4 Things to Know Before Paying for College

The tuition cost for one year of college can range from $20,000 to $65,000, which can make parents worry about their own futures, but there are ways to pay for your child's college without draining your retirement funds.

The tuition cost for one year of college can range from $20,000 to $65,000, says John McDonough, a money expert who helps retirees and parents plan for their families’ futures.

“For the 2012-2013 academic year, the average cost for an in-state public college is $22,261. A moderate budget for a private college averaged $43,289,” says McDonough, CEO of Studemont Group College Funding Solutions. “But for elite schools, we’re talking about three times the cost of your local state school. Either way, your kid’s higher education can easily shoot into six figures after four years.”

Along with worrying about rising tuition prices, parents also fear for their own futures if their retirement savings are drained by children’s college costs, McDonough says. Only 14%, for example, are very confident they’ll have the money to live comfortably in retirement, he says, citing a 2012 survey by the Employee Benefit Research Institute.

“Families feel they’re faced with conflicting goals, but there are numerous ways to pay for college while investing in your future retirement,” says McDonough.

The ROI of a college education

At a time when so many American families are financially strapped, college is an especially stressful topic because parents know higher learning will help their kids succeed. College graduates earn 84% more than those with only a high school diploma, according to Georgetown’s Center on Education and the Workforce.

Here is how earning breaks down over one’s lifetime, based on education:

• $3.3 million for those with a doctoral degree

• $2.3 million for college graduates

• $1.3 million for those with only a high school diploma

Move retirement assets to qualify for grants

Most parents know about the 529 savings account, but that’s not necessarily the best or only option. Reallocating your retirement assets, such as 401(k)s, can better position a child to qualify for grants and scholarships. This legal and ethical maneuvering may be the single most important factor when considering how to pay for college.

Know your student’s strengths and weaknesses

Consider independent and objective analysis of your future college student. Assessment might include a personality profile and a detailed search for a future career. Also think about a more nuts-and-bolts approach, including scholarship eligibility, SAT and ACT prep courses, review of admissions essays and an in-depth analysis of chances for enrollment in a student’s top four choices of colleges.

Make a checklist of financial aid forms

In order to maximize a fair price of higher education, remember there is plenty of data to review. McDonough recommends a checklist with a timeline and notable deadlines.

Be ready to troubleshoot the “alphabet soup” of data forms: FAFSA (Free Application For Federal Student Aid); CSS profile (College Scholarship Service); SAR (Student Aid Report); and more. Think about this process as a second job, or find professional help you can trust.