I recently wrote an article in ACEP NOW all about paying for college and in particular the fact that “financial aid planning” is probably wasted time for most physicians. I’ve written about this before, as well as the plan for my kids, but in this article I introduced the concept of The Four Pillars (nod to Bernstein) of Paying for (your kids’) College. Here’s an excerpt:
There are a few key pieces of information emergency physicians need to know regarding paying for the college education of their children. The first is that by virtue of their high income, their family situation is likely to differ significantly from that of the average student. Average students and parents will fill out a Free Application for Federal Student Aid (FAFSA) or the similar College Scholarship Service (CSS) application and discover a difference between the parents’ expected financial contribution (EFC) and the cost of attendance at their chosen school. That is not the case for the typical children of emergency physicians….
There are four pillars to successfully paying for children’s education. Every situation is different, and it is likely that one or two of these pillars will be more important in your scenario than the others, but the larger the contribution from each of them, the easier the task will be.
The first pillar is school selection. Far too many parents together with their children choose a school without paying attention to the value received for the price paid. The cost of tuition and fees vary dramatically from one college to another, not to mention the cost of living in the city the school is located in and the price of travel between your home and that city….
The second pillar is the child’s contribution. This includes merit-based scholarships for athletics, academics, musical ability, or anything else. It also includes the child’s savings, part-time work during the school year, and full-time work in the summers….
The third pillar is college savings. Hopefully, most physicians will be able to save something for their children’s college in between the time they pay off their own student loans and the time children enroll. The federal and many state governments have offered to help via tax breaks….
The fourth pillar is your current earnings. This is the main reason the FAFSA or CSS calculates your EFC to be such a high number. Typical emergency physicians will discover that their EFC is something like one-third of their annual income plus 6 percent of their non-retirement investments. It is true that for most physician families, a significant portion of the college expense can be simply cash-flowed. Unfortunately, one of the main benefits of cash flowing at least some of the cost of college is that tax credits and deductions are phased out for many emergency physicians….
Notice that there is no pillar called debt. There is little reason for any student to have student loans when finishing a bachelor’s degree, especially the child of a physician. Certainly there is no reason for the physician to take on additional debt such as Parent PLUS Loans or a home-equity line of credit to pay for school. If the cost cannot be covered with savings, the earnings of the child, and the earnings of the parent, consider choosing a less expensive school.
Read the rest of the article, then come back and leave a comment!
What do you think? Which pillars will you be using? Which one will be most significant? Did your children qualify for any need-based aid? Why or why not? Comment below!