having a regular job). Otherwise pick a degree that will result in marketable skills.

11. Good with your hands? Look into good, accredited trade programs. Remember, plumbers, electricians, or people who can build or fix things make good money and are always in demand!

12. Get creative and think outside the box. It is a world of opportunity out there…go for it.

For Grads with Debt:

1. Budget, budget, budget!  Pay that student loan off as soon as possible and DO NOT accumulate any other debt until it is paid off!

Remember: You can create a financially fantastic life. Clarify your Values.

Other information:

This is a hot topic. Recent press includes:

The Wall Street Journal article, ‘Degree of Value: How to Make a College Degree Pay Off ~ For Too Many Americans, College Today Isn’t Worth It’ adapted from Glenn Reynolds’ book, ‘The New School: How the Information Age Will Save American Education from Itself’ (the article is available online).

WSJ, January 9, Opinion page, ‘How the College Bubble Will Pop’.

Blog post by Young Americans for Liberty which referenced Ohio University Professor Richard Vedder and his book, ‘Going Broke by Degree: Why College Costs Too Much’.

Here are some numbers just for fun:

$ College prices have gone up twice the rate of inflation for decades (5% – 8% per year).

$ On an inflation adjusted basis the cost of college has increased 539% from 1988-2008.

$ The cost of college has increased more than transportation, housing, food, and even medical care over the same period!

$ In-state public schools run from $17,000 – $27,000 per year (4 yrs = $68,000 – $108,000).

$ Private colleges run from $45,000 – $60,000 per year (4 yrs = $180,000 – $240,000).

Helpful book: ‘College Admission, From Application to Acceptance, Step by Step’ by Mamlet and Vandevelde.

Video & Summer Seminar on College Tuition & Staying out of Debt by FEE