If you read anything at all about money and college, you know that the cost of college is outpacing inflation, and that even the “cheap” public colleges and universities are no longer inexpensive.
Therefore, the smart thing to do is to put money aside as soon as a baby is born. Or maybe you should start saving while you’re pregnant. Heck, start your college stash as soon as you stop using birth control.
If you can’t save enough, you can tell your kid to get scholarships, or go to community college for a few years to save money, or enter into indentured servitude with student loans.
While this advice all sounds (mostly) reasonable, this isn’t what I want for my family. My parents thought it was important for me to go to college, and they made it happen without forcing me to take out loans. I feel like I should pass on this gift to the next generation.
For that reason, as soon as my niece and nephews got their social security numbers, I started up 529 plans for each of them. I don’t put a ton of money away for them, but I think I will probably swing at least a semester’s tuition for each when the time comes. Maybe, depending on how the market behaves over the coming decade, the Auntie scholarship will cover a year or two for each child.
the surprise college student
Things got a little tricky when I got married 1 week before my step-son started college.
I didn’t have 18 years, or even 10, to put money aside for his college fees. Some of the expected family support (on his mom’s side) had evaporated in the financial crisis of 2008. Other issues meant that the FASFA wasn’t completed, and financial aid (either loans or grants) was not an option.
Thankfully, the Great Recession didn’t decimate all the assets on the other side of the family. The first year was covered fully (as promised earlier, before the wedding).
prestigious education for less
One of the best cost-saving moves was his choice of college. For various reasons, he ended up going to university overseas. He attended an excellent school, one routinely on the list of top 100 universities world wide. However, the tuition was significantly less than it would have been at, say, Harvard (especially without financial aid). More than 50% less.
For comparison, here are some tuition fees for 2019-2020 I found in a quick search. All are for schools found on lists of best universities world wide:
- University of Oxford (England): 26,235-34,678 GBP/US $32,872-43,451.
- University of Cambridge (England): 21,168-32,214 GBP/US $26,523-40,364.
- ETH Zurich (Switzerland): CHF 580 per semester/$584 per semester (presumably $1168 per year).
- University of Toronto: CAD 58, 680/ US $44,881.
- LMU Munich: free!
- University of Edinburgh (Scotland): 18,800-24,600 GBP/ US $23,556-30,823.
- University of Melbourne (Australia): AUS $32,512-43,008 /US $22678-30,000.
- Karolinska Institute (Sweden): 45,000 SEK / US $4765.
- Hong Kong Institute of Science and Technology: HK$140,000/ US $17,960.
- Harvard University: US $47,730.
Food for thought: this list only includes tuition, and not other fees, room and board, or getting to and from school.
More food for thought: tuition at some of these schools varies by course of study. You pay more for a science degree than one in the arts.
Even more food for thought: if you can get in and attend class at ETH Zurich, LMU Munich, or at the Karolinska Institute, tuition is less than the limit on contributions to an IRA ($6000 in 2019 for the under-50 crowd). The Hong Kong Institute of Science and Technology tuition squeaks in just under the limit for a 401 (k) or 403 (b) contribution ($19,000 in 2019 if you are under 50).
Cash flow college by living below your means
This doesn’t apply to people with the average American household income, which is $60,000 a year in 2019.
But if you are a physician in the US who has finished training, you should be making a lot more than that.
I would agree that coughing up $48,000 for tuition, and adding room, board, fees, computer, etc. would be pretty tough for a PCP making an average income ($204,000 per Glassdoor, I don’t know if I believe that). However, if tuition is about half that amount, we are starting to talk about $40,000 total each year to send a kid to college; that’s about 20% of your gross income. Tight, but possibly doable.
If you have been saving 10-15% of your after-tax income for a few years–maybe to save up for a newer car, or to bolster retirement savings–you could divert that 10% to paying for college.
If you have been saving faithfully in your retirement accounts for 15 to 20 years, you might even consider reducing contributions for a few years. Don’t withdraw your money! But maybe let the old money ride and use some of that $19,000 you were going to put away for retirement to send Junior to college instead.
If you are a specialist who is making more than a PCP, and has been living below their means, paying for college out of pocket should be even easier.
share the load
Happily for us, my step-son’s last years of college were funded by multiple people: grandparents, aunt, parents. Although I could have (probably) managed to send him all on my own, it was a tremendous help to have other family members pitch in. As it turned out, my habit of living on less than 100% of my salary meant we could cover room, board, and books; and I still was able to contribute to my own retirement.
Family members split the tuition, which was quite generous. However, with a lower tuition in the first place, each family member had, really, a manageable financial obligation.
Even if you don’t have such generous family help, a little help can go a long way. A good summer job can pay for your student’s books in the fall. Frequent flyer miles can get your student to and from school.
Of course, scholarship money should be mentioned here as well. Students from high-income families may or may not be eligible for grants and scholarships. However, you never know until you try. Filling out the FASFA and applying for scholarships may not get your child a full-ride, but even $6000 in aid can make a difference. A quick search shows that Harvard (to pick on them again) offers significant support to families earning up to $150,000 a year. That could be of significant interest to a pediatrician.
in summary
To sum it up, the best plan is to save money ahead of time. Really.
Apply for scholarships if you are able. Don’t assume that a physician household will not be eligible for financial aid.
If that doesn’t happen, or if you can’t save enough, a gifted student can get an excellent education abroad, if the in-state school isn’t on the table.
As for paying tuition and fees, splitting the cost with supportive family (if you have such), helps tremendously. Don’t be a pig: if you can get that support, be sure to pay it forward!
Living below your means also means you should have extra funds available to pay for college. Saving 10-15% of your physician salary can, depending on your specialty, pay for a significant portion of your child’s college costs.
I know we were very fortunate to be able to afford college without saving for it. Have you had to help someone pay for college? Do you plan to?