More Children, More Costs: Meeting Future College Expenses

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The rising cost of college tuition is a formidable obstacle for any parent. No one wants to see their child go into debt before they have the education needed for a fair shot at success. For parents with multiple children entering college at the same time, whether it is twins, triplets, or simply more than one child within a close age range, those future college expenses can seem like a looming disaster.

A growing number of experts believe it is only a matter of time before the higher education bubble pops, and they have some disturbing evidence of just how large it is. Student loan debt is currently at over $1 trillion and growing at greater than $100 billion per year. Tuition rates are also growing, despite extremely low interest rates. The picture is far from comforting, but planning ahead is still the best idea.

Facing the Fear

It is easy to calculate future college costs off of current fees with an assumed rate of steady growth. Annual college costs now are averaging $19,388, while four years yields a total expense (not adjusted for inflation) of $77,552. Four years from now at a cost inflation of five percent, this figure will be $93,062.

The best-case scenario assumes you start saving at birth, receive a steady eight percent growth in savings, and only face five percent increases in college fees. The cost for one child will be $201,108, and you’ll get there by putting away $418.90 every month. Plan on putting away $837 every month for two children! Now that you have experienced what is hopefully your first and only anxiety attack, it is time to consider some good news.

Cost Flexibility

College costs are an average of several expenses, including tuition, books, housing, food, and computers. Planning ahead during the junior year of high school can yield tuition scholarships, which will look great on resumes. Additionally, your children can contribute to their college fund with summer and part-time work.

Child Flexibility

Another thing to keep in mind is that not all children want to go to college. If their passion is in a specific trade or some other endeavor, this will free some money up. Of course, the belief that college is necessary for a decent life is not an easy one to overcome. Encouragement here is good, but pushing children to attend college against their decision not to is likely to result in wasted money and poor grades.

Cash Shelters

Most states now feature education savings plans, similar to federal retirement accounts, with guaranteed rates of return. Expert advice can be useful in choosing the best one for your family. There are also many creative ways to lessen the cost. For instance, buying a condo or home near the college for children to live in can actually be profitable when done correctly.

Home Loan Options

If you are looking for other ways to help your children pay for college, a home loan may come to mind. But a standard home loan has to be paid down each month. The added bill may only cause frustration and more financial issues. You can avoid such problems by taking out a reverse mortgage, which will allow you to let what you owe accumulate over time. For as long as you retain home ownership and continue maintaining the home, including paying taxes and insurance, the loan will not be called in. Your lender may show you an online reverse mortgage calculator tool to establish a top amount you can borrow. But you will have the freedom to choose how often to receive your money and how to spend it. You will be able to use the cash from your home’s equity to pay for everything from entertainment to medical bills to those college expenses.

Experts disagree on when, but the college bubble cannot continue indefinitely. Parents can best position themselves for college costs by thinking creatively and starting out as early as possible.