How To Know What To Spend on College

It’s a simple plan: Invest money in a college education now, and your child increases his or her earning power over their lifetime.

After all, those with college degrees still earn a lot more than those without four-year degrees.

Still, as the cost of obtaining that college degree gets increasingly higher, more and more families are looking at the cost of that degree in much different ways.

In today’s report, we’ll go over some pointers on how to make the best decision possible surrounding your child’s college education.

– Scott

How To Know What To Spend on College

Everyone wants the best education for the lowest price.

That’s because it’s tough to weigh the financial return of a college education – which may not occur until years after your student has graduated – against a hefty tuition bill that’s going to arrive right now.

But here’s something to keep in mind, as reported by The Wall Street Journal.

When a family opts for a less expensive school (which often times offers a different level of education), after they’ve qualified for a more selective (and almost always more expensive) school, a startling statistic is revealed:

The student stands 20% less chance of graduating.

The reasons for that vary. One is that the student may be less motivated, less challenged and less likely to apply themselves to their course work.

But how much is too much to spend? And what about loans?

The prevailing wisdom on how much student loan debt your future graduate should take on is that the final balance should never exceed the student’s expected income in their first decade out of school.

For example, if a student’s expected annual income for those first ten years is $60,000, then they should be carrying less than $60k when they graduate.

Here’s the math on that… if a student spends those ten years applying 10% of their gross income to loans, it could seriously inhibit their ability to save for and purchase other things like a car or home.

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What’s more – if taxes wipe out 25% of that gross income while you’re rightfully attempting to save 15% of it for those future needs, that leaves 60% for everything else.

Take away that other 10% for student loans and now they’re left with less than half their income for those living expenses.

And of course, this is yet another reason why it’s so important to try to rustle up as much “free” money for college as possible… money your student won’t have to pay back.

Scholarships, private grants and federal financial aid all fall into this category. Learning how to go after scholarships correctly as well as get the most financial aid possible are things College Made Simple can help you with (a great place to start is right here.)

In the end, when deciding how much to pay for college, the answer is one that’s wholly specific to your situation. But keep in mind these key questions…

  • How much debt can you realistically expect your child to take on upon graduation?
  • How much of an impact can a higher-priced school’s education have on that student’s future as opposed to what’s offered at a lower-priced school?
  • And how much can you afford to pay without forcing your student to negatively impact their studies by chipping in too?

If you can determine the answers to these questions, you’ll be on a much clearer path to figuring out what your tuition bottom line truly is.

To Your Family’s Successful College Search,

Scott Weingold

Co-Founder, College Planning Network, LLC
College Made Simple – The Free Educational Resource of the College Planning Network, LLC

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Editor's Note: Scott Weingold has been ranked the #1 “College Financial Aid Expert Worth Knowing About” in the entire country by CollegeStats.org.  He has co-authored the book, “The Real Secret To Paying For College. The Insider’s Guide To Sending Your Child To College – Without Spending Your Life’s Savings.” Scott also publishes a popular free online newsletter, “College Funding Made Simple" which reveals insider’s tips, methods, and strategies for beating the high cost of college.

Scott is the co-founder and a principal of the widely renown College Planning Network, LLC – the nation’s largest and most reputable college admissions and financial aid planning firm. CPN is a proud member of the Better Business Bureau, the National Association of College Funding Advisors, the National Association for College Admission Counseling, the National Association of Student Financial Aid Administrators and the Student Affairs Administrators in Higher Education.

Scott, along with his college funding advisory team, helps thousands of families throughout the country with their college planning needs and offers a series of free educational webinars and workshops on “How To Pay For College Without Going Broke In The Process!” He's been featured or mentioned in The Philadelphia Inquirer, Yahoo News, TheStreet.com, Voice America with Ron Adams, Crains Cleveland Business, and on Cleveland Connection with James McIntyre.  Scott has published numerous articles and is a professional speaker who has addressed thousands of audiences online and offline throughout the United States.  His actionable insights and candid, open approach have earned him & his team numerous media interviews, citations, and speaking opportunities, and his free online video workshop is one of the Internet’s most widely viewed pieces in the college funding space.