Be prepared for sharp increases in tuition at colleges across the country starting next year and for the trend to last for years!
The cost of higher education is one of the most significant costs that families face. Without a plan, Out Of Pocket Savings (OOPS) can be reduced faster than for any other expenditure and have a devastating affect on long-term financial vitality or even viability.
College Tuition set to increase
The College Board, a non-profit association of educational institutions, released data showing tuition rising 5.9 % at Private colleges and 6.4 % at Public college.
And those numbers do NOT take into account the significant changes coming from the current economic downturn and credit crisis!!!
Causes of rising costs
A college is a business with several of its income streams taking a hit all at once Revenues are going down much faster than they can cut expenses. The result is rising prices, wich means raising ‘tuition’.
Income Sources:
- Tuition
- Government funds (state, federal, etc.)
- Private Funds -alumni, fund raising, charitable donations, etc.
- Endowments – investments (from previous gifts and other revenue)
- Loans – banks, private, bonds, etc.
The Credit Crisis and the Receding Economy have combined to dramatically, and rapidly, reduce all sources of income to colleges by directly affecting their own loans and earnings as well as by affecting their government funding and private gifts.
Tuition is going up to cover the gap from their other revenue sources.
Impact on Family Net Worth
Current trends in tuition costs and the underlying causes combine to put additional strain on individual families current and future Net Worth. Family Net Worth is the best long-term indicator of financial health.
Trends in outside sources of funds for college:
- Grants/Federal Aid – falling supply and rising demand
- Loans – dramatically falling supply and rising demand
- Aid from Colleges – falling supply and rising demand
The real potential impact on Family Net Worth is that more money will come from savings and earnings to pay for higher education as the other sources of funds become harder to get.
Fewer options for outside funds means using:
- Savings
- Retirement
- Home Equity
- Extended Family Assets
Using these sources almost always means Reduced Family Net Worth and that is directionally incorrect.
Mitigate the Costs – Act Now
The key is be able to get your SHARE of the financial aid that is available. Plan to succeed, plan to start early, plan to get the help you need, plan to protect your Family Net Worth.
Include these items in your plan:
- Expertise in the process of financial aid
- Evaluation of all sources of funding
- Reallocate assets to maximize financial aid
- Understand which assets get counted in college evaluations
- Forecast Family Net Worth before, during, and after college costs
The bottom line is that your ‘bottom line’ after college costs will be directly affected by how well you plan for the cost of higher education and how disciplined you are in following that plan.
Your Family Net Worth is your bottom line — PLAN to keep it healthy and growing during the college years!
