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Published: Sep 26, 2022 15 min read
Photo Collage of graduate students celebrating on graduation day with dollar bills and a college building in the background
Nikki Ernst for Money

Every year, families with college-bound students stare down the same tricky calculation: How do we cobble together enough money to pay for college?

It’s a question that requires crunching numbers, navigating unfamiliar financial aid terms and, this year, managing the variables of high inflation and the possibility of a recession.

A bachelor’s degree can be one of the most expensive purchases Americans make, with the average four-year public university costing about $15,000 and private colleges averaging $28,600. Nearly 8 in 10 families say they're willing to stretch themselves financially to pay those sums, according to an annual survey from Sallie Mae released last month. While families’ budgets vary, it’s practically a given that coming up with the cash to cover tuition, room and board, and textbooks will require drawing from a variety of sources.

On average, the largest portion of college costs (43%) is paid from the parents’ income and savings, according to the survey. That's followed by scholarships and grants (26%), and then a combination of borrowing (18%), student income and savings (11%), and money from other family members (2%).

Of course, the details of each household’s strategy of balancing savings, earnings, debts and financial aid are different. Here’s an inside look at how three families are solving the paying-for-college equation this year.

Scholarships, savings and state school

Courtesy of The Kofkes Family

Who are they?

The Kofkes, of Hoschton, Georgia

What do they earn?

About $120,000

How are they paying for college this fall?

  • Scholarships: $4,895
  • Savings: about $6,600 per semester for room & board
  • Student loans: $0

With two teachers for parents, it’s little surprise that Ava Kofke grew up hearing a lot about the importance of good grades. Working hard in school was necessary for the sake of learning, of course. But it was also the path to major savings on a college degree.

Ava, a freshman at the University of Georgia, has her tuition covered thanks to the state’s Zell Miller Scholarship, which rewards residents based on test scores and GPA. Between the scholarship and her parents’ savings, the plan is for her to earn her bachelor’s degree without taking on debt, says her dad, Danny Kofke.

“You may not think [about] it when they’re in first grade and you’re helping them with their homework, but that does pay dividends in the future,” he says.

The Kofkes have always been vigilant about paying down debt and saving. When Ava was born, they set a goal to pay off their mortgage by the time she went to college. The idea was that they'd free up money in their monthly budget for college bills.

That didn’t pan out exactly as planned, though they’re not far off. They still have a small, 10-year mortgage with $800 monthly payments. Otherwise, they’re debt-free, with $82,000 in savings accounts outside of their retirement accounts. That sum is where they’ll pull some of their college funds from, but it also includes their emergency savings, as well as some smaller buckets for fun expenses like vacations and a celebration for their 25th wedding anniversary in a couple years.

Paying off debt while building up their savings wasn’t always easy. For years, they often walked around the grocery store with a calculator in hand. The purse strings were particularly tight during the first nine years of Ava’s life, when they lived off Kofke’s roughly $42,000 teacher salary as his wife stayed home to take care of the girls. (Ella, their younger daughter, is 15.)

In fact, they didn’t cross the six-figure household earning threshold until a couple of years ago, when Kofke left teaching to work for financial mentoring company Mentoro.

When it came time to look at colleges, he told Ava she was free to apply where she wanted, but he and his wife were open about what they earned and how much they’d saved.

For a while, Ava was interested in attending the University of Florida, which would have meant paying an exorbitant out-of-state tuition rate. Ultimately, Kofke says, the freedom that comes with graduating debt-free won out.

“Look,” he told Ava. “At 22, you won’t have any bills at all, and you’ll have a college degree. You want to go sell cappuccinos in Hawaii? You’re free to do so.”

The Kofkes just paid the first semester’s bill — about $6,600, including $4,600 for an on-campus dorm. They’ll also help cover day-to-day expenses as needed, though Ava also has a job lined up to generate some spending money.

The money for the fall bill came out of their savings, and Kofke is already looking to replenish it. Starting this month, he’s aiming to put aside $1,000 a month for future semesters.

He and his wife will manage that the same way they always have — by living below their means.

Kofke plans to drive their 2013 Kia Optima, which they bought outright in 2019, until it dies, for example. He also goes through their budget at least once a year to cut unnecessary items. Gone are the $200-a-month gym memberships and unused Audible subscription.

“I look at being wealthy as having options,” he says. “And that’s what I’ve always tried to do: give us options.”

‘Back-paying’ loans with current earnings

Courtesy of The Gonzalez Family

Who are they?

The Gonzalezes, of Appleton, Wisconsin

What do they earn?

About $100,000

How are they paying for college this fall?

  • Earnings from summer jobs: $6,250
  • Student loans: $2,750
  • Parent savings: $0

When Angela Gonzalez’s son was looking at colleges, he had three boxes to check: a football team he could play on, a good education program and, perhaps most importantly, an affordable price.

With a household income just over six figures, the family didn’t qualify for any need-based aid, and while Gonzalez and her husband had been setting aside about $50 a month for college expenses since Isaiah was a baby, they didn’t have enough in savings to pay outright.

So they decided Isaiah would start at the University of Wisconsin Oshkosh at Fox Cities, a branch campus of the university with a lower tuition rate than the main campus. As a bonus: It was close enough to their home that Isaiah could live at home his first year, netting even more savings.

The downside, Gonzalez says, was that the experience was very similar to high school; Isaiah commuted to classes. But the price was a huge selling point

“He’s going into his sophomore year without one penny of debt,” she says.

Now a sophomore, Isaiah has transferred into the main Oshkosh campus, where he owes about $9,000 for the fall semester for room and board, tuition and books.

He’ll use $2,750, half of the federal student loans he was awarded for the academic year. The rest he’ll cover with his savings, which he built up by stashing away a large tax refund in the spring and keeping all of his earnings from working as a lifeguard over the summer. (He also donates plasma for spending money.)

The fall bills will drain Isaiah’s savings, so next semester, in addition to the remaining $2,750 he has in federal student loans, Gonzalez says they also plan to take out private student loans. They considered federal Parent PLUS loans, but she did not like that they’d only be in her name.

“I’m fine with co-signing, but this is his education. This is his loan,” she says.

Next spring, Gonzalez anticipates that Isaiah will receive another large tax refund. Because he is paying out of pocket for the fall semester, he’ll likely qualify for the American Opportunity Tax Credit, which is worth up to $2,500. Then he’ll work again over the summer and use that money to pay down the private loans from the spring.

“We’re going to back-pay,” she says. “We’re not going to just keep piling on the private loans.”

The Gonzalezes also have about $10,000 earmarked for Isaiah’s education in a brokerage account. They’re leaving it untouched for now so that it can continue to grow (and hopefully recoup what they lost with this year’s stock market declines). They plan to give him the money when he graduates to pay down his loans. Altogether, his mom hopes he’ll have less than $25,000 in debt when he starts his career.

Now that their strategy of regularly paying down student loans with summer earnings is mostly set, Gonzalez is turning her attention to her daughter, Ariana, who’s a senior in high school this year. Cost will again be a driving factor in deciding where she attends. Ariana will likely apply to a mix of private and public colleges in Wisconsin.

For families going through the college application process for the first time, Gonzalez says she learned a lot from other parents through online groups like Grown and Flown. She also signed up for a local FAFSA session to help guide her through the financial aid form.

It’s crucial, she says, to prepare as much as possible.

“If you wait until the last minute, you’re going to be scrambling, and then you’re going to make a hasty decision,” she adds.

Working multiple jobs and using proceeds from selling a home

Courtesy of The Marshes Family

Who are they?

The Marshes, of Parker, Colorado

What do they earn?

About $60,000

How are they paying for college this fall?

  • Grants and scholarships: $5,000
  • Current income and savings: $4,700
  • Student loans: $0

Julie Marsh enjoyed the process of helping her oldest daughter apply to college so much that she went back to school to get a certificate in college counseling. Now, Marsh works full time managing an e-commerce website, works occasionally as a substitute teacher and takes on clients through Visualize College Consulting.

“College is expensive,” she says laughing, by way of explaining her three jobs. “I have to pay for it somehow.” Her daughter Anastasia is now a junior at Colorado State University.

For Marsh, one of the most challenging parts of the college application process — both as a parent and as a professional who guides other families — is managing the uncertainty around financial aid. You can estimate what you’re likely to pay, but nothing is guaranteed until you get a financial aid letter after applying to a college. Plus, it’s hard to predict how a family’s finances may shift over a period of four years, which can change what financial aid you’re eligible for.

Marsh also had the added complexity of getting a divorce right as her daughter was applying to colleges.

“Everything was very much up in the air, because at that time, I didn’t know what I would be doing or what support I’d be getting from her father,” she says. (Marsh now splits college costs with her ex.)

For the first year, her daughter received enough grants and scholarships that Marsh only owed about $1,600 out of pocket on a total bill of $24,200 (which included tuition and room and board).

Last year, she paid about $2,200 for her share of tuition and fees, plus $500 a month to Anastasia to put toward rent for her off-campus apartment, utilities and groceries. She also covers her daughter’s phone bill and car insurance.

During Anastasia’s freshman and sophomore years, Marsh’s out-of-pocket payments were reduced more than they originally expected, thanks to some extra money tied to pandemic emergency grants. Anastasia received a total of $6,250 over three semesters.

But since her daughter started college, Marsh’s financial situation has improved, so she’s expecting to owe more for her final two years.

This fall, in particular, the $9,400 bill is higher than normal because Anastasia is studying abroad in Florence, Italy. (Marsh owes $4,700, per her divorce agreement.)

So far, Marsh has been able to pay her portion of Anastasia’s college costs out of her current earnings and some savings she set aside from selling her house after the divorce.

But next year, she’ll have two daughters in college, and she says they may have to take out federal student loans. (She also has a son who’s a freshman in high school.) She doesn’t plan to take on Parent PLUS loans, in part because of their higher interest rates — “they’re a racket,” she says.

It’s easy, Marsh says, for families to get swept up in the emotion of choosing where to go to college and forget about the long-term financial viability of a specific campus. Anastasia, for one, loved some of the private colleges on the East Coast. Ultimately, though, they decided it was smart for her to stay in-state.

“Unless you have gobs of money and can afford full pay, it’s important to keep college expenses in perspective,” Marsh says.

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