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Make College Affordable Despite the Downturn

Some thoughts on how to get the most bang for your education bucks.

Susan T. Bart, 04/24/2009

College-savings expert Susan Bart answers advisors' questions on 529 plans and other education-planning matters. E-mail your questions to advisorquest@morningstar.com.

Here are some thoughts you might consider if your child is quickly approaching college matriculation and your 529 savings account and other investments have been devastated by the current financial crisis.

A College Degree Is Essential. One thing that has not changed is that it is still important to have at least a college degree in order to attain financial security. Median family income for different levels of education is as follows:

Not a high school graduate  $29,760
High school graduate           $49,739
Some college                        $60,955
Associate Degree                 $69,600
Bachelor's Degree, more     $100,000
Source: College Board, 2008 Trends in College Pricing

Select a College for Value. Your child needs to understand that college is an investment, not just a rite of passage. In these financially difficult times, one should focus on selecting a college that provides the best value. Value is determined by the quality of the education provided, the opportunities created by that education and the net price of that education. As will be discussed below, net price is the published cost of attending the college less the financial aid and tax credits available to the student for attending such college. In many cases, the only way to determine what the net price of attending a particular college is will be to apply and see what financial aid package the college will award. The sticker price of any college may not be a good indicator of its net price. Some colleges with high sticker prices provide generous financial aid to many students. In addition, many colleges without high profile names provide high quality education.

Pricing by Type of Institution. The type of institution selected will greatly impact the price of attendance. Community colleges are very inexpensive. Public in-state universities may be considerably more affordable than private universities. The published charges for 2008-2009 break out as follows:

Sector                         Tuition/Fees    Room/Board  Total Charges
Public 2-Year                $2,402                --                     --
Public 4-Year In-State  $6,585                 $7,748            $14,333
Out-of-State                 $17,452             $7,748              $25,200
Private Nonprofit 4-Year $25,143            $8,989             $34,132
For Profit                     $13,046              --          --
Source: College Board, 2008 Trends in College Pricing

However, after the average grant and education tax benefits per full-time undergraduate student, net tuition and fees can be considerably less.

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