Community College Funding: How to Leverage your Wealth to Fund your Children’s Future
It’s no secret, Higher education is expensive. In 2021, the average cost of one year of college stood at $26,373, down almost $5,000 from the previous year due to COVID's impact on campus housing. But even with the reduced room and board expenses, that’s still very pricey.
A family putting three children through college could spend more than a quarter of a million dollars on tuition and fees alone at an average institution. Scholarships, grants, 529 plans, and work-study programs can help reduce a family's financial burden. Still, in most cases, parents end up footing more than half the tuition bill.
If you plan for your child to attend college — and most parents do — you need to consider how you will help cover the cost. One simple, but highly effective way to reduce college expenses involves your local community college.
The Community College Strategy
Community colleges offer an inexpensive way to earn up to half your college credits before transferring to a four-year institution — if you do it right. Once you transfer and later graduate from the four-year university, a transfer student's diploma and degree is no different than any other non-transfer student. Future employers will be none the wiser. In addition to cost savings, community colleges typically offer an intimate and supportive atmosphere that can help nurture students through the challenges of the first two years of higher education.
Community College in High School
Many students can take college courses while in high school. Called dual-credit classes, these courses count for both high school and college credits.
Third and fourth year students in most public, charter, private, or homeschool settings can qualify for dual credit enrollment at their local community college. In fact, public school students typically do not have to pay any tuition to enroll in these courses since they are part of the high school curriculum. IVC link?
In some cases, A dedicated high schooler can earn up to 60 credits through dual enrollment.
Community College After High School
For high school graduates, community colleges offer both applied studies and university transfer courses close to home. Students can live with their parents while enrolled in school. Community colleges may offer courses online or in several locations, also making them easy to access.
Most community colleges operate on an open admission policy that admits all applicants but places students in the best courses for their level of preparation. If a student may need extra support in math or reading, community colleges typically lend a helping hand. They also can be a great option for the student who wanted the four year university experience, but didn’t quite have the grades in high school to get in.
Transferring From Community College to a 4-Year School
Is it easy to transfer your credits from community college to a university or liberal arts institution? Yes, provided you keep the following points in mind:
Prioritize community colleges that have articulation agreements with the school you ultimately want to attend.
Maintain or exceed the minimum GPA required for transfer.
Earn at least the minimum grade required for transfer in each course.
Check the number of credits offered for the course, and make sure the community college and the university offer the same number of credits for that class. In some cases the university may not accept those credits.
This might seem tricky at first, but community colleges have staff on hand to help your student identify and take the right set of courses.
How Much Can You Save by Attending Community College?
But can attending a community college really save you money?
It can indeed. Two years of community college can save $10,000 to $15,000 a year for students bound for public colleges school and $30,000+ for those headed to a private institution. That has the potential to reduce the total four-year cost of college by $20,000 - $60,000. In California, these numbers are even higher if your student lives at home while attending community college. In some states, community college students can save even more. Arkansas, California, Hawaii, Indiana, Tennessee, Nevada and several other states offer free community college tuition to qualifying learners (often available for families with financial need).
Degree-seekers attending two-year institutions can qualify for federal financial aid, including Pell grants, student loans, work study initiatives, and military/veteran's benefits. Private scholarships can also help pay for tuition at a two-year institution.
Community college funding comes primarily from state and local government sources. Unlike many tuition-driven private schools, community colleges do not depend on student payments to meet their budgets. Consequently, prices stay low and quality remains high.
Why Not Student Loans?
Why not just take out student loans and pay for your child to attend all four years at the institution of their choice?
Currently, 43 million Americans hold student loan debt. That's one out of every eight people who owe money for their education. The average debt for a bachelor's degree stands at $28,950. While people aged 25-35 hold most of this debt, nearly $600 billion is held by people over 35.
In all cases, borrowing money should be considered carefully. Proverbs 22:7 says, "The rich rule over the poor, and the borrower becomes the slave to the lender." After all, money borrowed today must be repaid tomorrow.
Although federally backed student loans such as the Direct Subsidized option may come with temptingly low interest rates, you are still borrowing money. Even the Parent-Plus loan may seem tempting, but these often come with a higher interest rate and fees (with current interest rates of 6.28% and a 4.228% fee for the 2021-2022 school year borrowers). Often, borrowers don't realize the total cost of the loan and how much money the loan will cost them over the years. Private loans can run many percentage points higher than federally backed loans and cost even more money.
Many recent graduates do not earn enough to pay back their loans, often causing delinquency and forfeiture — serious financial setbacks for young adults who are just getting started.
Using an IRA or 410k to Fund Your Child's Education
At Cooke Wealth Management, our wealth advisors do not generally recommend using your retirement funds to pay for your child's college education.
Degree-seekers have options to help cover the costs of their education. But there are no scholarships for retirement. — scholarships, grants, 529 plans, work study, savings, and attending a low-cost community college for two years. Retirees often have only their social security and retirement savings to draw from.
Robbing your retirement fund for college is never ideal.
Besides the financial concerns, we are seeing more and more parents expecting their children to have some skin in the game when it comes to paying for college. Students who choose less expensive options, work, save, and help cover their own tuition can feel a stronger sense of adulthood, independence, and financial security than their peers.
Conclusion
For most young people, college is still the ticket to a flourishing career and financial security. Paying for college can be challenging, but it's not impossible. Thinking strategically and choosing low-cost options such as community college for the first two years can help mitigate education expenses.