Jean Chatzky – financial literacy advocate, author, and CEO of HerMoney – sat down with Saving For College recently to discuss the challenges parents face in saving and paying for college.
We covered a range of topics parents face when they’re making decisions to help get their kids to college: what college really costs, how you can reduce your costs, how much to save, how to stay on track, and how to approach student loans.
Watch the video to see our full conversation, including Jean’s personal story of saving for college for her two children.
Here are some of the key takeaways from our conversation.
“The price of college is not as transparent as the price of cars”
- Don’t fixate on the sticker price. Most people access some form of financial aid, so do your research and understand what college is likely to cost you.
- Cast a wide net when applying to colleges. Shopping around can help you find colleges that offer more merit aid for your student.
- AP classes, dual enrollment programs and starting at a community college can all be strategies to lower your total cost of college.
- Talk to your child early about your college costs, what you’re saving and what you can realistically afford.
The College Savings Calculator can help you estimate your future costs and potential scholarships and grants.
How to balance saving for college with other priorities
- Save for retirement and max out 401k opportunities – “there is no financial aid for retirement” – but if you can set aside money for college too.
- You don’t have to save for everything, Jean says.“Aim to save a third. Pay a third out of cash flow. The other third can come from grants and loans.”
- Let others help: Grandparents, friends, and family often want to give meaningful gifts for birthdays and holidays – tell them you’ve opened a 529 plan.
How can parents keep their savings on track over time?
- Increase your college savings contributions as your income grows or you receive bonuses.
- Check in on your 529 accounts regularly to see how your balances align with your goals.
- Take advantage of the age-based or enrollment-year portfolios offered by 529 plans. These will help you earn more in the early years, and shift you to less volatile investments in later years, so you can protect what you’ve saved.
Some 529 plans allow you to automatically increase your future contributions. If your plan offers this feature, take advantage of it to help maximize your savings over time.
How should families approach borrowing for college?
- “Student loans are a fact of life,” Jean acknowledges. But try to borrow as little as possible. Use federal student loans before looking at private loans.
- Make sure your child understands what their monthly payments will look like after graduation, and how those payments might affect their budget and lifestyle.
- Do the math on Parent PLUS loans. Jean states: “If you’re thinking about Parent PLUS vs private loans, look at the numbers. Often, with the fees, PLUS loans are not the better deal.”
Jean Chatzky is the founder and CEO of HerMoney, as well as the coaching programs FinanceFixx and InvestingFixx. She’s the host of the podcast “HerMoney With Jean Chatzky” and appears on the PBS TV show Opportunity Knock$. Jean is a columnist for AARP, and an education fellow for The Alliance for Lifetime Income. She was also the Financial Editor on NBC’s Today Show for 25 years. Jean is an award-winning journalist and broadcaster, a New York Times and Wall Street Journal best-selling author, and a fierce advocate for financial literacy. Her latest books include Money Rules, Women with Money, and How To Money. Find her at HerMoney.com or @JeanChatzky everywhere.
