Answers for Stressed-Out Parents, Part 1 April 21, 2009

The pressure on college bound students to get good grades and score well on college exams is intense. But these days it’s parents who must answer a math question more difficult than any found on the SAT, ACT or AP exam:

The cost of a 4-year college education is between $75,000 and $250,000 per child. You have 2-3 children. You have a middle class income, and retirement is 15 years away. How in the world are you going to pay for it?

1. Bike-a-thon
2. Mortgage the house to the hilt
3. Tap into the retirement portfolio
4. Super-size the rosary beads
5. Tell the kids they’re on their own

If you’re like many New Jersey families, you’ll probably end up mortgaging your house to the hilt, or tapping into your retirement fund to muster up enough money to pay the college tuition bills. After all, no wants to have to tell the kids: “I can’t afford to send you to the college of your choice, you’ll have to settle for a state school or a community college.”

Good news, parental units. I’m happy to report that in most cases you don’t have to make these painful decisions. There are ways to send the kids to college and still have a life and be able to retire.

Since this is the start of a new blog, we thought we’d begin by answering some of the most common questions—and misconceptions—about college planning and financial aid.

QUESTION: It seems that no matter what happens in the economy, college tuition costs continue to rise. What’s up with that?
You’re right. And just when you think it can’t get any worse, it does. College tuition costs are up 99% in the last decade. The cost of attendance at Rutgers is now $25,500. Drew is $52,114 (gulp). The College of NJ is $24,620. Universities give the excuse that their costs are rising. But we’re talking orders of magnitude way beyond the cost of inflation. So what’s the real scoop? Mainly, it’s supply and demand. An unprecedented number of our progeny want to attain a college degree. Colleges know that for every student who can’t afford their tuition, there’s another in line, anxious to say yes.

QUESTION: So parents are doomed?
Actually, no. Admittedly, there are few downright bargains out there. But did you know that over 95% of New Jersey families pay more for college than they have to? Some overpay by as much as $20,000 a year. Why is that? In some cases it’s lack of knowledge. In other cases parents get bad or faulty information from accountants or financial advisors who don’t know the ins and outs and idiosyncrasies of college financial aid… or from guidance counselors who don’t have the time to work one-on-one with every student… or from Mildred Lubner down the street whose daughter Tiffany didn’t get any college aid so she walks around proclaiming, “Don’t bother applying for financial aid, you won’t get anything.” Other times, it’s something more prosaic, such as parents filling out financial aid forms incorrectly, or missing a deadline.

Actually, there are a number of mistakes we see almost all parents make where they shoot themselves in the foot and miss out on thousands of financial aid dollars available to them. We’ll share those in our next installment.