Posted by: Kimberlee Leonard Comments: 7 0 Post Date: January 12, 2019

How to Pay for College: the Average American Parent

It’s something parents think about. It’s something kids think about. How do to pay for college? More and more kids are thinking about jobs that pay well without a college degree because the cost of college is astounding. [cost of college] The reality is that many kids are afraid that they’ll go to school, borrow money for all the tuition and not get a good paying job – at least one that pays for the student loans. The world has changed and you don’t need a degree to be successful. The reality is that you never did. For many, even of us old folk who followed the advice or our parents, did our time in college, got our degrees and leaped into the workforce, we aren’t doing anything related to our degree.

Truth About Most College Degrees

A college degree is a stepping stone. It isn’t a designation for success. The most common examples in modern technology are Mark Zuckerberg, Bill Gates and Steve Jobs, all who left college before getting a degree to start their companies. Your child can too. The truth about most college degrees isn’t that it gets your child ready for a career, though there are some degrees where this is true. I probably wouldn’t trust a dentist or doctor who didn’t get through the basic requisites. There are some careers where a degree is more than helpful, it is vital. But let’s be honest about why 90% of students attend college or university. You could say it’s the partying. Okay, you’re right! While you may not have expected me to agree with you, most kids go to school to grow up. That simply means that they are separating themselves from their parents, figuring out how to help themselves, finding their tribe and maybe even a topic or two they want to pursue for the rest of their lives. That’s right, that very expensive .edu email they claim is a right of passage. Think of it as a vision quest for tribal youth. If the adolescent survives, he becomes a man. If not, well, the course of nature.

Financial Planning Is On the College Major Map

You heard about financial planning for college tuition avoiding the need to go into debt. Everyone has. I don’t think I’ve talked to a single parent who didn’t want to give their child every chance to succeed in life, paying for college being part of it. Then we all get busy chasing toddlers in desperate need of a diaper change around all day. But this “how to pay for college” post wouldn’t be complete if we didn’t start with financial planning Start Early: Financial advisors like math. Most of us didn’t go to college to study it but we will tell our children that we use it every day. At least the simple math like:

Saving $25 per month for 18 years with ZERO interest = $5,400

I get what you’re thinking. That money won’t buy a clunker let alone a college degree that helps my son get into a graduate program to save the world as the Autobot friendly, turtle feeding, garbage truck loving child your toddler is. (I think that is an accurate reflection of my son’s life ambitions 14 years ago. It changed frequently.) But you’re right! That isn’t a lot of money. So, let’s multiply that by 4 (seems logical).

$5,400 x 4 = $21,600

That’s $21,600 if you just put $100 under the mattress every single month from birth until your baby’s 18th birthday when she is so eager to leave the house that she took it for a last summer jaunt at the beach with friends. Point of that financial planning story: saving is hard and don’t put the money where your kids can get it. This is WHY they need to go to college. They need to figure out what it’s like to surviving on ramen noodle cooked 347 ways without your hard-earned and frugally saved money.

Who Saves Money Under the Mattress: Isn’t There IRA Rates for College

We’ll get to IRAs and saving for college in a minute. And you are right. Only your 5-year old think that the piggy bank is the BEST place to put his money. And it is until he needs to break the bank. But money should work for you, right? This is where parents start to think about how to maximize $21,600. Let’s face it, even in today’s record-bust interest rate market, that 1.3% interest over 18 years will only earn another $2,774.34.  So far, you have about a year of college tuition paid for in a school not-of-your-child’s-dreams. Take a little risk with that money in the stock market, pray a lot and hope for 7% on average returns over the 18 years and pray that the year your bundle of joy needs to move into her dorms the market doesn’t tank. I’m not jaded, but this is how people really do think when it comes to saving for their own and their children’s future. Everyone has the best intentions and sometimes life and fears get in the way for planning for things like college tuition. Let’s face it, that piñata needs to get filled with candy for the birthday party.

Paying for College or College Paying You?

Here’s the trick most parents really hope will happen when it comes to making that dream college happen without mortgaging the house: athletic scholarships. It’s true, athletic scholarships can help and many kids who wouldn’t otherwise be able to afford a college degree attend excellent universities. Keep in mind that these are competitive and the life of a student-athlete isn’t always easy. There are sometimes jobs associated with the financial offer as well as the community and service requirements associated with athletic scholarships. Universities fund the sports that fund the college and its programs. This means football and basketball are often the biggest scholarship packages. For a hack like myself who could play a little tennis but wasn’t a national star, I got an offer for a scholarship. My pride felt justified that all the year of work got me something, but I still left college with a degree and a lot of debt. Don’t get me wrong. It’s an honor to be selected for any scholarship. Heck, I felt a sense of pride when I got $100 from the Ray Krok Foundation. No, they wouldn’t supersize the scholarship for an extra $0.49.

But what parents do is take that $100 a month and invest it in sports programs. It’s the Venus and Serena Williams System, right? It makes sense; if you can spend $25,000 to save $250,000 in overall college costs that is a good deal, right? Excellent investment and financial planning! The one problem with this university planning via athletic scholarship preparation, well there is more than one problem with this:

  1. You can’t buy athleticism
  2. Athletes get hurt at every stage
  3. Burnout among child-athletes is big
  4. Even talented kids might not make it.

Many kids love sports early on. Many athletically talented kids decide to do other things. No one can control who gets hurt or when and whether or not it can ruin future athletic opportunities. If your kid is excelling in sports, great. But if at all possible, don’t put all the proverbial eggs in the basketball hoop or basket or whatever the kids are calling it these days.   The other avenue, one my son is considering, is the military academies. Not only do they pay for your school tuition, but they also pay you to go to school. This is an attractive idea for students looking to attend universities and study specific majors. But after getting the degree, there is the military duty. It’s something noble and worth considering, but it isn’t for everyone.

Does the Military Pay for College?

There are several ways the military pays for college. The first is through attendance in one of the military academies for a degree. There are also ROTC scholarships for students in more traditional university programs with service commitments after graduation. There is also the G.I. Bill that helps those who have served to go to school and get a degree.

Companies That Pay for College

There are two different ways to consider a company that pays you to get a degree. There is the scholarship and there is a company tuition assistance program. Holy bat-mobile! I know, it’s crazy. If only I had known. See here is the question you should have asked when I mentioned my Ray A. Krok Foundation Award.

Does McDonald’s Pay for College?

The Archway to Opportunity is a college tuition program for eligible employees seeking a university degree. Hourly workers can get up to $2,500 while managers can get $3,000 every year. What I’m saying is that McDonald’s does supersize some college opportunities. Maybe I should have stayed with the program but I really couldn’t hack the gig for more than a couple of days. Subway was my way (it was a little easier on that college 15 for me). But Starbuck and Pizza Hut both have programs. And fast food joints aren’t the only ones. Many large corporations have employee tuition programs along with beneficiary scholarships. Whether you are sending a child to school or looking for financial assistance and tuition help yourself, call your human resources department and ask about the opportunities available.

How to Pay for College: Traditional Financial Aid and Scholarships

Many parents wish they could have saved more, done more, provided opportunities for more scholarship options. Don’t be hard on yourself. I’m a single mom who knows what do to having been in financial services and consulting since graduating from college. But divorce, medical issues and just plain old life have happened and we aren’t where I’d like to be financially for my son who is a junior in high-school. It happens. And we’ll figure out what to do. First and foremost, he needs to figure out where he wants to go to school and continue to do his job: get the grades and test scores to give himself some options. There are a lot of options. Every school has a different type of financial aid and scholarship package solution for my child and your child. You may have heard of financial aid, grants and student loan packages. You don’t need to fill out 20 applications to get starts. The FAFSA application is free and gets you started.

What Is the FAFSA and How Does It Work?

FAFSA stands for Free Application for Federal Student Aid. It is a financial application that evaluates the student’s household for eligible financial aid programs such as grants, work-study, student loans and individual college scholarships. The filing calendar starts in October with deadlines in June; earlier applications often get more funds. Even if you haven’t planned ahead with financial options, you can do your child the biggest favor by marking your calendar right now with the FAFSA deadlines. This could be the most significant difference between going to the college of his dreams and coming out with no or well, there is always mortgaging the house.

Can I Use an IRA to Pay for College?

You can use IRA funds to pay for your own or your child’s college tuition. If you are not yet 59 ½ years of age, you can avoid the 10% early withdrawal penalty as long as the distribution does not exceed the higher education expenses. This is an eligible early withdrawal exception for IRAs. You can also use cash value or a loan from a permanent life insurance policy such as whole life or universal life. This is the entire premise of the “Gerber Life Plan” that has been around for decades. Loaning yourself the money or using cash proceeds may affect the life insurance death benefit but does allow you to fund something that the life insurance was probably set in place, at least partially, for to begin with. Learn more about college planning with life insurance here.

Are There Good Paying Jobs Without College Degrees?

There are many good paying jobs that don’t require a two-year or four-year university degree. Trade schools offer many great programs for little money while many small business opportunities rely on grit and grind. You don’t need a university degree to get a good paying job. With that said, as a mom, I’m still encouraging my son to go to school. A year ago, he wanted to live in a yurt in some Indonesian rainforest. Long gone are the Autobot days but time does march on as he completes his junior year of high school and works on a STEM project run by university professors. There are a lot of reasons life can get in the way of planning properly. Do what you can when you can. Things have a way of figuring themselves out. If you are looking for some ideas, check out our resources here.

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Comments (7)

  • Glorious Heights Reply

    Waoo this was very informative, usually as students we tend to get stuck in student loans even before we become something.. Let’s hope we are able to get scholarships

    January 12, 2019 at 9:41 pm
    • admin Reply

      I think my son is afraid to tell me where he wants to go because he knows how much it costs.
      Glad you enjoyed the article.

      January 12, 2019 at 9:51 pm
  • Melissa Reply

    I didn’t realize some of the fast food places offer college programs! That is awesome! I knew about FAFSA and scholarships but didn’t know about some of the other things you mentioned. Thanks!

    January 13, 2019 at 4:25 am
    • admin Reply

      They’ve adapted over the years to make it more attractive for kids to want to stay working there as a stepping stone. The little things we don’t realize big corporations do – sometimes can make us smile 🙂

      January 13, 2019 at 6:16 pm
  • lynee Reply

    Love the focus on starting when they are kids. I fear the day my kids go to school as the costs are headed towards a downpayment on house. Interesting to know different jobs are aiming at helping their employees. Smart business move and so helpful.

    January 13, 2019 at 9:57 pm
  • Darja Reply

    Coming from Europe, I find it insane how expensive college education in the US is. I keep reading in the news how many young people are defaulting on their student loans and how that leaves a long-lasting impact on their lives. It really shouldn’t be like that. Education should be affordable and available to anyone interested.
    I completely agree with you that a huge chunk (if not the vast majority) of people don’t end up working in the field of their studies, but maybe it’s because college provides foundations and some general knowledge that helps grow and succeed globally. 🙂 This is at least my experience.
    Awesome article! Good food for thought and ideas for college financing. I’m sure there are a lot of people who will find this very insightful and useful.

    January 14, 2019 at 5:33 am
  • Single Mom Grants - Single Mommy Tribe Reply

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