A College Savings Question of the Day

Technically, eight questions; the Wall Street Journal has a quiz titled “Eight Questions to Answer Before Picking a College,” and I’m curious how well Team Billfold will do—and whether we agree with the answers.

I got five out of the eight questions correct, but I’m not sure how I feel about the WSJ’s answers to two of the questions. I am going to spoil you here, so if you want to take the quiz first, TAKE THE QUIZ AND THEN COME BACK.

Ready? Okay. I want to talk about the maximum amount of money students should borrow for college, and the amount of money parents should save, per month, for their child’s education.

Both of these answers feel a little out of touch with reality. The maximum amount of money a student borrows for college is probably going to be “the cost of the college minus scholarships, grants, and saved income,” and sure, you can tweak that number a little, but a lot of it isn’t going to be up to you.

The WSJ wants you to only borrow as much as you’ll earn during your first year out of college, and that’s a very hard number for a student to know ahead of time. I certainly didn’t—and it didn’t help that I went to college in 2000, when people were still certain we’d all have great jobs after graduation, and came out in 2004, when the economy was starting to hint at the Great Recession to come.

Plus, as I’ve written before, the first year out of college is a crapshoot. You might get a great job, and you might end up telemarketing. Or you could follow Robert Langellier’s example and take a job completely unrelated to the career you want to pursue, just so you’re bringing in some cash.

So yeah. I don’t like the idea that high school seniors are somehow expected to know how much money they’ll earn their first year out of college, and then find a college that costs exactly that much after scholarships, grants, and saved income.

On the subject of saved income: I’ll just quote the WSJ’s advice to parents:

It’s best to assume you’ll use your savings to cover about one-third of the cost of college and income and loans to fund the rest, according to Mark Kantrowitz, a financial-aid expert. That means setting aside about $250 per month starting when a child is born to afford in-state tuition at a public college, roughly $500 per month for a private college, and $400 per month for an out-of-state public college, he says.

Let me recap this, because it is dismal:

1. Even if you try your hardest you’ll only be able to pay off one third of your child’s anticipated college costs.
2. Trying your hardest, in this case, means setting aside up to $500 per month, per child, starting at birth.

Even if you get your student loans paid off before the birth of your first child (not likely, for a lot of people), you’ll immediately begin making a new set of college payments for your children. And each child will still be responsible for two-thirds of the cost of college, either through summer jobs, scholarships, grants, or student loans.

Anyway. How well did you score on the quiz? And how do you feel about the WSJ’s answers?

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