Wednesday Welcome: College Diplomas, Without the Debt - Jean Chatzky - Making money make sense
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Wednesday Welcome: College Diplomas, Without the Debt

Lynn2If you’re a parent who’s footing the bill for your child’s college education, you already know the high cost of higher-ed is only getting—you guessed it—higher. 

College tuition rates have risen more than 1,000 percent since the 1970s, so you can imagine the sense of relief Lynn O’Shaughnessy, a higher education speaker and journalist, had when she finally made that last payment for not one, but two children.

From starting to save early to getting the kids involved, this week, Lynn shares with us her tips for managing college costs:

My husband and I recently finished paying for college.

We made monthly payments for seven consecutive years for our daughter Caitlin, who graduated from Juniata College in 2011 and our son Ben, who graduated from Beloit College in May. We did not take out any loans to pay for college and neither did our children.

When your children are little, college seems so distant that it’s hard to get motivated to save for this monster expense. When you are in the midst of paying for college, those monthly payments seem like they will never end.

As a couple, we resisted the natural urge to put off saving and we are proof that the monthly obligations eventually do disappear. As I look back on the time spent planning for—and paying for—my children’s college educations, here are some of my biggest takeaways:

Starting to save early: I hear from parents (mostly affluent) who bitterly complain about what colleges expect them to pay for college. A family making $150,000 a year, for instance, with one child in college can have an expected family contribution (EFC) that’s in the mid $30,000 range or higher. And most colleges will expect parents to pay more than their official EFC.

It would be very hard for most families to pay for college strictly out of their household income, which is why getting a head start is essential. And that’s especially true during an era when the wages of most Americans have shamefully stagnated while college prices continue to rise beyond many households’ ability to pay.

My husband and I started saving for college when our kids were infants. I left the Los Angeles Times when my daughter was just 1 1/2 years old so we could move to San Diego where my husband got a job as a science writer/columnist for the San Diego Tribune.

I eventually began freelancing as a personal finance journalist, which allowed me to stay home with my two children. My income has been erratic over the years. During the dot-com boom years, I got two book contracts to write about investing in one 12-month period, while other years I struggled to adapt to the reality that the number of financial magazines had shrunk.

Making college a top priority: Through it all, saving for retirement and college were our top priorities.  That meant that buying a house in the area known for the best public schools was not in the cards. Before my daughter’s second birthday, I visited the San Diego County Board of Education to look at the academic report cards for very good schools in a less expensive area of the county.

Parents often believe that it’s important for their children to attend the very best schools in the very best neighborhoods and will spend whatever it takes to do so. I have never bought into that belief. And if you’ve spent any time listening to the Freakonomics guys, you’ll appreciate why this isn’t true.

My husband (also a journalist) and I tried to find opportunities to save a few dollars more whenever we could. When my kids stopped wearing diapers, we increased our monthly college contributions. When my son was out of preschool, we upped what we could save. Most of the toys, books and clothes that our kids had for many years came from garage sales. When Ben and Caitlin were older, they knew that we would not be buying them a car (a huge money drain). It would not even have occurred to them to ask.

Lynn 3Involving the kids: I let my children know that we were saving for college and shared the progress with them. To the left is a photo of the college folder that Caitlin decorated with stickers and I used to keep track of her college account statements when she was young (this was before you could go online and get the information easily). It helped her to calculate the value of her college accounts.

I also explained to my kids about the power of compounding and the benefits of saving early. With Ben sitting on my lap in front of the computer, we would use an online calculator to see how much he could accumulate for his retirement if he started saving even modest amounts early. Both my children have Roth IRAs and my daughter Caitlin, who is the marketing director of a toy company, maxes out hers every year.  I expect Ben will do the same when he gets out of graduate school.

Investing wisely for other goals: I realize none of this is going to help people who are facing large bills right now for college, but I think how we invested the money could help you with your retirement goals.

Like most financial journalists that I’ve met, I invest in index funds. I’ve invested in Vanguard’s index funds for many years for our retirement and non-retirement accounts.  I also picked two 529 college funds—Utah and Nevada —that use  use Vanguard Index funds. Utah now also uses index-like funds from Dimensional Fund Advisors, which are excellent and not available to most retail investors. My husband and I also invest in DFA funds.

If you are not invested in index funds, you should explore doing so.  As an investor, you can’t control what returns you will earn in the future. However, what you can do that is very powerful is to control your expenses. One major reason why financial journalists embrace index funds is their low expenses. Even mutual funds that charge average expenses will greatly erode your returns over your investing lifetime. Investing in index funds over time will generate higher returns than the vast majority of mutual funds.

About Lynn: Lynn O’Shaughnessy, a higher-ed speaker and journalist who helps families with teenagers to become smart college shoppers through her Amazon bestseller, The College Solution, her blog, and through her online course – Cutting the Cost of College.  Have a question for Lynn?  You can contact her at

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