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College debt isn't always a done deal.

I have to admit it feels a bit odd, having just seen my last child graduate from college, to be writing about financing a college education. But, forging ahead in the world of financial planning, I continue to see college financing as an obstacle to my younger clients' retirement as well as an ongoing concern for their parents, now the grandparents, who may feel some obligation to help.

Today I ran some simple calculations for a 3-year-old, likely to go to a California school, and the numbers were sobering. Figuring four years for college, at $30,000 a year, with a 6-percent inflation rate, this young lady will require something north of $275,000 to cover expenses.

With numbers like those, it is not hard to see why burgeoning student debt loads have many policy makers concerned. Especially since most of the cost of college can be borrowed.

So, as they say in my neighborhood, let's throw a rope around the problem and find some useful solutions.

First, pick the right school. Not only does this mean finding a fit for student and school, but looking at financially efficient schools. Start by looking at graduation rates. Schools that have a high four-year graduation rate may cost more per year than a state school where graduation rates are more likely to be 5 or 6 years due to availability of classes or inadequate state support.

For example, California's San Jose State's four year graduation rate is 7.7 percent! Nationally, the four-year graduation rate at state colleges is 33.3 percent. At private institutions it is 52.8 percent. Check this out on the website of The Chronicle of Higher Education (you must pay a subscription fee to get detailed data). But, you can check four- and six-year graduation rates. When you do the math, it becomes apparent that the savings for graduation in four vs. five or six years can be significant!

Next, the family should know whether the student is a candidate for financial aid. If so, that student should be looking at schools whose endowments are large and who have a history of covering larger parts of the education bill. Conversely, a student who is not a likely financial aid candidate should look for the best education for money spent and/or schools that are more likely to provide merit based scholarships.

To make this determination, the family first should do an Expected Family Contribution (FEC) calculation The FEC is the total amount the family is expected to contribute to the student(s) education. It is determined by a formula that takes into account parental and student earnings, age of parent(s), and the assets of parents and student(s). It is a total figure, meaning that a family with three students has one FEC that may be apportioned among family members.

One of the best sites for testing your financial aid likelihood is bigfuture.collegeboard. org. Note that calculations are based on two methodologies: Federal and Institutional. The latter takes into account home equity while the former does not. Different schools may elect different methodologies.

Finally, check out the Net Price Calculators for schools of interest. All schools are required by the federal government to post this special calculator on their web site. By inputting your information into the site, the calculations that follow represent the average net price of attendance that students with similar financial circumstances paid is a given year.

Often you will discover that a $50,000 a year school does not actually cost that when taking into account average grants and aid provided by the school.

Wendell Cayton is an independent Registered Investment Advisor Representative of Wealth Management Advisors LLC, a registered investment advisor firm registered in Washington and California. His views are his alone and not those of any company with whom he may be associated. This writing is intended for general planning purposes. Cayton does not give legal or tax advice. Those seeking such advice should consult appropriate professionals. He can be contacted at His website is
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Title Annotation:TAKING STOCK
Author:Cayton, Wendell
Publication:Wenatchee Business Journal
Date:Jul 1, 2016
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