Planning for college started early for Tori Purnell and her husband, John. They opened a mutual fund when their daughter, Nicolette, was not yet 2. But you know what they say about “best-laid plans.”
“We were anticipating we would have enough when she was old enough for college,” Purnell, who lives in Gig Harbor, recalls. “But we stopped contributing, then the market crashed, and we lost a lot of money.”
So when Nicolette started looking at colleges last year, they had about enough money to cover one year of school. Now what?
Paying for college has always been a major challenge for parents, but with costs rising and the economy wavering, it can be a daunting proposition these days.
Lyanne Asada, manager of the Center for Student Success in Seattle, says the economic downturn has been a definite factor in how families are making decisions about college. Her organization offers college planning services, with a focus on underserved groups and first-generation students.
“Families are making decisions on what college a student attends based on finances. It’s not necessarily ‘Is it a good fit?’ It comes down to ‘Can we afford it or not?’” she explains.
Asada says financial aid packages are also being affected by the bad economy. “The costs are increasing, but financial aid hasn’t been able to maintain the same pace.” That leads more students to forgo private schools and apply for less costly state schools.
Wendy Krakauer, head counselor at Seattle’s Roosevelt High School, agrees. “Kids will say, ‘I have to go to a public school in the state of Washington,’” she says, “or ‘I’m not going to apply to a private school. My parents can’t afford it.’”
In the past, Roosevelt seniors going directly to a four-year school have been fairly evenly divided between in-state and out-of-state schools. Last year, 136 seniors said they were staying in state, while 88 were headed out of state. “That’s the first time I’ve seen that difference,” Krakauer says.
Make a plan
Financial planner Debbie Gianelli recommends that parents start planning for college when they first learn they are going to have a baby. But what about those who are dealing with the aftermath of financial misfortune or have just plain procrastinated?
“It is never too late to have a plan,” says Gianelli. “The plan will be different, but any plan is better than no plan at all.”
Experts say there are options for parents who come up short. David Aramaki, a financial adviser for Ameriprise, says he has never seen a situation in which a student couldn’t go to college because that student’s parents couldn’t afford it. “Studies say that a family’s financial state is not a barrier to education, and it’s not,” Aramaki says. “There are ways. There’s hope out there.”
While the state of the economy may not prohibit students from attending college, Aramaki says he is seeing some effect on his clients. “They seem to be more conscious of how they spend money. They’re just spending less, and that money is going toward school.”
Explore all options
Counselors and financial planners urge parents to explore all options. Financial aid forms may look complicated, they say, but they are worth the time, no matter what your income level. Explore all available scholarships. Many companies and philanthropic organizations offer targeted scholarships for students from low-income families or those interested in specific fields of study.
Gianelli says a financial planner can help parents explore options such as refinancing a home, selling assets or tapping into a retirement account. But parents are cautioned against putting their retirement at risk to send a child to college.
“Our financial adviser told us, ‘Your child can get a loan for college; you can’t get a loan for retirement,’” Tori Purnell says.
For parents who want their children to share some of the costs of college, student loans may be a good option. A recent overhaul of the federal student loan program expanded Pell grants and made it easier for students to repay outstanding loans after graduating.
Seattle-area parent Tryna Peterson says she and her husband didn’t want to saddle their children with student loans, but their income level was too high to qualify for anything else. One private school in Oregon offered generous scholarships, but the cost for that school would still have been almost double the tuition for the University of Washington.
Some institutions in western states offer a way to make attending an out-of-state school more affordable. The Western Undergraduate Exchange (wiche.edu/wue) includes a network of schools that offer students an opportunity to pay resident or reduced tuition. Rules differ with each participating school; some exempt specific programs from the reduced tuition.
Some schools are also creating programs of study to allow students to finish in three years instead of four. Financial planner Gianelli designed her own three-year program to cut costs, which included going to summer school and taking a heavy course load. “It was challenging at times, but earning a college degree was very important to me,” she says.
Peterson also suggests going through the early application process, which can sometimes pay off in early acceptance and scholarships. But she urges parents to give their children much of the responsibility for their own college plans; to encourage kids to explore the costs and requirements of the schools that interest them.
“Then they should work to earn a spot there and figure out how to pay for it,” she says. “This is their life and their future, and Mommy and Daddy can’t and shouldn’t do it all for them.”
Elaine Bowers is a Seattle writer and mother.
Resources for parents looking for college funding
• Free Application for Federal Student Aid. All parents should complete this application, no matter what their financial circumstances.
• Nela Center for Student Success in Seattle. The goal of this organization is to improve access to higher education, particularly within underserved groups and for first-generation students.
• TheWashBoard.org. A new website run by a public/private partnership of nonprofits and the state’s Higher Education Coordinating Board (HECB) aims to match students with organizations offering scholarships. The service is free.
• The College Savings Plans Network is a comprehensive 529 plan guide.
• Whole Family Financial Services has a learning center with useful information about saving for college.
• The Western Interstate Commission for Higher Education offers students pursuing undergraduate, master’s or doctorate degrees, or degrees in the health professions the opportunity to pay resident or reduced tuition at participating institutions across the West.
• The Securities and Exchange Commission. For parents who start college planning early, the SEC provides a good description of how 529 college savings plans work and compares prepaid tuition plans with college savings programs.
• Guaranteed Education Tuition is the state of Washington’s 529 plan, which helps parents keep pace with increases in tuition costs.