38 KIPLINGER’S PERSONAL FINANCE^ 09/2017MONEYPOON WATCHARA-AMPHAIWANHow to Pay for College
The tab for a four-year education is mind-boggling. But don’t panic: You don’t have to save
the entire cost. BY KAITLIN PITSKERFAMILY FINANCESVICKI AND GEORGE PETRIDES STARTED
saving for college shortly after their
oldest daughter was born. Now
Kaelyn, 18, is starting her second
year at Virginia Tech, and her sisters,
Laurel, 15, and Anna, 9, aren’t too far
behind. “With three children, college
expenses are a big number to deal
with,” says George. By the time the
Petrideses’ daughters finish college,
they could face a total tab of $500,000
or more. And the couple have long set
their sights on getting all three of their
daughters through their undergradu-
ate years without any debt.
Their strategy for this gargantuan
task? Start early, make use of all their
options and check in periodically with
their financial adviser to make sure
they’re prioritizing college and retire-
ment savings in a way that makes sense
and maximizes tax breaks along the
way. They got a head start on building
their college kitty shortly after Kaelyn
was born thanks to a contribution
from Vicki’s grandfather. Since then,
the couple have been using a combina-
tion of 529 accounts, company stock
from Vicki’s job and mutual funds to
save for college expenses. They will use
their savings—along with scholar-
ships, financial aid and current in-
come—to pay the college bills. Plus,
they plan to pay off a home-equity
loan by next summer to help free up
cash for current college expenses as
well as beef up their college fund.
And though the Petrideses hope to
keep student loans out of the mix, they
expect their daughters to contribute
financially to their education. Byworking during summer and semester
breaks, they aim to save several thou-
sand dollars to help pay for textbooks
and personal expenses.HOW MUCH TO SAVE
The average sticker price for the 2016–
17 academic year at a four-year public
institution, including tuition, fees,
and room and board, was $20,090 for
in-state students and $35,370 for out-
of-state students, according to the Col-
lege Board. The average tab at private
colleges was $45,370, but many private
schools post annual sticker prices
north of $60,000.
It’s tough to predict what college
will cost by the time your child (or
grandchild) enrolls. The steady rise in
the cost of a college education contin-
ues, but the pace has slowed in recent
years. Over the past decade, published
figures for in-state tuition, fees, and
room and board at public four-year
colleges increased 32.4%, or 2.8% per
year after inf lation, whereas private
four-year institutions increased 25.8%,
or 2.3% per year after inf lation. Simi-
lar increases over the next decade
would push some schools’ sticker
prices to more than $75,000 per year,
or more than $310,000 over four years.
To get an estimate of the costs by the
time your child heads off to college,
visit http://www.finaid.org/calculators to
use the College Cost Projector.
Such eye-popping sums may seem
like an insurmountable obstacle, par-
ticularly if you’re just starting to save
or you have more than one child to
send to college. But most families payfar less than a school’s sticker price.
At many schools, generous need-
based-aid awards often reduce the
school’s net price by 50% or more of
the published price for families who
qualify. Scholarships and non-need-
based aid, also known as merit aid,
can further reduce costs.
“Your biggest worry shouldn’t be
how much to save,” says Brian Boswell,
vice president of SavingforCollege
.com. “Instead, worry about getting
started—and soon.” The longer you
wait, the more difficult it will be to
reach your savings goal. Although you
have a variety of options (see below),
the savings vehicle of choice is the 529
college-savings account, which allows
earnings to accumulate tax-free and
usually offers state tax breaks for con-
tributions. (Our guide to 529s begins
on page 43.) To see how your savings
goal may change depending on your
child’s age and the type of school you
hope he or she will attend, see the box
on page 41.
Most experts recommend that you
aim to save between one-fourth and
one-third of the projected sticker price
for each child. You’ll generally be able
to use a combination of scholarships,
grants, loans and a portion of your
current income when your child is
enrolled to cover the rest of your col-
lege costs (see the box on page 42).
Families with their eye on an in-state
public university may want to use a
slightly different strategy. Fidelity
recommends multiplying your child’s
current age by $2,000 and comparing
that figure to your savings efforts to