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A hard test in college finances

She wrote the book on saving for school, but touring campuses with her daughter was an eye-opener.

September 09, 2007|Kathy M. Kristof | Times Staff Writer

I boarded JetBlue's flight to Los Angeles with a bag full of mixed feelings. My daughter, Samantha, and I were returning from Boston after a week of college tours. Seven colleges in five cities in seven days, it made a whirlwind European trip seem lazy.

But what was bothering me was my plan. My confidence about how I was going to manage college costs was shaken. And I was supposed to have this all figured out.

Four years ago, I wrote a book on financing college. With the assurance that only someone with no personal experience on the topic could have, I waxed on about how you could decide how much to save. And if you started early enough, you could meet those goals without starving or giving up on the retirement plan. That much remains true.

The tough part was that our weeklong jaunt made me question my savings goals.

They were all based on what I believed was reasonable and, frankly, what I would do given a world of choices. In a nutshell, I've told my kids that I would give them $10,000 annually -- $40,000 total -- which is enough for tuition, fees and books at a school in the University of California system, which I believe is the envy of the world.

At UCLA, for example, tuition, fees and books currently run $8,076 a year for a California resident, according to the College Board, which offers school snapshots on its website at www.collegeboard.com. Room and board add $12,312 to the annual total.

My plan, incidentally, factors in the fact that I'm only half of this college finance equation. When my husband and I divorced five years ago, we divided in half the money we had saved to finance the children's college education. So if their father also pays $10,000 a year for each of them and if they go to a school in the UC system, almost all of their bills will already be covered. I'd still encourage them to work. But scrimping, borrowing and juggling three jobs along with a full course load, like I did, would not be necessary.

I'm an avid saver and earn a reasonable salary, so financial aid is not in the cards. (Federal financial aid formulas consider only the custodial parent's income, not the income of the nonresident spouse, though private schools often take both into account.)

My kids know they'll get $40,000 from me regardless of what college costs. If they spend a couple of years in junior college and don't need all their savings, they can use the excess to buy a car or go to Europe. If they need more, they should be prepared to pay for it, either by working or by taking out student loans.

Everyone approaches college expenses differently. My sister and her husband, who graduated with tens of thousands of dollars in student loans from college and law school, expect their kids to work but are trying to pay enough to allow them to graduate without any debt.

My friends Diane and Alex want their children to pay a portion of their college costs, even if that results in some debt, so that they feel invested in their own educations. Other friends pay all costs because they want their kids to concentrate solely on school. Each of these approaches makes sense. We choose the ones we're comfortable with and can justify based on our experiences and our beliefs about money.

My approach is based on the idea that this is another opportunity to teach my kids about making money choices. They need to understand how much you have to work to generate $100 in after-tax income and whether it's worth it to them to pay $300 for something when they could get a similar item for $100.

Relative values are different for everyone, so I don't want to make the decision for them. But I also want them to understand -- and take responsibility for -- the repercussions. There will be hundreds of similar decisions to make later in life. The Prada shoes or the Nine West? The Mercedes or the Toyota? The $2,000-a-month beach apartment that means a long commute or the $1,000 Pasadena condo that is more convenient?

I can't justify paying $30,000 more of my money each year -- $120,000 more over four years -- for a private university than for a highly rated public university such as UCLA or UC San Diego. If my children can, they have to put their money where there mouth is.

Or so I said.

--

Georgetown on her mind

The first stop on our college tour was Georgetown University, a 300-year-old Jesuit college in a quaint section of Washington. Annual tuition and fees: $35,964. Add $12,146 for room and board, $1,060 for books and $2,120 for other incidentals for a total estimated cost of $51,290.

Fifteen minutes into the hourlong opening talk at the university, I was hooked.

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