College affordability: only the rich, poor, and geniuses may have alternatives to student loans

February 6, 2024 | by


College affordability is a growing concern as rising tuition costs continue to outpace the growth of income and the middle-class families struggle to cover the expenses of higher education. In an era where student loans have become almost inevitable, only the rich, the poor who qualify for tuition adjustments, and those rare geniuses who receive free merit aid seem to have alternatives to massive student loans. Middle-class families, who neither have significant savings nor qualify for substantial financial aid, find themselves in a precarious situation. The projected increase in college expenses, with private university costs potentially reaching $1,000,000 by 2044, further exacerbates the anxiety of parents. The 529 plan, once viewed as a viable solution, has faced setbacks in terms of underperformance and contribution limitations, leaving families unsure if they will be able to save enough for their children’s college tuition. As a result, the author of this article outlines a game plan that includes investing in an S&P 500 index fund, maximizing 529 plan contributions, encouraging the children to work and contribute to Roth IRAs, teaching practical skills, and even owning rental properties to secure cash flow for college expenses.

College affordability: only the rich, poor, and geniuses may have alternatives to student loans

529 Plan Limitations and Rising Tuition Costs

The cost of a college education continues to rise, making it increasingly difficult for families to afford. While many turn to 529 plans as a way to save for their children’s education, these plans may not be sufficient to cover the steep expenses associated with higher education. Rising tuition costs are a major factor in this dilemma, as they outpace the growth of savings in 529 plans.

Affordability for the Rich, the Poor, and Geniuses

When it comes to college affordability, not all families face the same challenges. The wealthy can often afford to send their children to college without having to rely on massive student loans. They have the financial resources to cover tuition, fees, and other expenses comfortably.

On the other spectrum, there are certain provisions in place to ensure that students from low-income backgrounds can receive the necessary financial assistance. These students may be eligible for tuition adjustments and other forms of aid, making college more affordable for them.

Additionally, students who demonstrate exceptional abilities and talents may be awarded free merit aid. These “geniuses” are often recognized for their academic achievements, artistic talents, or athletic abilities. Through these merit-based scholarships, their college education becomes more affordable.

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College affordability: only the rich, poor, and geniuses may have alternatives to student loans

Struggles of Middle-Class Families

While the rich and the poor may have some pathways to address college affordability, middle-class families often face the most significant struggles in this regard. These families often fall into a financial gap where they do not qualify for substantial financial aid, but they also do not have the resources to pay for college outright.

Middle-class families must navigate the complexities of finding significant savings or exploring various financial aid options. They are often caught in a balancing act, trying to secure their children’s education without falling into excessive debt.

Projected Increase in College Expenses

Unfortunately, the financial burden of college education is only expected to increase over time. Tuition costs have been rising consistently, and this upward trend is projected to continue. By 2044, the costs of attending a private university may reach an astounding $1,000,000. This projection only adds to the challenges families face when planning for their children’s future education.

College affordability: only the rich, poor, and geniuses may have alternatives to student loans

Target Savings and Estimated Costs

To combat the rising costs of college, families are encouraged to set ambitious savings targets. For example, experts suggest aiming to save $750,000 for one child’s college education by 2036. This figure takes into account expected increases in tuition and other expenses.

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In addition to the target savings, families must also be aware of the estimated costs. It is crucial to have a realistic understanding of what a college education may cost. Currently, the estimated all-in cost for four years at a private university is around $360,000. This figure includes tuition, fees, room and board, textbooks, and other miscellaneous expenses.

However, it’s important to note that public universities can offer a more affordable alternative. The estimated four-year cost at a public university in 2036 is projected to be around $320,000. This lower cost may make public institutions a more manageable option for many families.

Author’s Uncertainty About Saving Enough

The author of this article expresses a degree of uncertainty about their ability to save enough for their children’s college tuition. One of the reasons for this uncertainty is the underperformance of 529 plan returns. While these plans are a popular choice for college savings, their rate of growth may not be sufficient to keep pace with rising tuition costs.

In addition to underperforming returns, contribution limitations also impact the author’s ability to save for their children’s education. These limitations may restrict the amount of money that can be deposited into a 529 plan, further complicating the savings process.

Author’s Game Plan for College Affordability

Recognizing the challenges and uncertainties of college affordability, the author has devised a game plan to navigate this complex terrain.

Firstly, the author plans to invest in an S&P 500 index fund. This form of investment allows for potential growth over time and can help mitigate some of the risks associated with underperforming 529 plan returns.

Additionally, the author aims to increase their contributions to the 529 plan. By maximizing their contributions within the set limitations, they hope to accumulate a significant amount of funds over time.

Encouraging their children to work and contribute to Roth IRAs is another part of the author’s game plan. By instilling a sense of personal responsibility and financial independence, the children can make their own meaningful contributions to their future education.

The author also believes in the importance of teaching practical skills that can generate future income. By equipping their children with valuable skills or encouraging them to explore entrepreneurial ventures, they can have additional means to finance their education.

Lastly, the author plans to invest in rental properties to generate cash flow. Owning rental properties can provide a steady income stream that can be channelled towards college expenses. The author intends to pay off the mortgages of these properties before their children enter college, ensuring increased cash flow for funding education.

Owning Rental Properties for College Expenses

Owning rental properties can be an effective strategy for addressing college costs. By having at least one rental property per child, families can generate additional income that can be used to cover tuition, fees, and other expenses.

To maximize the benefits of owning rental properties, it is important to pay off the mortgages before the children’s college years. By eliminating this significant expense, families can significantly increase their monthly cash flow, making it easier to meet the financial demands of college education.

In conclusion, the combination of 529 plan limitations and rising tuition costs presents a challenging landscape for families striving to afford college. While the rich, the poor, and exceptional students may have some avenues for affordability, middle-class families often find themselves in a precarious position. However, with careful planning, strategic investments, and a focus on generating additional income, families can improve their chances of providing their children with a quality education without compromising their financial stability.


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