03 Apr

So my son wants to go to Notre Dame…

April 03, 2014

First, I must disclose to you that I actually have three sons; each has his own personality and his own ambitions. It’s my oldest son, the quintessential student, who at the age of 14 already has a strong desire and motivation to attend Notre Dame.  I’m not exactly sure why he became such a big fan of the school, either, other than the fact that he is a huge sports fan, and it might have to do with Notre Dame’s sports history in combination with its fairly high academic standing.  Either way, my wife and I are a little worried.   You see, I, his dad, am a financial planner and am known for watching my pennies. Yes, I have been called a cheapskate by my boys on many occasions!   So I believe I better start running some numbers to see if my son’s dream and our education savings plan match.  Notre Dame charged about $55,000/year for the 2012-2013 school year, and that was just for tuition and living in the dorm. I figure that by the time you get done with all the other costs – you know, the important stuff like late-night pizza and extracurriculars – it’s an easy $60,000/year.

But…he’s such a good student!

Now, his mom and I both went to Big Ten schools, in-state mind you. Hers was Wisconsin, and mine was Iowa. During the 2012-2013 school year going to UW Madison in-state was about $18,500/year for tuition and room and board. The University of Minnesota is also not far off in price. You’ve got to love reciprocity – Minnesota and Wisconsin honor each other’s in-state tuition cost.  So I’m sitting here thinking; wouldn’t it be a good idea to get your undergrad at a more “modestly ” priced college – assuming you’ll probably be going to grad school anyway and could look for a more prestigious school then?

But he works so hard, and he’s such a good student! And don’t you want to give your kids everything you can?

Did I tell you that I’ve been accused of being cheap? But, let’s talk…

Right now there are 37 million people in the US burdened under $1 trillion in student debt. The median net worth in 2009 for a household without outstanding student debt was $117,000; in contrast, the net worth of households with student debt was $42,800. Basically the message is that student debt is an anchor on saving and getting ahead financially.

So, how do you help your kid go down that road? What do you do?

Some people will sacrifice putting away retirement savings and instead aim those funds towards their children’s college costs. Even worse, they will take a loan out against their 401k or a withdrawal from an IRA account. Think about those possible penalties and taxes on that! Is this a wise idea?  Absolutely not!  As Tom Muldowney, the wise gentleman that started Savant, once wrote, “If you are on a plane and the oxygen masks drop down, put yours on first and then you can assist the others sitting around you.”  The message is clear: take care of yourself (financially maybe?) and then you will be able to take care of those around you.

How do you do this? Make a plan and stick to it.  I’ve been saving for college, but is it enough?  Also, think about the choices and costs of the decisions you make today. Obviously, spend some time finding out about financial aid and possible scholarships. There are many techniques to help support college funding, but it all starts with a budget.  Make your savings regular. Make it automatic. Stretch yourself.   And make sure to bring your children into the discussion and demonstrate the realities of debt.

This is financial literacy month, and you can find some great information on making your own family financial plan and following a budget at:

http://www.financialliteracymonth.com/Tools-for-Success.aspx

Also check out http://www.savingforcollege.com/tools_calculators/ for some great college calculators (including financial aid).

Sources:
http://finance.yahoo.com/news/1-trillion-student-loan-debt-141440433.html
http://nces.ed.gov/collegenavigator/

1 Comment | Leave A Comment

  1. Brent,

    Great article and kudos to you for being honest about your financial disposition, a.k.a. being a cheapskate (I belong to that club as well). In my work with families I have many discussions about money and college, but am often surprised that my clients either have not discussed the financial realities of paying for college, or address it with a “we’ll cross that bridge when we get to it” mentality. My boys are about the same age as yours, and they have a pretty clear idea of what their share of college expenses will be. There may be no more important question for a family to address than “who pays for what and when?”

    Alongside the money question has to be the discussion of value: How much are we paying, and what exactly do we get for our money? Does your oldest want to be a Golden Domer because he watched “Rudy” and has an Ara Parseghian bobble head, or does he know that Notre Dame is an Ivy League-caliber institution with really solid programs in a multitude of disciplines? Like him, I’m also a huge fan of ND but for the total package it presents as an academically prestigious, mid-sized private university…which also has a really cool sports tradition, I have to admit. I’m sure you’ll help him understand both sides of the coin, and find what I call his “University of You” — the right fit at the right price with the right value. That’s a win for all of you.

    Tom Kleese
    OnCampus College Planning

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