Financing College Education When a Recession Hits
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
Planning for college and determining how to fund it is difficult in the best of times. But during a recession, it can be…a blessing? We’re not kidding, and here’s why: When you are out of a job – even temporarily – or have depleted your savings, the cost of college is drastically reduced.
The expensive, out of state private schools – no way. The flowery degree in 15th century French poetry – not a chance. Tough times impose discipline and pragmatism, and that’s a good thing.
Seeing 5% daily swings in the S&P % after a 30% drop is a sobering wake-up call. The prospect of a job loss, on top of deep investment losses is shaking up college planning efforts for families everywhere. Also, we’re seeing that college admissions officers are dropping enrollment deadlines and relaxing standards at all but the most elite colleges. Every parent should be using that information to their advantage. It’s the equivalent of buying at the market bottom. If a family has suffered a job loss or is nervous about big expenditures, there are many opportunities to cut costs, and they can without compromising educational quality.
We’ve assembled a series of points and strategies to control costs in this uncertain environment. With this information, you can show your clients that they have many educational options that they might not have contemplated previously.
As a starting point, a family should be informed that undergraduate tuitions at four-year colleges ranges from $5,000 to $80,000 annually. Private colleges are obviously at the high end of the range, while public colleges make higher education accessible to everyone across the income strata. It’s worth mentioning to people who may question the academic quality of lower cost “state schools” that tuitions are held down because a significant component of their funding comes from taxes. In essence, you’ve already paid for a hefty chunk of tuition at a public college when you paid your taxes.
In college admissions office lingo, tuition is referred to as the “expected family contribution” (EFC). The EFC at any given college is not a set price – not even close. It’s a convoluted series of calculations, with some arbitrary and discretionary elements added to the methodology. Know in principle that the higher your income and the greater your net worth is, the more your EFC will be.