A college planning tool is very helpful in understanding how much you can afford. With college tuition still marching higher, despite a global pandemic and a great suppression, using a college planning tool is important.
Empower (previously Personal Capital), my favorite free financial tool, announced new features to their free financial planning tools. These changes were based in part on user suggestions to help all of us better understand our total financial picture.
Their most helpful new feature for parents is their College Planning Tool. College tuition is expected to keep on skyrocketing every year for decades.
Scenario Analysis tools take the guesswork out of financial decisions by allowing you to create multiple income or spending scenarios. You can immediately see the impact of hypothetical income events like inheritance, the sale of a home, or going back to work after retirement.
Similarly, you can input expenses like travel, a child’s wedding, home renovation, or making a charitable donation. Best of all, you can save different scenarios and compare the impact of different decisions on your overall portfolio.
College tuition is now prohibitively expensive if your child doesn't get any grants or scholarships. Therefore, it's important to save and plan for your child's future.
College Planning Tool
To use the college planning tool, see below. Go to PLANNING -> RETIREMENT PLANNING on the dashboard.
Once you're done inputting your planned saving and timeline, Empower with run thousands of algorithms to suggest what's the best financial path for you. You can then compare two financial scenarios (old one vs. new one) to get a clearer picture. Just link up your accounts.
Public Or Private School?
I believe for the vast majority of middle class citizens, going to a public university is the optimal choice for the following reasons:
Benefits Of Going To A Public School
* High Rankings: Schools such as UC Berkeley, UCLA, UCSD, Wisconsin, Michigan, UVA, William & Mary, and UNC Chapel Hill are regularly ranked amongst the top universities in the nation. There is no dearth of high ranking public schools who produce Nobel laureates and Rhodes Scholars. If you don’t go to a highly ranked public school, rest assured that your public state school provides a similar quality level of education.
* More Economical: If we simply compare tuition costs, private school tuition is regularly 4X more than public school tuition ($40,000 vs. $10,000). After factoring in need based scholarships, the difference is still at least 2X. But if your family falls in the amorphous middle class income level of $60,000 – $120,000 a year, it’s unlikely your family will get need based help. The average student loan debt is roughly $29,400 according to the annual Project on Student Debt / TICAS report study.
* Larger Alumni Base: Public schools are generally much larger than private schools. As a result, you’ve got a much larger alumni base to work with who might help get you employed.
* More Grounded. No matter how hard a private school tries to diversify its students’ economic backgrounds, they will never succeed. They will never reflect the economic reality of the country’s population. I attended private schools for over a decade when I was overseas, and public schools for 11 years in the US and there is a big difference.
* Less Stress. If your parents pay $170,000 in tuition alone for your private education you’re going to be mighty stressed to be somebody successful by the time you graduate. You’ll feel similar amounts of stress if you have to take out student loans. If you go to public school that costs $40,000 in tuition over four years, you can afford to breathe easier if you don’t find that money job after graduation.
Related: The Journey To Making Our Kids 529 Millionaires
Benefits Of Going To Private School
* Prestige. If prestige is your thing, private schools in America carry more prestige. The reverse is true overseas at the university level curiously enough. Just remember that prestige must be followed by a prestigious occupation, otherwise, what’s the point other than to waste money?
* Facilities. Oh, how I envied some private school athletic and academic facilities! Some schools feel like you’re walking around a private country club. With a world class golf course, a indoor Olympic pool, magnificent library, and the best computers and electronic equipment money can buy, it's tough to beat. Public school bathrooms and dorms can be less than Ritz Carlton like.
* Connections. The rich have gotten much richer than the rest of us over the past several decades. Attending private school puts you in contact with a much wealthier pool of students. These students likely have better connections to get you what you want. Your academics can only get you so far in this incestuous world. (Read: How The Rich And Powerful Become More Rich And Powerful)
* Target Schools. Many of the top employers in the world will specifically target a handful of schools for recruiting purposes. Many of these schools are private schools. Therefore it is even that much more important that if you do spend the big bucks attending a private school, that your school be on the recruiting list of employers you’d like to join.
Obviously if you are smart enough to get a scholarship from a private school, then attending a private school is also a great choice. Just know that not all private and public universities are created equal. And of course if your family is rich, then feel free to do whatever you want!
You Can Always Go To Private School Later
Hopefully nobody is foolish enough to want to go to private school just because it’s a private school. It’s important to do a cost benefit analysis on the university based on reputation, lifestyle, academics, sports, learning, alumni network, arts, music, and the ability to get a job upon graduation.
Also know the many different ways to pay for college. It will help you plan for the likely huge expense when it's time for your kids to leave the nest.
I seriously cannot believe that after 24 years, William & Mary still only charges $17,300 a year for tuition and fees. As an alumni, investor, and personal finance buff, there’s no way I would spend $45,000 a year for ANY private university over William & Mary. My kid would have to get at least a $25,000 a year scholarship from a top 10 school for me to even consider.
For folks considering blitzing their parent’s retirement savings or going into major debt by going to a private university, know that you might feel like a total failure if you graduate with a job that doesn’t match the cost and reputation of your university. You might even join protestors who rail against the government and your private university for not doing enough even though you consciously decided to attend!
Education is becoming commoditized with free online courses from MIT and other leading universities for example. You can even read blogs like this one to learn about personal finance for free.
If you have your heart set on private university, I suggest going to public university first to see how things go. If you’re financially responsible and still have an itch to go to private school, then go ahead and spend a ton of your own money on graduate school.
Related: Public University Or Private University? Depends On Your Guilt And Fear
Use The College Planning Tool For Free
There's no rewind button in life. Therefore, it's best to plan for your financial future as meticulously as possible. It's better to end up with a little too much, than too little!
I've been Empower's free tools since 2012 to analyze my investments and I've seen my net worth skyrocket since. Take advantage of the internet, technology, and free tools to help you live a financially free life. Paying for college is no joke.
And frankly, with everything now available online for free, paying record high tuition is not wise. Be smart about college!
About the Author:
Sam began investing his own money ever since he opened an online brokerage account in 1995. Sam loved investing so much that he decided to make a career out of investing. He spent the next 13 years after college working at two of the leading financial service firms in the world.
During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $200,000 a year in passive income. He spends time playing tennis, hanging out with family, consulting for leading fintech companies.
FinancialSamurai.com was started in 2009. It is one of the most trusted personal finance sites today with over 1.5 million organic pageviews a month. Financial Samurai has been featured in top publications such as the LA Times, Bloomberg and The Wall Street Journal.