Paying for College [Video]

Transcript:

Congratulations. If you're like a lot of families with college-bound seniors you've now determined where your kid's gonna be going to school in the fall. And that's gotta be a huge weight lifted off their mind, however, you may still have in the pit of your stomach "How am I gonna pay for college?". When I think about paying for college I really think about three main buckets of resources. The first bucket is gonna be the parent's resources. These are gonna be like 529 accounts, Roth accounts, things that you set up for the kids when they were young and you've been contributing through many years to pay for college. And maybe you have enough money set aside at this point and that's great. For those who don't, just continue to contribute but now contribute maybe to books and tuition and what-have-you. And that's resource number one. Resource number two is gonna be the student's resources, and that could be accounts that you set up for them, maybe they've been working and they've been putting money aside and putting money into these accounts. Maybe family members have also been contributing, birthdays and holidays and things like that, and you've put money in these accounts, these are usually custodial accounts like UTMA or UGMA accounts, custodial checking accounts, things like that. Also if they've been working they can continue to work, right? Obviously either through work study at the university, or when they can take a part-time job at a restaurant or something like that or in the summers they could work even full-time. So great opportunities for them to contribute towards college too as well. The last resource that I would say is probably the one that we wanna stay away from the most, and that's gonna be student loans. I think people kind of look here first typically 'cause it's the easiest one, right? Just take out as much loans as we can and pay for college. However, it has the effect of burdening the student with a lot of debt when they get out, right? In fact, as a rule of thumb, you don't wanna take anymore debt than the child will be making when they emerge from school in their first year. So let's say their first job they make $70,000 a year, you don't wanna take anymore than $70,000 worth of debt because that just means that they're gonna be paying that off for a very, very long time. Anything below that hopefully that can knock that debt off in 10 years, which is still a considerable amount of time when you think about it. So we wanna try and keep that down as much as possible. There's other resources like grandparents and other family members that might be willing to help, that'd be great, and you just wanna kinda pull that into the mix if they do exist. If you really haven't planned for college, you haven't put any money aside, and you have this large bill coming up, I would urge people against taking on a lot of debt like we talked about for the student, or raiding your retirement. Again, we want that student to get out and be in a good position when they get out. Either for yourself or for the student, they're not gonna be in a great position if you end up raiding your retirement or taking on a lot of debt. So what are your options? I think the junior college system is a great option to delay going to college for a couple years, allow the student to build up some resources there, maybe you would be able to build up some more resources too as well and it's fairly economical. So hopefully this is helpful and yeah, congratulations again. Take care.