A new study shows that even wealthy parents also struggle with their children’s tuition fees in the United States, not just low and middle income parents.
According to a study by the Institute for Higher Education Policy (IHEP), even parents that earn more than $100,000 annually cannot afford about 60 percent of colleges in the United States.
According to data from the College Board, the average college fees for this past academic year is:
* Public Colleges within the same state: $9,650
* Public Colleges outside your state: $24,930
* Private Colleges: $33,480
This doesn’t include other college expenses, such as accommodations, an often necessary part of college. The average accommodation expense for public colleges is $10,440, and $11,890 for private ones, the College Board data says.
IHEP’s current definition for college affordability, is the ability to afford college tuition after saving up 10 percent of one’s income for the 10 years that precede their child/children’s college attendance, in addition to the student’s income for a 10-hour per week job. It is worth noting that parents are also advised to save up 10 percent of their earnings for retirement.
This study shows that even those who manage all these requirements still fall short in terms of affording most US colleges.
Other than the obvious and ongoing political endeavor to get colleges to reduce their tuition fees, increase their scholarship opportunities or even the political attempts to try and make a higher education a free right for all US citizens, there are still things parents can do in order to save up in a smarter way.
Other than just saving 10 percent of one’s income, it is also important where you put this cash. One option is the 529 plan, also known as the “qualified tuition plan.” Putting your savings for college in a 529 plan makes it safe from income taxes. The plans vary depending on the state. You can also choose any state in the US, not necessarily the one you live in. According to Fidelity Investment reports, 40 percent of families now use 529 plans for college savings, a fairly high number in comparison to previous years.
Parents sometimes choose to put their college funds in saving accounts, which have proven to be pretty inefficient. These days, most US banks barely offer a 1 percent annual interest on their savings accounts.