Paying for College

4 Steps to Funding an Education

Prepare, plan, prioritize and persevere.

As Americans, we have the freedom to explore opportunities and pursue our goals; the sky is the limit. Our belief in endless possibilities is particularly true when it comes to educating our children. Every generation wants to provide their kids with more years of school and a higher-quality education than they received. That’s because we believe that a good education is necessary for a better life. In fact, on average, a college degree will result in higher earnings. According to the Bureau of Labor Statistics, an individual with a bachelor’s degree or higher is typically expected to earn 67.7% more than an individual with only a high school degree.

But while the aspiration of providing our children with a better education makes sense, we also have to face reality. One obstacle stands between our goal of educating our children and our ability to achieve it: money.

The education funding puzzle is both challenging and complex. The good news is that, like many puzzles, there is a solution. The bad news is that finding the solution requires focus, time and effort. There isn’t a “one size fits all” solution to achieving this goal. Instead, each family’s solution is unique and reflects their philosophy of education, the reality of their cash flow and a realistic assessment of their financial resources.

To create your solution and achieve your goal, you must do four things: prepare, plan, prioritize and persevere.


While preparation is the key to achieving any financial goal, it is especially true when it comes to college funding.

First, you need to decide whether it would be valuable to work with a financial adviser. You may want to choose an adviser because s/he has the experience and expertise to help you determine the cost of your goals, advise you on how to achieve those goals and help you navigate the investment markets along the way.

Next, with or without an adviser you have to determine how much a child’s education will cost in today’s dollars and how much those costs may increase in the future.


In the chart above, the first column lists the three most common types of four-year educational institutions: private, state (resident) and state (non-resident).

The second column shows annual costs in today’s dollars for each type of school, separated between tuition and fees and room and board. Transportation, books and other fees are not included.

The third column illustrates how those costs may increase if school attendance begins 18 years from now. Because tuition and fee expenses have historically increased at higher average rates than room and board costs, a higher rate of increase has been applied to those costs. (Sources: State school costs, The College Board. Private school costs, Assumptions: 1.89% core inflation rate applied to annual room and board increases. Tuition and fees are assumed to increase at 5% per year, according to The College Board.)

If you’re like most people, the numbers will surprise you. How much it takes to fund a college education for one or more children can be shocking. But, this is reality.

To make any financial goal more palatable and achievable, you must first determine the entire cost—then reduce the numbers to monthly costs.

Assuming you begin funding your child’s education at birth, you would have to invest the following amounts every month for 21 years (until and through the college years) while earning a 4% average annual rate of return on the dollars you invest:

Private college:$1,413.06
State (resident):$380.29
State (non-resident):$742.28


Now that you know how much it can cost to fund four years of college, it’s time to create a plan. Begin by asking yourself these questions:

  1. Given the costs, is college the best and only choice? Would a two-year college, technical or trade school be an alternative?
  2. What kind of higher education funding vehicles are available to high school graduates? Scholarships, grants?
  3. Would I expect my children to work during high school and save money to offset some of their higher education expenses?
  4. Are grandparents a source of funding?

Your answers to these questions will help you decide which approach is most realistic and gives you the best odds of success.


Once you’ve answered these questions and you’ve managed your expectations, it’s time to prioritize. Today, just as young couples are having children, often they’re still paying off their own student loans. At the same time they’re paying off student loans, their parents are trying to fund their own retirement. Because there are many moving parts, the approach you take and how you prioritize your options requires flexibility and a balancing of various activities.


You’ve calculated your goal, and you know what you need to do to achieve it. Now your challenge is to calmly and consciously remain committed to achieving the goal, month after month, year after year. Financial goals are achieved by people who persevere. You want to remain up-to-date and current on education funding laws and options. You want to regularly invest and stay invested through thick and thin despite changes in your life. You want to focus on your goals regardless of the changes, challenges or discouragement you face.

You can solve the education funding puzzle and achieve your goal by preparing, planning, prioritizing and persevering.

Jan Blakeley Holman, CFP, CIMA, ChFC, CDFA, CFS, GFS, is Director of Advisor Education at Thornburg Investment Management, a global investment management firm.

About the Author

Jan Blakeley Holman, CFP

Director of Advisor Education, Thornburg Investment Management

Jan Blakeley Holman, CFP, CIMA, ChFC, CDFA, CFS, GFS, is Director of Advisor Education at Thornburg Investment Management, a global investment management firm. She is a noted expert and speaker on women and investing, longevity planning, life transition planning, and family wealth management.

Jan has over 40 years of experience in the financial services industry and holds a BA in political science from the University of Denver.

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