As the father of a 5-year-old, I worry about the cost of college and I'm sure many parents of young children do. Prices at my alma mater, the University of Richmond, have risen close to 200% since I graduated in 1997. Has the quality of education also improved by that much? It's doubtful. While amongst friends, we laugh uncomfortably at the thought of million dollar tuitions, but one wonders if there has to be a breaking point where people just turn their backs on higher education. At what point is it unaffordable?
Last year, Malia Obama made headlines when the White House announced that she would take a gap year between high school and college. The hiatus from classrooms, textbooks and tests has been a common occurence in other countries like Australia, UK and Israel; and it has become an increasingly popular choice in the US. I didn't take a gap year but I studied in the UK during my junior year of college and backpacked across Europe with friends. Traveling certainly expanded my worldview and I would encourage my own daughter to consider a gap year. In today's global economy, it can only help to have more experience with other cultures and a perspective that expands well past any borders. The concept is that college bound students go on an adventure, do something meaningful and arrive as a freshman a year later more mature and focused. This can be a year of travel, community service, interning, language immersion or working -- or a combination of any of those.
My weekends are packed with activities to entertain my 2-year-old daughter Chloe. Virtually all my friends have children, from newborns to kindergarten age. We all reminisce about the days when college was a third of the cost and wonder how the heck we will pay for our kids to go to college. With 50 colleges charging over $60,000 a year, where will prices be in another 10-15 years?!?!? My dad always thinks outside the box and he thought I should train to become a football placekicker so I could earn a scholarship. While definitely a cool idea, it never progressed past a Nerf football being kicked about 15 yards in the backyard.
Are you a grandparent thinking of helping out a grandchild fund their college expenses? Be aware of 529 plan structures to ensure that your gift doesn’t turn into a bomb that destroys your grandchild’s financial aid.
According to a recent Fidelity Investments survey, 65% of parents saving for college expect grandparents to contribute. In recent years, a growing number of grandparents have set up 529 college savings plans but before writing a check, grandparents must be aware of the potential pitfalls.
As a new father, I marvel at all the new things my one year old daughter Chloe does. But like all new parents, I joke and mostly fear that the cost of education will be in the millions by the time she graduates high school. While I pray that education inflation slows from its ridiculous pace of 7%+ per annum, I know that I need to prepare for the worst which means saving as much money as possible sooner rather than later.
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