College Finance: Investing in Education
Paying for School Without Selling an Organ
It's not just Tiger Moms who worry about college.
Today, planning for college when you're ten isn't some freaky high-achieving thing. Not only is getting into a college whose name you actually want to hang in your office tougher than ever, but finding the money to pay for it seems near impossible.
The problem is especially bad post-2008 financial crisis. Let's take a look at, say, Wake Forest University's endowment (i.e. the total assets colleges use to cover student fees, buildings, and operating costs). It was 1.254 billion in 2008, and the next year, it dropped to .887 billion, which meant less money for students (das you). While some universities have recovered from the financial crisis, it took a schlep of about five years for the numbers to come close to what they were in 2008. It ain't easy to climb back up, and you never know when another crisis might hit.
Time's a wasting.
Investing is one way you can get the money you need to get a college education. Let's say you started when you were ten, and you or your parents put $2,000 a year into an investment account—something like S&P 500 index funds. You could compound that investment at 8% a year, and you'd have a nice chunk of change by the time you grabbed your high school diploma.
Another option is to have your parents invest in a 529 Savings Plan. This type of savings plan is designed especially for college costs and helps your parents defer taxes on their investment until you're actually a freshman. If your family started early, you might have enough to pay for tuition and maybe some extras.
Other Ways to Pay
Maybe you didn't start saving at age 10. (Most people don't.) Maybe your parents were too busy raising you or working 60-hour weeks or just didn't know about investments because they hadn't read Shmoop.
How can you pay for tuition, food, and the new jacket you need for winter? You have a few options.
Your school's career counseling office has a bunch of 'em. As long as you're not looking for glamour, you can work on campus for a few extra bucks. There's also the Federal Work-Study Program. If you qualify for the program (it's based on need), you are guaranteed at least minimum wage and a job to help you pay for college.
Depending on your family's financial status, you could qualify for financial aid. Bursaries are need-based and you don't have to apply to get them; the school will work out what you qualify for. You also don't have to repay them, so they're basically free money.
There are scholarships for just about anything (including your sandwich-making skills), but you do need to apply for them. As soon as you find out you want to go to college, start applying for every scholarship you qualify for—even if just a little bit. You never know. Your PB&J classic sandwich could let you pay for a semester.
Nobody wants student loans, but they're a necessary evil if you don't have cash and don't want to sell a kidney. When looking at student loans, go after the government-backed ones first. These loans have the lowest interest rates and the best terms.
Take out the smallest loans you can, and try to make up the difference with work-study programs, scholarships, and savings. The bigger the debt, the bigger the headache when you have to pay it off.