The cost of attending college keeps rising. The tuition inflation rate runs around 4% to 6% per year. What is the current annual cost of college? At a private university expect to pay $42,224 while a public college will set you back $21,447.
What are your options for sending little Johnny or Suzy to school?
Save and invest. The best way to pay for college is to save for it. When your child is born start saving early and often. If you have a child today, you know in 18 years or so they may go to college. You can identity a college and figure out how much it will cost to attend. With these two data points you can calculate how much money you need to save. When my daughter was born I set up an investment account for her and started saving anything I could - $5, $25, $50 – and bought as much stock as I could. Let’s say you invested $100 in the Dimensional Large Cap Value Fund (DFLVX) and $100 in the Dimensional Small Cap Value Fund for 18 years. The result is $111,600. With $111,600 you can pay for all or some of the tuition.
Scholarships. Can you rely on a scholarship? The number of students who receive a scholarship is low. The percentage of students who receive a full ride is .3% or 3 students per 1,000. An athlete will fare a little better at 2% or 20 students per 1,000.
Student Loans. In 2014 students borrowed $100 billion to finance college. According to the latest figures the default rate for these loans is 10.7%. The lowest default rates were from students who attended 4-Year Private Institutions (5.9%) and 4-Year Public Institutions (7.4%).  These are big numbers in both borrowing and defaults.
Junior College. It may pay to spend two years at a junior college before transferring to a 4-year university. This path will help reduce your cost of attending college.
No College. The percentage of kids who attend college after graduation is 65%. What does this mean for the other 35% who don’t go on to college? It’s not good. The cost of not going to college is a lot more expensive than paying for college. According to the Pew Research Center the unemployment rate for high school graduates is 12.2% and the percentage of these former students living in poverty is 21.8%. Dark numbers. The no college option is not an option and should be avoided at all costs.
My recommendation is to budget and save for college. Can you find a few dollars hidden at the bottom of your non-fat latte? A budget will help you identify opportunities to cut costs and save money. The best way to set up a budget is to look back at your spending for the past few months. Do you see any trends? Your past spending behavior will help you save for a stronger future. The more you save the less you have to rely on others to help you achieve your goals.
Yet we urge you, brothers and sisters, to do so more and more, and to make it your ambition to lead a quiet life: You should mind your own business and work with your hands, just as we told you, so that your daily life may win the respect of outsiders and so that you will not be dependent on anybody. ~ 1 Thessalonians 4:10-13.
Bill Parrott is the President and CEO of Parrott Wealth Management, LLC. www.parrottwealth.com.
 Morningstar Office Hypothetical.