A college education is a financial equation of two halves: the cost of the investment to attend and the potential income related to the degree earned. An increasing number of graduates leave school each year with an astronomically high amount of debt. For some, this crushing level of debt eventually leads to loan delinquency or default.
RISING COSTS OF COLLEGE
Annual increases to college tuition is one of the reasons for high levels of student debt. According to industry leaders, tuition tends to increase about 8% per year. This translates to the cost of college doubling every nine years.1 The sooner you start saving and creating a plan - the better. The longer you delay, the more difficult it may be to reach your goals.
FUTURE PERSONAL INCOME
It’s unrealistic to expect to cover the cost of college out of your expected future personal income. If you haven’t managed to set aside funds by the time your child or grandchild is ready for college, how will you fund an entire college education out
of your income while he or she is attending school? This may prove especially difficult if you are in or nearing retirement age at the same time.
WHAT HAPPENS AFTER COLLEGE? INVESTING IN THE BEST MAJOR
College is likely one of the largest financial investments you’ll ever make on your child's or grandchild's behalf. Therefore, it’s important to consider the end-goal for example, what does your child intend to do after graduation? Your family will make a huge investment. As with any investment, you should consider what the expected return looks like for the degree.
Majors most likely to pay the healthiest “return on your investment” are ones that fall within STEM-related fields—STEM is an acronym for science, technology, engineering and math. STEM-related fields dominate the top 100 highest paying Bachelor degrees.2 If your student has an interest in or an aptitude for a range of subjects, it’s worth including expected salary in your discussion of college major—especially if your child will be responsible for meeting student debt obligations. A double major, or a major and a minor - for example - in math and fine art might serve your student better than a stand-alone degree in art.
THERE IS A LOT TO THINK ABOUT
Keep in mind that the decision to attend college and the choice of major are very personal decisions. How you pay for such decisions has implications you might not be thinking about.
For example, did you know that earnings withdrawn from a 529 plan could be treated as income to your child and could show up on the following year’s financial aid application? Or that out-of-state plans may have in-state income tax ramifications? If you are like most parents and grandparents, your focus will be squarely on making the right decision for your child/grandchild and your family.
We encourage you to join us for our upcoming event to learn more on this topic.
Getting, Saving and Losing Money For College
Wednesday, September 28th
6:00 - 8:00 pm ET
The Stone Barn | 15 Middleton Drive | Wilmington, DE | 19808
Register online here https://www.covenantwealthstrategies.com/events/getting-saving-and-losing-money-for-college-1
If you have specific questions related to your own investments or financial planning needs, we welcome you to contact us to set-up time to discuss how we can assist you.
1. “Tuition Inflation.” FinAid. https://finaid.org/savings/tuition-inflation/.
2. “Highest Paying Jobs With a Bachelor’s Degree.” Payscale.com, 2020. https://www.payscale.com/college-salary-report/majors-that-pay-youback/bachelors.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.