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Financial
Feb 9, 2018

Three Questions to Help You Invest Wisely in a College Education

Sponsored Content provided by Brett Tushingham - CFP®, CCFS®, Managing Member & CCO, Tushingham Wealth Strategies

The cost of a college education keeps going up, with the average price now at over $44,000 a year for private school. 

This pales in comparison to some schools closer to home, such as Duke University, which now has an annual price tag over $75,000.       

Before making any investment, you should always evaluate the costs and risks it involves. College is no different. Answering the following three questions will help you evaluate your education investment and determine the potential return.


What Is The initial Cost?

Like any investment, the price you pay will impact your future return. In terms of your education investment, this is where college selection comes into play and why it should be one of the most important pieces of your college planning strategy.   

To figure out what you can expect to pay, first begin researching schools to determine where you will be a good fit and how your academic profile compares with those of current students. The College Navigator site is a great resource to use in assessing this.

We like to find schools for students where they will be in the top 20 percent academically when compared to the incoming freshman class.  The more desirable you are to the school, the more likely it is that you will be accepted and receive merit-based financial aid in the form of grants and scholarships. Don’t exclude community colleges in your search, as they can offer a good education at a fraction of the cost of private schools.

Once you receive your award letters from the schools, you will be able to determine your net price. This is the difference between the school’s sticker price minus any grants or scholarships. Student loans should not be subtracted, and any student loan interest should be added to your sticker price. At this point, you will be able to determine your initial investment cost.


What Are The Risks?

Every investment has risk, and a college education is no different. One of the greatest risks is that you extend your stay beyond four years or not graduate at all. Currently, only 55 percent of students complete a degree within six years.

To address these risks, you may benefit from working with a college admissions professional who can help you determine where you might fit in best, select a major you will stick with and increase your odds of graduating on time. As part of our planning process we provide career assessments to help match students with a major and potential career.      


What Is The Potential Return?

Not all gains can be measured in dollars, but for now let’s focus on the financial aspect of the return on your investment in your education. Research shows that people who go to college earn substantially more over their lifetimes than nongraduates. Decades of higher earning power can make a college degree an excellent investment that pays you back exponentially.

When selecting your potential school and area of study, estimate what you can expect to earn after graduation. PayScale offers salary projections for specific majors and offers a return-on-investment calculation based on future income and college costs. Of course, such calculations won’t be exact, but thinking realistically about what you can expect to earn later in life can help you make decisions about how much you can afford to invest in your education today.


Be Proactive

The last thing on my mind when selecting a college was the return on my investment. I remember opening the Barron’s college ranking book and choosing a few recognized schools in the area that offered business degrees. Then, I subsidized what I couldn’t pay with student loans. 

But knowing what I know now, it’s clear that this lack of planning cost me thousands of dollars in missed financial aid opportunities and excessive student loan debt.

Don’t make the same mistake - be proactive! Start by saving early in 529 plans, choosing your college wisely and exploring financial and tax aid opportunities. Figure out ahead of time how your degree will impact your future earning potential.

With a sound planning strategy, your college education can be the best investment you ever make.
 
At Tushingham Wealth Strategies, our goal is to help you proactively oversee all of your financial affairs by serving as your “Personal CFO” and fiduciary, so that you may live your ideal life worry free. As part of our "Personal CFO" service we help families develop "late stage" college planning strategies so that they can save money on college, protect their retirement assets and help their children graduate with minimal student loans. This is why our “Personal CFO” services will help you integrate college and retirement planning into one strategy.


 

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