TRAVERSE CITY — Veda, Tristan and Layla got a nice benefit package when they signed on to the Urban family — a college plan with parental matching funds.
They’ll appreciate it more when they’re out of diapers.
“We set it up after our first daughter was born, and listed every child as a beneficiary,” Terese Urban said of the family’s 529 Michigan Education Savings Plan account. “Any time they receive money for birthdays, Christmas and baptisms, we put it in there. Then we round up and match it with our own money. They’re actually doing pretty well right now.”
Veda is 3, Tristan is 2 and Layla is 5-months-old.
Parents of young children usually groan when college financial planner Vicki Beam sets up her booth at Traverse City’s preschool expos. But it’s never too early for parents to start thinking about college financial strategy — especially if they actually want to retire, Beam said.
“They hold their hands up and say ‘I can’t think about this right now,’” Beam said. But college tuition trajectory — Beam sends her hand skyward — and the complicated tangle of college financial procedure and policy, means there’s no time like the present.
The alternative is ugly. The gap between what families expect to pay and the actual bill can prompt panic and unnecessary loan debt.
“They’re overwhelmed. They’re confused. So they don’t end up doing anything,” said Matt Breimayer, Beam’s colleague at Michigan College Planning. Confused inaction with a blind faith in “financial aid” is the most common — and least effective — coping mechanism, he said.
This is sticker shock season, and often a time of last-minute scholarship scrambling.
Families of high school seniors are making a last dash for the Free Application for Federal Student Aid — the deadline is March 1 — and are getting the numbers back on their Expected Family Contribution. More than 35 scholarship applications recently opened up on the Grand Traverse Regional Community Foundation website, all with deadlines between now and March 10.
“This is the point where families realize ‘this is going to cost much more than what we’ve saved — now what can we do?’” Beam said.
Higher education is no longer a wistful place of self-discovery. Tuition and fees, have risen 7.6 percent annually since 1978, outpacing health care costs and home prices, said Mark J. Perry, University of Michigan Flint finance professor.
National averages rose to $18,000 for a two-year public college, $24,000 for four-year public college and $50,000 for 4 year private college by 2012. Those annual price tags put four-year totals into the $100,000 to $200,000 price range.
“School is way too expensive a place to ‘find yourself’ anymore,” said Breimayer.
Tuition rises tandem to federal and state allocation cuts to universities, have driven costs higher. Families turn to loans to make up the shortfall, and in 2012, student loan debt eclipsed credit card debt in the United States. President Barack Obama called for tuition caps at a podium in University of Michigan in Ann Arbor in 2012 in exchange for funding incentives.
But planning and financial forethought can put families in a good financial position, Beam said. The pair conduct free Do-It-Yourself workshops for families, and offer a free one-hour consultations to attendees. Families who want additional support and strategy pay a fee.
Learning about layers of financial aid, scholarships and work study is just the beginning. A 529 plan is just a “teeny” part of overall picture, Beam said. Comparing schools and selecting a marketable course of study means the student needs to be thinking ahead to avoid dropping out, extra years of school or going broke.
Just 38 percent of students graduated from Michigan public universities in four years, according to 2010 numbers released by the Chronicle of Higher Education.
“College planning is not about the next four years — it’s about the next 40,” Beam said. “We want to make sure they’re not going to a school because of ‘Sparty.’ We want to make sure they’re going to the right school for the right career.”
The Roehler family’s investment in their children’s education began with the decision to enroll their three boys in a private Montessori elementary school, Yvonne Roehler said. Self-motivating methodology had a “stepping-stone” effect when the boys transferred to Traverse City Area Public Schools. They earned high school credits in middle school, and college credits in high school.
Their oldest son, Wyatt Roehler, used dual enrollment at West Senior High School and Northwestern Michigan College to start his degree at Michigan State University with 23 credits, just shy of “junior” status. He was 18.
The forethought saved his parents $42,523, according to MSU’s average tuition costs.
“That is a savings worth mentioning,” Yvonne Roehler said.
Wyatt Roehler is working on his master’s degree at the same time as his undergrad by taking classes that count for both, she added.
“It’s not as easy road, and you really have to apply yourself, but it is a huge savings,” Yvonne Roehler said.
Dollar-for-dollar, expensive as it is, college is still a good investment in the long run. A recent Pew Research Center study found that college graduates earn higher salaries, were less likely to be unemployed and were happier in their jobs overall compared to high school graduates.
Even by saving at birth, with three kids in college at the same time, Terese Urban doesn’t think she and her husband will be able to foot the entire half million dollar tab for their children’s education.
“We might be able to offset a chunk, at least,” Urban said. “We like to think that when our kids get out of school, they can get into the workforce without a ton of debt.”